Mr. Vidyadhar Sarfare And Anr vs Cs Anagha Anasingaraju & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No.1733 of 2024 (Arising out of Order dated 21.08.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Court-II, Mumbai Bench in IA No.2241 of 2024 in Company Petition (IB) No.1806/MB/2019)

IN THE MATTER OF: Vidyadhar Sarfare & Anr ...Appellants

Versus

CS Anagha Anasingharaju & Ors. ...Respondents

Present:

For Appellant : Ms. Madhavi Divan, Mr. Abhijit Sinha, Sr. Advocates with Mr. Akshay Petkar, Mr. Vishesh Kalra, Ms. Heena Kochar, Ms. Anoushka Deo, Mr. Hardik Khatri and Mr. Aishani Narain, Advocates.

For Respondent : Mr. Amol Nehra, Mr. Ashish Choudhury, Advocates for R-6 to 12. Mr. Ashish Pyasi Advocate for R- 2, 4, 5.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by a Suspended Director of the Corporate Debtor ("CD")

- Sant Dnyaneshwar Hospital Pvt. Ltd. has been filed challenging order

dated 21.08.2024 passed by National Company Law Tribunal, Court-II,

Mumbai Bench, rejecting IA No.2241 of 2024 filed by the Appellant in CP

(IB) No.1806/MB/2019. The Appellant aggrieved by rejection of the

Application - IA No.2241 of 2024 has come up in this Appeal.

2. Brief facts of the case necessary to be noticed for deciding the

Appeal are:

Company Appeal (AT) (Insolvency) No.1733 of 2024 1

(i) The Corporate Debtor - Sant Dyaneshwar Hospital Pvt.

Ltd. was incorporated on 20.03.2003 by Respondent

Nos.6 to 12. The CD, which is a Hospital, became debt

ridden Company, the erstwhile Directors entered into a

Memorandum of Understanding ("MoU") dated

17.02.2016 with Accord Mediplus Pvt. Ltd. (the

Company of the Appellants). Under the MoU, entire

shareholding of Sant Dyaneshwar Hospital proposed to

be transferred to Accor Pathlab Pvt. Ltd. and/ or its

affiliated (Accord Group) for a consideration of Rs.17.50

crores. As a transient measure for operation of the

Bank account of the Company maintained with

Janseva Sahakari Bank Ltd., it was decided that two

nominees of Accord Group was mandatory to sign for

clearing of cheques. The Appellant No.2 is one of such

nominees.

(ii) In October 2016, an amount of Rs.1.96 crores was

deposited in the Corporate Debtor and transferred by

Respondent No.6 to 12 into a Trust of which

Respondent No.6 to 12 were also Directors. On

28.03.2017, another amount of Rs.35 lakhs was

deposited in the account of the CD, which was

transferred on 31.03.2017 by Respondent No.6 to 12

Company Appeal (AT) (Insolvency) No.1733 of 2024 2 into the Trust. The erstwhile Directors resigned from

the Company in April 2017.

(iii) On 21.04.2017, a Share Purchase Agreement was

executed, wherein the erstwhile Directors sold their

equity in favour of Accord Mediplus Pvt. Ltd.

Respondent Nos.6 to 12 also resigned from the Trust

on 01.09.2017.

(iv) Respondent Nos.6 to 9, erstwhile Directors of the

Company filed a petition under Section 7 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter

referred to as the "IBC") on 26.03.2019, claiming a debt

of Rs.2.60 crores against the CD.

(v) Respondent Nos.6 to 9 have also invoked arbitration

proceedings by filing an Application under Section 17

of the Arbitration and Conciliation Act, 1996, which

Application was dismissed by the Arbitrator.

(vi) On 08.10.2021, the Adjudicating Authority admitted

the CD into insolvency. The Appellant immediately on

17.11.2021 wrote to the IRP that the claim of

Respondent Nos.6 to 15 are without any basis and civil

and criminal proceedings were initiated by the Hospital

against them much prior to initiation of CIRP. The

Appellant wrote to the RP that claims of Respondents,

cannot be admitted.

