Prowess International Pvt. Ltd vs Parker Hannifin India Pvt. Ltd

Prowess International Pvt. Ltd. ...Appellant

Vs.

Parker Hannifin India Pvt. Ltd. ...Respondent

Present: For Appellant: - Mr. Akhilesh Shrivastava, Advocate, Ms. Suhita Mukhopadhyay, PCS Mr. Arun Kumar Gupta, IRP.

ORDER

18.08.2017- The Respondent- Parker Hannifin India Pvt. Ltd.

'Operational Creditor' preferred an application under Section 9 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "I &

B Code") for initiation of 'Corporate Insolvency Resolution Process'

before the National Company Law Tribunal (hereinafter referred to as

"Adjudicating Authority"), Kolkata Bench. The Adjudicating Authority by

order dated 20th April, 2017 admitted the application and initiated the

'Corporate Insolvency Resolution Process'. Ordered for publication of

notice in the newspaper and declared Moratorium.

2. The appellant-'Corporate Debtor' having come to know of order

passed by Adjudicating Authority, settled the dispute with the

'Operational Creditor' and other Creditors who applied pursuant to

notice and filed an Interlocutory Application for withdrawal of the

petition. By impugned order dated 29th May, 2017, the Adjudicating Authority rejected the application on the ground that after admission of

an application, petition for withdrawal cannot be entertained.

3. Ld. Counsel appearing on behalf of the appellant submits that the

application was admitted on 201h April, 2017, without notice to the

appellant-'Corporate Debtor'. Subsequently, having come to know of

the same, the amount claimed by 'Operational Creditor' and other

Creditors has already been paid and claims of all the Creditors have

been satisfied;. in that view of the matter, the Adjudicating Authority

ought to have allowed the appellant to withdraw the application.

4. Notice was issued on respondent and the 'Insolvency Resolution

Professional'. In spite of service of notice, the Respondent- 'Operational

Creditor' has not appeared and not disputed the stand taken by

appellant.

5. Mr. Arun Kumar Gupta, Chartered Accountant, 'Insolvency

Resolution Professional' is present in person and filed an affidavit

wherein following statement has been made: -

"2. That in terms of Section 15 of the Code and as

required under Regulation 6(2)(b)(i) of the Insolvency

and Bankruptcy Board of India (Insolvency Resolution

Process for Corporate persons) Regulations, 2016, and

also per direction of the Hon'ble Bench vide its order

passed on 20.4.17, a public announcement was issued

in two newspapers in the state of Jharkhand where the 3

Registered Office of the Corporate Debtor is situated;

The public announcement were issued in the

Jamshedpur editions of The Telegraph (English) and

Chamakta Aaina (Hindi) on 26.4.17. A copy of the

public announcement as published in both the

newspapers are annexed hereto and collectively

marked as Annexure - B.

3. That in terms of Section 15 of the Code and as

required under Regulation 6(2)(b)(iii) of the Insolvency

and Bankruptcy Board of India (Insolvency Resolution

Process for Corporate Persons) Regulations, 2016, the

same public announcement was also uploaded on the

website of the Insolvency and Bankruptcy Board of

India (IBBI).

4. That the last date for submission of claims was 4,

5, 1 7per the Public Announcement. Asper Regulations,

a creditor, who failed to su bmit proof of claim within the

time stipulated in the public announcement, may submit

such proof to the Interim Resolution Professional or the

Resolution Professional, as the case may be, till the

approval of a resolution plan by the committee.

5. That pursuant to the public announcement, claims

from only 2 creditors have been received till date as per

details given below -

4

SL. NAME OF CONTACT CATEGORY SECURITY AMOUNT Date NO. CREDITO PERSON CREATED CLAIMED R (Rs.) Claim

ed

Punjab Preeti Jha, Chief . Financial Fixed 2,87,55,64 Email National Manager, Creditor- Deposit of 9/- on Bank, bo0225(pnb.co.in Cash 1,85,10,50 4.5.1 Bistupur Credit 5/-, Block 7 Branch, Account assets Jamshedp including ur Leasehold Account factory Number- land 02250031 71160 2 Punjab Preeti Jha, Chief Financial Cash 54,71,127/ Email National Manager, Creditor- margin of - on Bank, bo0225(ipnb,co.in Bank 100%- 4.5.1 Bistupur Guarantee 54,71,127/ 7 Branch, -, Block Jamshedp assets ur including Account Leasehold Number- factory 02250031 land 71160 3 Parker Priti Baria, Operationa None 45,73,250/ Email Hannifin Company 1 Creditor- - of India Pvt. Secretary, Applicant 8.5.1 Ltd. priti.banaparker. 7 corn

6. That the meetings of the Committee of Creditors,

consisting solely of Punjab National Bank were held on

6.5.17 and 12.7.17 respectively.

