Navneet Kumar Gupta Rp Of Monnet Power ... vs Bharat Heavy Electricals Ltd

Company Appeal (AT) (Insolvency) No. 743 of 2018 [arising out of Order dated 12th October, 2018 by NCLT, Mumbai Bench in MA No. 550/2018 in CP 1696/I&BC/MB/MAH/2017]

IN THE MATTER OF:

Mr. Navneet Kumar Gupta, Resolution Professional of Monnet Power Company Limited ...Appellant

Versus

Bharat Heavy Electricals Limited, BHEL House, Siri Fort, New Delhi - 110 049. ...Respondent

Present: For Appellant : Mr. Atul Sharma, Mr. Hitesh Kumar and Ms. Ashly Cherian, Advocates

For Respondent : Mr. Anil Puri, Senior Advocate assisted by Mr. Shubham Saxena, Mr. Ravi Chandra, Mr. I.P.S. Oberoi, Ms. Gunjan and Ms. Aditi Sharma, Advocates

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

In the 'corporate insolvency resolution process' against 'Monnet Power

Company Limited' (Corporate Debtor) the respondent 'Bharat Heavy Electricals

Ltd.' (BHEL) (Operational Creditor) filed an application before the 'Resolution

Professional' to admit the entire claim of Rs.977,49,97,545/- along with interest.

The 'Resolution Professional' on consideration of the same, had not accepted part

of the claim.

2

2. The Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench by impugned order dated 12th October, 2018 while determined to

'inventory cost' etc. held that the 'Resolution Professional' wrongly disallowed the

substantial claim in its entirety and directed the 'Resolution Professional' to

re-examine the claim on the basis of the accounts and evidence of BHEL and if

the evidences corroborated the claim, the same should also be taken into

account while finalising the total claim of BHEL.

3. The 'Resolution Professional' being aggrieved has preferred this appeal.

4. The only question arises for consideration in this appeal is whether the

'Resolution Professional' has jurisdiction to reject the claim of BHEL in its

entirety, without going into the evidence.

5. The aforesaid issue fell for consideration before the Hon'ble Supreme Court

in 'Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. - Writ Petition

(Civil) No. 99 of 2018' (2019 SCC OnLine SC 73). In the said case, the Hon'ble

Supreme Court by its decision dated 25th January, 2019 held :

"RESOLUTION PROFESSIONAL HAS NO ADJUDICATORY POWERS.

85. It is clear from a reading of the Code as well as the

Regulations that the resolution professional has no

adjudicatory powers. Section 18 of the Code lays down

the duties of an interim resolution professional as

follows:

"18. Duties of interim resolution professional.-- (1) The interim resolution professional shall perform

the following duties, namely--

Company Appeal (AT) (Insolvency) No. 743 of 2018 3

(a) collect all information relating to the assets, finances

and operations of the corporate debtor for determining

the financial position of the corporate debtor, including

information relating to--

(i) business operations for the previous two years;

(ii) financial and operational payments for the

previous two years;

(iii) list of assets and liabilities as on the initiation

date; and

(iv) such other matters as may be specified;

(b) receive and collate all the claims submitted by creditors

to him, pursuant to the public announcement made

under Sections 13 and 15;

(c) constitute a committee of creditors;

(d) monitor the assets of the corporate debtor and manage

its operations until a resolution professional is

appointed by the committee of creditors;

(e) file information collected with the information utility, if

necessary; and

(f) take control and custody of any asset over which the

corporate debtor has ownership rights as recorded in

the balance sheet of the corporate debtor, or with

information utility or the depository of securities or any

Company Appeal (AT) (Insolvency) No. 743 of 2018 4

other registry that records the ownership of assets

including--

(i) assets over which the corporate debtor has

ownership rights which may be located in a

foreign country;

(ii) assets that may or may not be in possession of

the corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any

subsidiary of the corporate debtor, financial

instruments, insurance policies;

(vi) assets subject to the determination of ownership

by a court or authority;

(g) to perform such other duties as may be specified by the

Board.

Explanation.--For the purposes of this section, the term

"assets" shall not include the following, namely--

(a) assets owned by a third party in possession of

the corporate debtor held under trust or under

contractual arrangements including bailment;

(b) assets of any Indian or foreign subsidiary of the

corporate debtor; and

Company Appeal (AT) (Insolvency) No. 743 of 2018 5

(c) such other assets as may be notified by the

Central Government in consultation with any

financial sector regulator."

86. Under the CIRP Regulations, the resolution professional

has to vet and verify claims made, and ultimately,

determine the amount of each claim as follows:

"10. Substantiation of claims.--The interim

resolution professional or the resolution professional,

as the case may be, may call for such other evidence or

clarification as he deems fit from a creditor for

substantiating the whole or part of its claim."

xxx xxx xxx

"12. Submission of proof of claims.--

(1) Subject to sub-regulation (2), a creditor shall

submit claim with proof on or before the last date

mentioned in the public announcement.