Company Appeal (AT) (Insolvency) No.1733 of 2024 3

(vii) An IA No.1238 of 2022 under Section 65 of the IBC was

filed by the Appellant, claiming that initiation of CIRP

is ex facie mala fide. The Application was heard on

11.05.2022 by the Adjudicating Authority and

Adjudicating Authority directed the RP not to hold any

voting on the Resolution Plan, which position

continued as on date.

(viii) IA No.2106 of 2022 was filed by the Appellant,

challenging admission of the claim of erstwhile

Directors. During the CIRP, the Appellant operated the

Hospital along with the RP satisfactorily, which caused

good financial results. However, prolonged CIRP

hampered the Hospital to being upgraded. The

Financial Institutions (Respondent Nos.2 to 5) holding

92.17% vote share of CoC, sought to settle the debt

and revive the Hospital.

(ix) On 06.05.2021, the Appellant filed IA No.2241 of 2024

praying for recall of the admission order dated

08.10.2021 and for withdrawal of the CIRP against the

CD in exercise of inherent power. Certain other

prayers were also made in the Application. The

Application - IA No.2241 of 2024 was heard by the

Adjudicating Authority and by the impugned order

21.08.2024, the Application was rejected. The

Company Appeal (AT) (Insolvency) No.1733 of 2024 4 Adjudicating Authority held that no ground has been

made out either for recall of the admission order dated

08.10.2021 or for withdrawal of CIRP against the CD,

on the ground that the matter has been settled with the

creditors. Aggrieved by the impugned order, this

Appeal has been filed by the Suspended Directors.

3. We have heard Ms. Madhavi Divan, learned Senior Counsel and

Shri Abhijeet Sinha, learned Senior Counsel for the Appellant; Shri Amol

Nehra and Shri Ashish Choudhury, learned Counsel for Respondent

Nos.6 to 12; and Shri Ashish Pyasi, learned Counsel for Respondent

Nos.2, 4 and 5.

4. Learned Counsel for the Appellant in support of the Appeal

contends that the CD did not owe any debt to Respondent Nos.6 to 12.

The claim of debt against the CD was created by Respondent Nos.6 to 12

by circular transaction. It is submitted that the Appellant came to know

about relevant fact after reply was filed by Janseva Sahakari Bank, which

clarified that the amount was transferred by Respondent Nos.6 to 9 in the

CD, which was immediately transferred to the Trust controlled by them

and from Trust, the amount was transferred for clearing the debt

obligation of the Trust. The fact pertaining to circular transaction/

fraudulent transfer, came to the fore by the reply affidavit of Janseva

Sahakari Bank filed in IA No.1770 of 2022. It is submitted that

Respondent Nos.6 to 9 have initiated Section 7 proceedings malafidely

and fraudulently for purposes other than resolution of the CD. It is

Company Appeal (AT) (Insolvency) No.1733 of 2024 5 submitted that initiation of CIRP being fraudulent and malicious, the

Adjudicating Authority ought to have permitted withdrawal of CIRP,

exercising its inherent power. It is submitted that the Financial

Creditors, who are Financial Institutions holding 92.17% vote shares

have already settled their debt and other Financial Creditors are already

receiving repayment. The Financial Creditors have also filed a pursis

before the Adjudicating Authority expressing their consent for settlement.

However, the Applicants being Respondent Nos.6 to 9, who have

malafidely and fraudulently initiated the CIRP are opposing the

settlement with the Financial Creditors under Section 12A. The

Application for withdrawal can be filed only by the Applicant, i.e.

Respondent Nos.6 to 9, who initiated the CIRP, hence, withdrawal under

Section 12A is not permissible. However, the Adjudicating Authority does

not lack jurisdiction to permit closure of the CIRP in the facts of the

present case exercising its jurisdiction. It is submitted that since 92.17%

of CoC, who are genuine Financial Creditors in their commercial wisdom

have settled with the CD, the CIRP cannot be allowed to be continued. It

is submitted that the Hon'ble Supreme Court in SBI vs. Consortium of

Murari Lal Jalan & Florian Fritsch - (2024) SCC OnLine SC 3187

has held that Tribunal would not be precluded from exercising its

inherent power in order to secure the object of the IBC. It is further

submitted that the Appellant has already filed an Application under

Section 65 of the IBC on 11.05.2022 being IA No.1238 of 2022, pleading

that initiation of CIRP is malafide, in which Application the Adjudicating

Authority has directed the RP not to hold any voting on the Resolution

Company Appeal (AT) (Insolvency) No.1733 of 2024 6 Plan and which IA has not yet been disposed of. It is submitted that