7. That progress reports were submitted by me before

the Hon'ble National Company Law Tribunal, Kolkata

Bench, Kolkata as per below details -

1st Progress Report on 28.4.17 and 4th Progress

Report on 23.6.17."

6. 'Insolvency Resolution Professional' submits that the claim amount

of all the creditors have been paid. The Punjab National Bank has not declared their account as Non-Performing Asset (NPA) account and the

account is standard account from where payment is made.

7. As per Rule 8 of the I & B Code (Application to Adjudicating

Authority) Rules 2016, the Adjudicating Authority may permit

withdrawal of the application on the request of the applicant before its

admission. Tribunal has no power to allow any applicant or any other

person to withdraw the application after admission, as apparent from

Rule 8 and quoted below:

"8. Withdrawal of application- The Adjudicating Authority

may permit withdrawal of the application made under rules 4,

6 or 7, as the case may be, on a request made by the applicant

before its admission."

8. In the aforesaid circumstances, Ld. Adjudicating Authority having

refused the applicant- Parker Hannifin India Pvt. Ltd. to withdraw the

application after admission of the same, no interference is called for in

absence of any illegality.

9. In so far as the order dated 20th April, 2017 by which the application

under section 9 was admitted is concerned, we are not deciding the

question of legality and proprietary of the said order having not

challenged. However, we have noticed the submissions made on behalf of

the appellant and not disputed by the respondent that order dated 20th

April, 2017 has been passed, in violation of Rules of natural justice

without notice to the 'Corporate Debtor'. This is also clear from the order 6

dated 20th April, 2017, wherein the appearance of the

applicant/ respondent has been recorded but no reference of the

appearance of the 'Corporate Debtor' has been made by the Adjudicating

Authority.

10. If the order dated 20th April, 2017, would have been challenged by

the appellant, it was open to this Appellate Tribunal to set aside the order

dated 20th April, 2017 and then to permit the 'Operational Creditor' to

withdraw the application, in view of settlement. In the present case as the

order of admission is not under challenge and the application cannot be

withdrawn, we cannot grant the relief as sought for by the appellant.

11. However, we make it clear that the 'Corporate Insolvency Resolution

Process' starts with admission of an application under sections 7 or 9 or

10 of the I & B Code and comes to an end if resolution plan is approved

under sub-section (1) of Section 31 and if not approved after completion

of liquidation proceeding. As per the procedure, a Committee of Creditors

is to be formed under section 21, which reads as follows:

"21. Committee of creditors. - (1) The interim

resolution professional shall after collation of all claims

received against the corporate debtor and determination

of the financial position of the corporate debtor,

constitute a committee of creditors.

(2) The committee of creditors shall comprise allfinancial.

creditors of the corporate debtor:

7

Provided that a related party to whom a

corporate debtor owes a financial debt shall not have

any right of representation, participation or voting in a

meeting of the committee of creditors. Personnel to

extend cooperation to interim resolution professional.

Management of operations of corporate debtor as going

concern. Committee of creditors.

(3) Where the corporate debtor owes financial debts to

two or more financial creditors as part of a consortium

or agreement, each such financial creditor shall be part

of the committee of creditors and their voting share shall

be determined on the basis of the financial debts owed

to them.

(4) Where any person is a financial creditor as well as

an operational creditor, -

(a) such person shall be a financial creditor to the

extent of the financial debt owed by the corporate

debtor, and shall be included in the committee of

creditors, with voting share proportionate to the

extent offinancial debts owed to such creditor;

(b) such person shall be considered to be an

operational creditor to the extent of the operational

debt owed by the corporate debtor to such creditor. (5) Where an operational creditor has assigned or legally

transferred any operational debt to a financial creditor,

the assignee or transferee shall be considered as an

operational creditor to the extent of such assignment or

legal transfer.

