Sarang Bhand vs West Coast Ventures (India) Pvt. Ltd. & ...

Sarang Bhand ...Appellant

Versus

West Coast Ventures (India) Pvt. Ltd. & Anr. ...Respondents

Present:

For Appellant : Mr. Ameya Gokhale, Mr. Saurabh Jain, Ms. Jasveen Kaur, Mr. Vijayant Paliwal and Mr. Shantanu Chaturvedi, Advocates

ORDER

08.02.2019 The respondent - 'West Coast Ventures (India) Private Limited'

(Operational Creditor) filed an application under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (for short, 'I&B Code') for initiation of 'corporate

insolvency resolution process' against 'Organic Recycling Systems Pvt. Ltd.'

(Corporate Debtor). The application having admitted by the Adjudicating

Authority (National Company Law Tribunal), Mumbai Bench by order dated 30th

August, 2018, the present appeal has been preferred by the shareholder of the

'Corporate Debtor'. Learned counsel appearing on behalf of the appellant

submitted that the application under Section 7 was filed on 28th September,

2017. The case was heard on the question whether the respondent is a 'financial

creditor' or not and thereafter the impugned order was passed on 30th August,

2018. This order has not been even shown on the website and certified copy of

the impugned order was received by the 'Corporate Debtor' on 20th November, 2

2018. Learned counsel for the appellant submitted that the main issue whether

the respondent can be termed to be a 'financial creditor' within the meaning of

Section 5(7) of the I&B Code has not appropriately considered. Learned counsel

submits that 'West Coast Ventures (India) Pvt. Ltd.' (so called Financial Creditor)

formed a joint venture with M/s. Organic Recycling Systems Pvt. Ltd. (Corporate

Debtor) for project to project basis. Both the parties desired to bid, execute and

operate various municipal solid waste to Energy Project in consortium with each

other.

Notice was issued on the respondent but initially returned unserved with

note that 'the addressee (Financial Creditor) has left the place". Notice on the

'Corporate Debtor' has been served. It was in this background we directed the

appellant to make paper publication in newspapers one English ('Indian Express'

Bengaluru Edition) and another Kannada ('('Udayavani' Bengaluru Edition)

intimating them that 8th February, 2019at 10.30 A.M. is the next date fixed for

admission and the appeal may be disposed of at the stage of admission. In spite

of service of notice through newspaper, the respondent - West Coast Ventures

(India) Pvt. Ltd. has not appeared. It is informed that the 'Resolution

Professional' as was appointed has not taken over the 'corporate debtor',

therefore we find that the 'corporate debtor and the 'Resolution Professional' in

spite of service not appeared.

2. From the record we find that 'memorandum of understanding' dated 10th

November, 2014 was executed between the 'corporate debtor and the respondent

'West Coast Ventures (India) Pvt. Ltd.' for funding of Rs. 43 crores from time to

time as per timeline mentioned therein. Such funding were to be made eventual

investment in the SPVs for Pune and Bangalore Municipal Solid Waste to Energy

Company Appeal (AT) (Insolvency) No. 746 of 2018 3

Projects. SPV for Bangalore Project with Organic Waste India Private Limited

was already in existence as on the date of the 'MOU' and the SPV for the Pune

Project namely Pune Urban Recyclers Pvt. Ltd. was incorporated on 9th January,

2015. In terms of the 'Memorandum of Understanding' between the parties, the

respondent also invested a joint venture company for execution of the project.

Thus, we find that both the 'corporate debtor' and the respondent 'West Coast

Ventures (India) Private Limited' invested money for the purpose of projects of

equity share of third party and, therefore, it cannot be held that the respondent

'West Coast Ventures (India) Private Limited' invested in the company namely

'M/s. Organic Recycling Systems Pvt. Ltd.' (Corporate Debtor) and thereby 'West

Coast Ventures (India) Private Limited' cannot be termed to be a 'financial

creditor' of M/s. Organic Recycling systems Pvt. Ltd. (Corporate Debtor). The

Adjudicating Authority though noticed that such investments were made for

purchase of equity share of 3rd party but failed to consider the real issue whether

the respondent 'West Coast Ventures (India) Private Limited' can be termed to be

a 'financial creditor' of 'Organic Recycling Systems Pvt. Ltd.' (Corporate Debtor).

3. In view of the observations aforesaid, we hold that an application under

Section 7 filed by 'West Coast Ventures (India) Private Limited' against 'Organic

Recycling systems Pvt. Ltd.' (Corporate Debtor) was not maintainable. The

impugned order dated 30th August, 2018 is accordingly set aside.

4. In effect, order (s) passed by Ld. Adjudicating Authority appointing 'Interim

Resolution Professional', declaring moratorium, freezing of account and all other

order (s) passed by Adjudicating Authority pursuant to impugned order and

action taken by the 'Resolution Professional', including the advertisement

published in the newspaper calling for applications all such orders and actions

Company Appeal (AT) (Insolvency) No. 746 of 2018 4

are declared illegal and are set aside. The application preferred by the 1st

Respondent under Section 7 of the I&B Code is dismissed. The Adjudicating

Authority will now close the proceeding. The 2nd Respondent Company is

released from all the rigour of law and is allowed to function independently

through its Board of Directors from immediate effect.

5. The Adjudicating Authority will fix the fee of 'Interim Resolution

Professional' and 'Organic Recycling Systems Pvt. Ltd.' (2nd Respondent) will pay

the fees for the period he has functioned. The appeal is allowed with aforesaid

observation and direction. However, in the facts and circumstances of the case,

there shall be no order as to cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/sk/

Company Appeal (AT) (Insolvency) No. 746 of 2018