present is a case where Adjudicating Authority ought to have invoked the

jurisdiction under Section 65 for closure of the CIRP. It is submitted that

present is a case where erstwhile Directors had played a fraud by creating

charade of financial debt by engineering circular transaction, which had

come to light subsequently and after filing of the affidavit in reply by

Janseva Sahakari Bank on 27.06.2023. It is submitted that present is a

fit case for exercising jurisdiction by this Tribunal, closing the malafide

and fraudulent CIRP initiated by the Respondents. It is submitted that

Respondent Nos.6 to 9, who have entered into an MoU and Share

Purchase Agreement transferring their all rights in the Company with

intent to regain the control has adopted this malafide and fraudulent

exercise of initiation of CIRP.

5. Learned Counsel for Respondent Nos.6 to 12, opposing the

submissions of learned Counsel for the Appellant submits that

Respondent Nos.6 to 12 has never been approached for any settlement.

No offer of settlement having been given to Respondent Nos.6 to 12, there

is no occasion to file any Application under Section 12A of the IBC for

withdrawal. It is submitted that Appellant has no locus standi to file IA

No.2241 of 2024 for seeking withdrawal. It is submitted that an Appeal

was filed against the order admitting Section 7 Application, which came

to be numbered as Company Appeal (AT) (Ins.) No.881 of 2021, which was

dismissed by this Appellate Tribunal on 25.11.2022 and 10.01.2023.

Challenging the order of this Appellate Tribunal, an Appeal (Diary

Company Appeal (AT) (Insolvency) No.1733 of 2024 7 No.4846 of 2023) was filed before the Hon'ble Supreme Court, which too

was dismissed on 20.02.2023. It is submitted that the Appellant had

filed various IAs with similar, if not identical prayers, as prayed in IA

No.2241 of 2024, IA Nos.1238 of 2022 and IA No.2106 of 2022. The

Appellants have filed Application for setting aside the claims of answering

Respondents and staying the CIRP and direct the RP to take action on the

alleged fraudulent actions of the Respondents. Despite there being no

stay on admission order and on the basis of some oral stay, the

Appellants are repeatedly stating that CIRP has been stayed. Nothing has

transpired post the passing of the admission order that would merit an

Application under Section 65 for invoking the inherent powers of the

NCLT. All the grounds and facts, which are mentioned by Appellants for

recalling the admission order are facts and events that transpired prior to

passing of the admission order. The NCLT in the impugned order has

considered various submissions made by the Appellants. The present

Appeal deserves to be dismissed. Withdrawal under Section 12A of the

IBC is not permissible in the facts of the present case.

6. Learned Counsel appearing for Respondent Nos.2, 4 and 5 submits

that the Financial Creditors have already expressed their consent to the

settlement. This Tribunal while issuing notice on 03.09.2024 has also

recorded the submission of Respondent Nos.2, 4 and 5 that they have

given consent beyond which they have nothing more to say. Respondent

No.3 has also expressed his agreement by letter, which is brought on the

record by the Appellant.

Company Appeal (AT) (Insolvency) No.1733 of 2024 8

7. We have considered the submission of learned Counsel for the

parties and have perused the record.

8. By the impugned order, IA No.2241 of 2024 filed by the Appellants,

has been rejected by the Adjudicating Authority. We need to first notice

the prayers made in the IA, which are as follows:

"7.1. That this Hon'ble Tribunal be pleased to exercise its inherent power under Rule 11 of the NCLT Rules, 2016 to recall the admission order dated 08.10.2021;

7.2. In the alternative and without prejudice to prayer 7.1, this Hon'ble Tribunal be pleased to pass an order for withdrawal of CIRP proceedings against Sant Dnyaneshwar Hospital Pvt. Ltd. on such terms and conditions as it may deem fit in the exercise of its inherent powers;

7.3. Pending the hearing and final disposal of the present application, this Hon'ble Tribunal be pleased to direct the Respondent No.1 - Resolution Professional to act in terms of the settlement dated 26.04.2024 for repayment of the debt due to financial institutions in terms of the settlement from the monthly profits generated by the Hospital under the management of the Applicants / Accord Group.