(6) Where the terms of the financial debt extended as

part of a consortium arrangement or syndicated facility

or issued as securities provide for a single trustee or

agent to act for all financial creditors, each financial

creditor may--

(a). authorise the trustee or agent to act on his

behalf in the committee of creditors to the extent of

his voting share;

(b) represent himself in the committee of creditors

to the extent of his voting share;

(c) appoint an insolvency professional (other than

the resolution professional) at his own cost to

represent himself in the committee of creditors to

the extent of his voting share; or

(d) exercise his right to vote to the extent of his

voting share with one or more financial creditors

jointly or severally.

9

(7) The Board may specify the manner of determining

the voting share in respect of financial debts issued as

securities under sub-section (6).

(8) All decisions of the committee of creditors shall be

taken by a vote of not less than seventy-five per cent. of

voting share of the financial creditors:

Provided that where a corporate debtor does not

have any financial creditors, the committee of creditors

shall be constituted and comprise of such persons to

exercise such functions in such manner as may be

specified by the Board.

(9) The committee of creditors shall have the right to

require the resolution professional to furnish any

financial information in relation to the corporate debtor

at any time during the corporate insolvency resolution

process.

(10) The resolution professional shall make available

any financial information so required by the committee

of creditors under sub-section (9) within a period of

seven days of such requisition."

12. It should be followed by meeting of Committee of Creditors under

section 24 for the purpose as mentioned therein and quoted below: - 10

"24. Meeting of Committee of Creditors. - (1) The

members of the committee of creditors may meet in

person or by such electronic means as may be

specified.

(2) All meetings of the committee of creditors shall be

conducted by the resolution professional.

(3) The resolution professional shall give notice of

each meeting of the committee of creditors to--

(a) members of Committee of creditors;

(b) members of the suspended Board of Directors or

the partners of the corporate persons, as the case

may be;

(c) operational creditors or their representatives if

the amount of their aggregate dues is not less than

ten per cent. of the debt.

(4) The directors, partners and one representative of

operational creditors, as referred to in sub-section (3),

may attend the meetings of committee of creditors,

but shall not have any right to vote in such meetings:

Provided that the absence of any such director,

partner or representative of operational creditors, as 11

the case may be, shall not invalidate proceedings of

such meeting.

(5) Any creditor who is a member of the committee of

creditors may appoint an insolvency professional

other than the resolution professional to represent

such creditor in a meeting of the committee of

creditors:

Provided that the fees payable to such

insolvency professional representing any individual

creditor will be borne by such creditor. Resolution

professional to conduct corporate insolvency

resolution process. Meeting of committee of creditors.

(6) Each creditor shall vote in accordance with the

voting share assigned to him based on the financial

debts owed to such creditor.

(7) The resolution professional shall determine the

voting share to be assigned to each creditor in the

manner specified by the Board.

(8) The meetings of the committee of creditors shall

be conducted in such manner as may be specjfied." 12

13. In the meantime, Interim Resolution Professional is required to

perform duties in terms of Section 23 and to protect and preserve the

assets of the 'Corporate Debtor' under Section 25.

14. After collection of all the materials, the Committee of Creditors are

required to submit a resolution plan to the Resolution Professional on the

basis of information memorandum as per Section 30, as quoted below: -

"30. Submission of resolution plan. - (1) A

resolution applicant may submit a resolution plan to

the resolution professional prepared on the basis of

the information memorandum.

(2) The resolution professional shall examine each

resolution plan received by him to confirm that each

resolution plan--

(a) provides for the payment of insolvency

resolution process costs in a manner specified

by the Board in priority to the repayment of

other debts of the corporate debtor;

(b) provides for the repayment of the debts of

operational creditors in such manner as may

be specified by the Board which shall not be

less than the amount to be paid to the

operational creditors in the event of a 13

liquidation of the corporate debtor under

section 53;

(c) provides for the management of the affairs

of the Corporate debtor after approval of the

resolution plan;

(d) the implementation and supervision of the

resolution plan;

(e) does not contravene any of the provisions of

the law for the time being in force;

(J) conforms to such other requirements as may

be specified by the Board.