(2) A creditor, who fails to submit claim with proof

within the time stipulated in the public

announcement, may submit the claim with proof

to the interim resolution professional or the

resolution professional, as the case may be, on

or before the ninetieth day of the insolvency

commencement date.

Company Appeal (AT) (Insolvency) No. 743 of 2018 6

(3) Where the creditor in sub-regulation (2) is a

financial creditor under regulation 8, it shall be

included in the committee from the date of

admission of such claim:

Provided that such inclusion shall not affect the

validity of any decision taken by the committee prior to

such inclusion.

13. Verification of claims.--

(1) The interim resolution professional or the

resolution professional, as the case may

be, shall verify every claim, as on the

insolvency commencement date, within

seven days from the last date of the receipt

of the claims, and thereupon maintain a

list of creditors containing names of

creditors along with the amount claimed

by them, the amount of their claims

admitted and the security interest, if any,

in respect of such claims, and update it.

(2) The list of creditors shall be -

(a) available for inspection by the persons

who submitted proofs of claim;

Company Appeal (AT) (Insolvency) No. 743 of 2018 7

(b) available for inspection by members,

partners, directors and guarantors of the

corporate debtor;

(c) displayed on the website, if any, of the

corporate debtor;

(d) filed with the Adjudicating Authority;

and

(e) presented at the first meeting of the

committee.

14. Determination of amount of claim.--

(1) Where the amount claimed by a creditor is not

precise due to any contingency or other reason,

the interim resolution professional or the

resolution professional, as the case may be, shall

make the best estimate of the amount of the claim

based on the information available with him.

(2) The interim resolution professional or the

resolution professional, as the case may be, shall

revise the amounts of claims admitted, including

the estimates of claims made under sub-

regulation (1), as soon as may be practicable,

when he comes across additional information

warranting such revision."

Company Appeal (AT) (Insolvency) No. 743 of 2018 8

87. It is clear from a reading of these Regulations that the

resolution professional is given administrative as

opposed to quasi-judicial powers. In fact, even when

the resolution professional is to make a "determination"

under Regulation 35A, he is only to apply to the

Adjudicating Authority for appropriate relief based on

the determination made as follows:

"35A. Preferential and other transactions.--(1)

On or before the seventy-fifth day of the insolvency

commencement date, the resolution professional

shall form an opinion whether the corporate debtor

has been subjected to any transaction covered

under sections 43, 45, 50 or 66.

(2) Where the resolution professional is of the opinion

that the corporate debtor has been subjected to any

transactions covered under sections 43, 45, 50 or

66, he shall make a determination on or before the

one hundred and fifteenth day of the insolvency

commencement date, under intimation to the Board.

(3) Where the resolution professional makes a

determination under sub-regulation (2), he shall

apply to the Adjudicating Authority for appropriate

relief on or before the one hundred and thirty-fifth

day of the insolvency commencement date.

Company Appeal (AT) (Insolvency) No. 743 of 2018 9

88. As opposed to this, the liquidator, in liquidation

proceedings under the Code, has to consolidate and

verify the claims, and either admit or reject such claims

under Sections 38 to 40 of the Code. Sections 41 and

42, by way of contrast between the powers of the

liquidator and that of the resolution professional, are

set out hereinbelow:

"41. Determination of valuation of claims.--

The liquidator shall determine the value of claims

admitted under Section 40 in such manner as

may be specified by the Board.

42. Appeal against the decision of

liquidator.--A creditor may appeal to the

Adjudicating Authority against the decision of the

liquidator accepting or rejecting the claims within

fourteen days of the receipt of such decision."

89. It is clear from these Sections that when the liquidator

"determines" the value of claims admitted under

Section 40, such determination is a "decision", which is

quasi-judicial in nature, and which can be appealed

against to the Adjudicating Authority under Section 42

of the Code.

90. Unlike the liquidator, the resolution professional cannot

act in a number of matters without the approval of the

Company Appeal (AT) (Insolvency) No. 743 of 2018 10

committee of creditors under Section 28 of the Code,

which can, by a two-thirds majority, replace one

resolution professional with another, in case they are

unhappy with his performance. Thus, the resolution

professional is really a facilitator of the resolution

process, whose administrative functions are overseen

by the committee of creditors and by the Adjudicating

Authority."

6. The present case being covered by the decision of the Hon'ble Supreme

Court in 'Swiss Ribbons Pvt. Ltd. & Anr.' (Supra), we are not inclined to interfere

with the impugned order dated 12th October, 2018 passed by the Adjudicating

Authority. The 'Resolution Professional' is directed to act in accordance with

the directions of the Adjudicating Authority.

7. The appeal is dismissed with aforesaid observations and directions. No

costs.

[Justice S.J. Mukhopadhaya] Chairperson

New Delhi

26th February, 2019

/ns/

Company Appeal (AT) (Insolvency) No. 743 of 2018