7.4. In the alternative and without prejudice to prayer 7.3, pending the hearing and final disposal of the present application, this Hon'ble Tribunal be pleased to direct the Respondent No.1 - Resolution Professional to deposit an amount of 25 lacs per month from the Hospital accrued from 08.10.2021 till the disposal of this application with the Financial Institutions as per settlement plan.

Company Appeal (AT) (Insolvency) No.1733 of 2024 9 7.5. Interim and ad-interim orders in terms of prayer clauses 7.3 and 7.4 above;

7.6. Any other and further reliefs as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the present case.

9. In the Application - IA No.2241 of 2024 in paragraph 1.1, the

Appellant has made following pleadings:

"1.1 The Applicants are suspended directors of the Corporate Debtor - Sant Dnyaneshwar Hospital Pvt. Ltd. ("Hospital") - currently in the Corporate Insolvency Resolution Process ("CIRP"). The Hospital is registered as a small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006. By virtue of transactions between"17.02.2016 to 21.04.2017, the Applicants had taken over the Hospital from its erstwhile shareholders and directors being the Respondent Nos. 6 to 9, by way of the transaction for sale of shares of the Hospital from the Respondent Nos. 6 to 9 to the Applicants. It is the case of the Applicants that the initiation of CIRP by Respondent Nos.6 to 9 claiming to be creditors of the Hospital was fraudulent and I.A. No.1238 of 2022 is pending to that effect."

10. Further in paragraph 1.3, it was pleaded that Respondent Nos.2 to

5 Financial Creditors/ Financial Institutions constitute 92.17% of the

CoC have worked out a settlement to resolve the debt of Hospital (CD). In

paragraph 1.3, following is pleaded:

"1.3. Respondent Nos. 2 to 5 are Bankers/Financial Institutions ("Financial Institutions") and are genuine and bona fide Financial Creditors of the Hospital. Respondent Nos. 2 to 5 constitute 92.17% of the

Company Appeal (AT) (Insolvency) No.1733 of 2024 10 Committee of Creditors ("COC") and are interested and have worked out a settlement to resolve the debt of the Hospital and revive the Hospital. The said Bankers agree to bring the Hospital out of CIRP as the Financial Creditors have realized that even during CIRP, the Hospital working under the suspended management of the Applicants is able to do sustainable business and was otherwise not insolvent in the first place."

11. The first prayer in the Application was to recall order dated

08.10.2021 admitting Section 7 Application. Reply has been filed in this

Appeal by Respondent Nos.6 to 12, where orders passed by this Tribunal

in the Appeal filed by the Suspended Directors challenging order dated

08.10.2021 has been brought on the record. The Appellants filed an

Appeal before this Tribunal against order dated 08.10.2021 - Company

Appeal (AT) (Ins.) No.881 of 2021. The Appeal was dismissed on

25.11.2021 by passing following order:

"25.11.2022: At the outset Ms Adya Singh, learned counsel submits that she has been engaged by the appellant to appear and file Vakalatnama in the present case and she requests for granting short adjournment for filing the same. On the last date i.e. 11.11.2022, when the matter was taken up, a proxy counsel on behalf of the appellant requested for adjournment of the appeal. The prayer was allowed and the case was adjourned. Today the appellant has come out with a proposal of engaging a new counsel and requested for time for filing Vakalatnama and appearance.

The present appeal was filed under Section 61 of the IBC. Admission order of CIRP was passed on 08.10.2021. It goes without saying that for completion of CIRP proceeding

Company Appeal (AT) (Insolvency) No.1733 of 2024 11 upper time limit has been prescribed i.e. 180 days. Admission order was assailed but no stay order was passed in the present appeal. In view of the said situation unnecessary adjournment may not be granted that too to the appellant who is intending to drag the matter by engaging new counsel. On the examination of record it appears that the appellant instead of getting the appeal finally decided, one way or the other is trying to drag the matter. Such a prayer may not be entertained in a proceeding in which time is essence.