(3)

The resolution professional shall present to the

committee of creditors for its approval such resolution

plans which confirm the conditions referred to in sub-

section (2).

(4)The committee of creditors may approve a

resolution plan by a vote of not less than seventy-five

per cent. of voting share of the financial creditors.

(5) The resolution applicant may attend the meeting of

the committee of creditors in which the resolution plan

of the applicant is considered:

14

Provided that the resolution applicant shall not

have a right to vote at the meeting of the committee of

creditors unless such resolution applicant is also a

financial creditor.

(6) The resolution professional shall submit the

resolution plan as approved by the committee of

creditors to the Adjudicating Authority."

15. As noticed above, the Adjudicating Authority, thereafter, if satisfied

with resolution plan approved by the committee of creditors and meets

the requirements as referred to in sub-section (2) of section 30, it shall

by order may approve the resolution plan in terms of sub-section (1) of

Section 31, which 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, guarantors and other

stakeholders involved in the resolution plan. Submission of

resolution plan. Approval of resolution plan.

(2) Where the Adjudicating Authority is satisfied that the

resolution plan does not confirm to the requirements 15

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."

16. Only if the resolution plan does not confirm the requirements

referred to in sub-section (1) of Section 31, the Adjudicating Authority

may reject the same. However, if approval of plan under sub-section (1)

of Section 31 is granted, the Moratorium order passed by the

Adjudicating Authority under Section 14 shall cease to have its effect in

view of sub-section (3) of Section 31.

17. In the present case, it is informed that in terms of Section 21 the

meeting of the Committee of Creditors has taken place. Meeting of the

Committee of Creditors as required under section 24 after notice has also

taken place, as informed by. Interim Resolution Professional. 16

18. All the information having received by 'Insolvency Resolution

Professional' after publication of notice in the newspaper and all creditors

having satisfied, except Punjab National Bank who has reported that

there is no default and they intend to proceed with their business with

the 'Corporate Debtor', the 'Insolvency Resolution Professional' is

required to prepare a memorandum to that extent under section 29 of the

I & B Code. Thereafter, in case(s) where all creditors have been satisfied

and there is no default with any other creditor, the formality of

submission of resolution plan under section 30 or its approval under

section 31 is required to be expedited on the basis of plan if prepared. In

such case, the Adjudicating Authority without waiting for 180 days of

resolution process, may approve resolution plan under section 31, after

recording its satisfaction that all creditors have been paid/ satisfied and

any other creditor do not claim any amount in absence of default and

required to close the Insolvency Resolution Process. On the other hand,

in case the Adjudicating Authority do not approve resolution plan, will

proceed in accordance with law.

19. It is made clear that Insolvency Resolution Process is not a recovery

proceeding to recover the dues of the creditors. I & B Code, 2016 is an

Act relating to reorganisation and insolvency resolution of corporate

persons, partnership firms and individuals in a time bound manner for

maximisation of value of assets of such persons and to promote

entrepreneurship, availability of credit and balance the interests of all the

stakeholders including the Government dues. Such being the object of 17

the I & B Code 2016, if the interest of all the stakeholders are balanced

and satisfied then to promote entrepreneurship and to ensure that the

company continue to function as on going concern, it is desirable to close

such proceeding without delay and going into technical rigour of one or

other provisions, which are all otherwise futile for all purpose.

20. In the circumstances, instead of interfering with the impugned

order, we remit the case to the Adjudicating Authority for its satisfaction

whether the interest of all stakeholders have been satisfied and whether

one or other creditor has not raised any claim like Punjab National Bank,

alter giving notice to individual claimant and taking into consideration of

the Insolvency Resolution plan and report of the Insolvency Resolution

Professional as may be prepared, the Adjudicating Authority may close

the proceedings.

21. Hope and trust that all the formalities will be completed by group

of 'Financial Creditors' and Insolvency Resolution Professional

expeditiously and the Adjudicating Authority will pass appropriate order,

in accordance with law after notice of hearing the parties

22. The appeal stands disposed of with aforesaid observations and

directions. However, in the facts and circumstances, there shall be no

order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

ar