Accordingly the appeal stands dismissed due to non- prosecution.

This order was passed in present of learned counsel for the Respondent."

12. The Restoration Application (AT) No.15 of 2022 was filed by the

Appellants to restore Company Appeal (AT) (Ins.) No.881 of 2021, which

was dismissed by this Tribunal on 10.01.2023. Aggrieved by both the

aforesaid order, the Appellant filed Civil Appeal (Diary No.4846 of 2023)

before the Hon'ble Supreme Court, which Appeal was also dismissed by

the Hon'ble Supreme Court vide order dated 20.02.2023. The order dated

08.10.2021 having been questioned and challenged by the Appellant by

means of Appeal under Section 61 of the IBC and further the Appeal

under Section 62 of the IBC before the Hon'ble Supreme Court and both

the Appeals before this Tribunal as well has Hon'ble Supreme Court

having been dismissed, we are of the view that Adjudicating Authority did

not commit any error in rejecting the prayer of the Appellant in IA

No.2241 of 2024 for recall of the order dated 08.10.2021. The

Adjudicating Authority has also in paragraph 26 has noted the order

Company Appeal (AT) (Insolvency) No.1733 of 2024 12 passed by this Appellate Tribunal and has rightly observed that no case

has been made out for recall of the admission order dated 08.10.2021.

We do not find any error in the order of the Adjudicating Authority

rejecting the prayer of the Appellant to recall order dated 08.10.2021.

The order of Adjudicating Authority to that extent is not interfered with.

13. The next submission which has been pressed by learned Counsel

for the Appellant is that present is a case where the Adjudicating

Authority ought to have exercised its inherent jurisdiction permitting

withdrawal of CIRP proceedings against the CD. Learned Counsel for the

Appellant submits that the CIRP having been initiated by Respondent

Nos.6 to 9 fraudulently and malafidely, the Adjudicating Authority should

have very well permitted withdrawal of the proceedings. With regard to

withdrawal under Section 12A of the IBC, the law has been settled by

Hon'ble Supreme Court in Glass Trust Company LLC v. BYJU

Raveendran - (2024) SCC OnLine SC 3032. The Hon'ble Supreme

Court in the said judgment has noticed the procedure for withdrawal of

the CIRP as provided in Section 12A and Regulation 30A of the CIRP

Regulations. After noticing the statutory provisions, the Hon'ble Supreme

Court in paragraphs 61 and 62 has laid down following:

"61. The proviso to Regulation 30A (1) provides that when the application is made after the CoC has been constituted and after the invitation for expression of interest has been issued, the applicant shall state the reasons for withdrawal at this stage. In essence, the regulation in its amended form, deviates from its earlier form by also responding to the decision of this Court in Brilliant Alloy Private Limited (supra). Unlike the unamended

Company Appeal (AT) (Insolvency) No.1733 of 2024 13 regulation, the regulation acknowledges the possibility of withdrawal even after the invitation for expression has been issued. However, it mandates that an application for withdrawal in such cases must be accompanied by reasons.

62. Regulation 30A (2) provides that the application must be made in the manner prescribed in Form FA of Schedule-I,45 and must be accompanied by a bank guarantee towards the specified expenses. Regulation 30A(3) provides that in cases where the application for withdrawal is moved before the constitution of the CoC, the IRP shall submit the application to the NCLT on behalf of the applicant within three days of receipt. Regulations 30A (4) and (5) deal with the situation where the CoC has already been constituted. They provide that the CoC shall consider the application within seven days of receipt, and subsequently, if the application is approved by the CoC with a ninety-percent voting share, the RP must submit the application with the approval to the NCLT within three days of the approval. Finally, regulation 30A(6) provides that on the receipt of the application under both mechanisms (before the CoC and after), the NCLT may pass an order approving the application submitted by the RP or IRP, as the case may be."

14. In the present case, Section 7 Application has been filed by

Respondent Nos.6 to 9 and unless an Application is filed by the

Applicant, who has initiated Section 7 Application, compliance of Section

12A read with Section 30A, cannot be made. We, thus, are of the view

that present is not a case where CIRP can be withdrawn under Section

12A read with Regulation 30A.

15. The submission which has been pressed by learned Counsel for the

Appellant is that Adjudicating Authority has ample jurisdiction under

inherent power to permit withdrawal of the CIRP. Reliance has been

placed on the judgment of the Hon'ble Supreme Court in SBI vs.

Company Appeal (AT) (Insolvency) No.1733 of 2024 14 Consortium of Murari Lal Jalan & Florian Fritsch - (2024) SCC

OnLine SC 3187. The learned Counsel for the Appellant has relied on

paragraphs 162 and 163, which provides as follows:

"162. However, the aforementioned decision should in no manner be read so as to restrict the exercise of plenary powers under Article 142 of the Constitution even while in deviating from the statutory procedure and framework of the IBC, 2016 or the rules and regulations thereunder, if such deviation is very much necessary. This Court in Glas Trust (supra) only went so far as to say that, where there is a prescribed procedure in place for a particular purpose, then that particular thing must be done only in the manner prescribed. It no way lays a dictum that even where cogent reasons exist warranting such deviation, the court would be powerless to exercise such inherent powers. In other words, Glas Trust (supra) only went to the extent of saying that in the absence of any exceptional circumstances or extraordinary reasons necessitating a deviation from the procedure laid down, the court should refrain from invoking its inherent jurisdiction to do something which otherwise could have been validly done in accordance with the procedure.

163. We are of the considered view that where there exists extraordinary circumstances warranting the exercise of such powers in order to ensure that the very salutary purpose of the Code, 2016 is not frustrated, then the Court would be well-within its prerogative to exercise them to secure the object of the IBC, 2016. If the proposition that there ought to be no exercise of the inherent powers where a procedure is laid down were to be blanketly accepted then it may have a very chilling effect whereby the very purpose of vesting this Court with inherent powers under Article 142 and tribunals Rule 11 of the NCLT Rules would be rendered otiose and meaningless."

Company Appeal (AT) (Insolvency) No.1733 of 2024 15

16. The above judgment clarified the law that where there exists

extraordinary circumstances warranting the exercise of such powers in

order to ensure that the very salutary purpose of the Code, is not

frustrated, then the Court will be well within its prerogative to exercise

them to secure the object of the IBC. Learned Counsel for the Appellant

has also placed reliance on judgment of this Tribunal in Hindalco

Industries vs. Hirakud Industries Works Ltd. - Company Appeal (AT)

(Insolvency) No.42 of 2022, where this Tribunal after noticing that the

case was one which attracted Section 65 of the IBC, held that initiation of

CIRP was done fraudulently by the CD, working in collusion with

Financial Creditor and the Court took the view that admission under

Section 7 was liable to be set-aside. Applying Section 65, the admission

of Section 7 Application was set aside. In paragraph 97 of the judgment,

following was laid down:

"97. Section 65 of the IBC prescribes a stringent punishment, which may be a penalty extending up to Rs. one crore for fraudulent and malicious initiation of the CIRP. In such a background, we are of the clear view that the initiation of CIRP was done fraudulently by the corporate debtor working in collusion with financial creditor Nandakini and therefore such fraudulent initiation of CIRP started with the admission order under section 7 is liable to be set aside. Therefore, taking recourse to section 65 of the IBC, we set aside the admission order of the section 7 application as its basis, the section 7 application, and loan therein which is claimed to be due and in default are found to be fraudulent."

Company Appeal (AT) (Insolvency) No.1733 of 2024 16

17. There can be no quarrel to the proposition that in a case where

Adjudicating Authority comes to the conclusion that ingredients of

Section 65 are attracted, i.e. Application has been filed with fraudulent

or/ with malicious intent for the purpose other than the resolution of the

Corporate Debtor, the Adjudicating Authority may impose on such person

penalty. In a case where finding is returned within the meaning of

Section 65, the Adjudicating Authority can very well exercise its inherent

jurisdiction to close such CIRP proceedings. The Hon'ble Supreme Court

in (2020) SCC OnLine SC 1233 - Beacon Trustship Ltd. vs. Earthcon

Infracon Pvt. Ltd. and Anr. laid down following in paragraph 7:

"7. Considering the provision of Section 65 of the IBC, it is necessary for the Adjudicating Authority in case such an allegation is raised to go into the same. In case, such an objection is raised or application is filed before the Adjudicating Authority, obviously, it has to be dealt with in accordance with law. The plea of collusion could not have been raised for the first time in the appeal before the NCLAT or before this Court in this appeal. Thus, we relegate the appellant to the remedy before the Adjudicating Authority."

18. In the present case, the Appellant has also pleaded that prior to

filing of the Application, the Applicant has also filed an IA No.1770 of

2022 and IA No.1238 of 2022, which are pending consideration. It is

useful to notice the prayers made in IA No.1238 of 2022 and also in IA

No.1770 of 2022. In the present Appeal, a reply has been filed by

Respondent Nos.6 to 12, in which reply in paragraph 2.1.9, Respondents

Company Appeal (AT) (Insolvency) No.1733 of 2024 17 have referred to the prayers made in both the IAs. It is useful to extract

paragraph 2.1.9 (a) and (b), which are as follows:

"(a) IA No.1238/2022, seeking: (i) direction to the RP to take appropriate action u/s 43, 44, 45, 49 and 66 of the Insolvency and Bankruptcy Code, 2016 (Code) against the Respondent Nos. 1 to 4 therein for fraudulent transactions and siphoning of monies, (ii) that the money transfers dated 1 November 2016 and 31 March 2017 from the Company/ Corporate Debtor to Trust amounting to Rs.2,31,00,000/- by the Respondent Nos1 to 4 therein declared as fraudulent, (iii) declaration that the Respondent Nos.1 to 4 therein have initiated CIRP with malicious intent, (iv) declaration that Dr. Suhas Laxman Kamble (Respondent No.7 herein) as person not eligible to be a Resolution Applicant u/s 29A of the Code, (v) stay of CIRP, and (vi) to refrain from considering/ allowing/ discussing/ evaluating/ approving any Resolution Application from the Respondent No.7 herein.

(b) IA No.1770/2022, inter alia, seeking: (i) direction that the Janseva Bank to provide copies of the cheques and instruments for transfer of Rs.2.31 Crore from the account of the Company/ Corporate Debtor in the year 2016-17, (ii) direction that the Committee of Creditors of the Corporate Debtor not to consider and approve any Resolution Plan till the disposal of the application, (iii) declaration that the RP as ineligible to be appointed/ continue as RP,

(iv)direction for IBBI to register a complaint against the RP for not disclosing her ineligibility to be appointed as RP and submitting false forms with the Hon'ble Tribunal for her appointment as RP; (v) direction for IBBI to appoint any person to conduct

Company Appeal (AT) (Insolvency) No.1733 of 2024 18 an investigation u/s 218 of the Code; and (vi) direction for IBBI to constitute a disciplinary committee to consider the reports of the investigating authority."

19. It is further relevant to notice that during submission learned

Counsel for the Appellant submitted that Adjudicating Authority itself has

issued a direction that no further steps will be taken in the CIRP, which

was disputed by learned Counsel appearing for Respondent Nos.6 to 12 to

the effect that no such orders have been passed. Learned Counsel for the

Appellant has submitted that Adjudicating Authority had issued direction

to the RP, not to proceed with the voting on the Resolution Plan. In the

rejoinder, which has been filed by the Appellant, the Appellant has

brought on record an Application (At Annexure A-6) filed by the RP in

March 2023, in which Application, prayer was made for exclusion of 220

days from 16.09.2022 till 24.04.2022. In the said Application, it is useful

to note paragraph 21, where RP himself has stated that Adjudicating

Authority has issued an oral direction in IA 1238/2022 for staying the

voting. In paragraphs 21 and 22, following has been pleaded by the RP:

"21. It may be noted that as on date, as per the Order of this Hon'ble Bench dated 07.09.2022, the statutory period of CIRP was extended upto 09.11.2022. However, since there are oral directions acting vide an Order dated 11.05.2022 passed in IA 1238/2022 as stated supra this further lapsed 220 days shall be excluded and the statutory period of CIRP shall be extended further from 09.11.2022. Accordingly, by calculating the days the period of the CIRP will now stand extended upto 17.06.2023.

Company Appeal (AT) (Insolvency) No.1733 of 2024 19

22. It is stated and submitted that as on date there are two Resolution Plans are on table which are to be voted upon by the CoC. And in light of the fact that the final voting cannot be taken upon, amid the Oral directions passed by this Hon'ble Bench on 11.05.2022, the CIRP would not be reached to tis finality."

20. From the above, it is clear that IA No.1238/2022 has not yet been

heard and under the directions of the Adjudicating Authority, no steps

have been taken towards voting on any Resolution Plan. From the facts

as noted above, it is clear that the Appellants by filing IA No.1238 of 2022

as early as on 11.05.2022 have pleaded that initiation of CIRP by

Respondent Nos.6 to 9 is malafide. We have extracted the prayers in IA

No.1238 of 2022 as noticed in paragraph 2.1.9 of the reply of the

Respondents, where one of the prayers is "declaration that the

Respondent Nos.1 to 4 therein (Respondent Nos.6 to 9 herein) have

initiated CIRP with malicious intent". Thus, the Appellant has flagged the

issue within the meaning of Section 65 of the Code, as early as on

11.05.2022, which Application is still pending before the Adjudicating

Authority.

21. We have already observed that Adjudicating Authority has rightly

refused to grant the prayer made for recall of the order dated 08.10.2021

in IA No.2241 of 2024. We further notice that present is a case, where

withdrawal of CIRP cannot be made under 12A read with Regulation 30A

of the CIRP Regulations. Learned Counsel for the Appellant has also

contended that present is a case where Financial Creditors, who have

Company Appeal (AT) (Insolvency) No.1733 of 2024 20 vote share of 92.17% have already filed a compromise pursis before the

Adjudicating Authority. The learned Counsel appearing for Respondent

Nos.2, 4 and 5 has also submitted before us that they are agreeable to the

arrangement letter dated 18.05.2024 sent by Respondent No.2 to the

Appellant, which has also been brought on the record as Annexure A-27,

where they have also given their consent for termination/ withdrawal of

the CIRP of the Corporate Debtor.

22. While considering the exercise of inherent power by the

Adjudicating Authority, we have already noticed the judgment of the

Hon'ble Supreme Court in SBI vs. Consortium of Murari Lal Jalan &

Florian Fritsch (supra), wherein the Hon'ble Supreme Court laid down

that in an appropriate case, the Adjudicating Authority very well can

exercise its inherent power. We have already noticed that IA No.1238 of

2022, in which averments and pleadings have been made within the

meaning of Section 65 of the IBC, still pending consideration before the

Adjudicating Authority and while hearing the said Application, the

Adjudicating Authority directed for stay of voting on the Resolution Plan.

We, thus, are of the view that IA No.1238 of 2022, which is pending

consideration before the Adjudicating Authority, need to be heard and

decided before proceeding any further in the CIRP. We, however, make it

clear that we are not expressing any opinion on the merits of IA No.1238

of 2022, which is pending consideration before the Adjudicating

Authority. It is for the Adjudicating Authority to consider all facts and

pleadings and take appropriate decision in accordance with law.

Company Appeal (AT) (Insolvency) No.1733 of 2024 21

23. In view of our above discussion and conclusion, we dispose of the

Appeal in following manner:

(1) The order passed by Adjudicating Authority dated

21.08.2024, rejecting the prayer of the Appellant in IA

No.2241 of 2024 to recall order of admission dated

08.10.2021 is upheld.

(2) IA No.1238 of 2022 filed by the Appellant on 11.05.2022,

which is pending consideration before the Adjudicating

Authority, be heard and decided by the Adjudicating

Authority before proceeding further in the CIRP process. The

Adjudicating Authority shall endeavour to consider and

dispose of the Application at an early date.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

18th December, 2024

Ashwani

Company Appeal (AT) (Insolvency) No.1733 of 2024 22