Shashi Kanth Jain vs Alloys & Metals (India)

Shashi Kanth Jain ...Appellant Versus M/s. Alloys & Metals (India) ...Respondent Present: For Appellant : Ms. Poonam Agarwal, Mr. Dilip Agarwal and Ms. Rachna Singh, Advocates

For Respondent : Mr. Sumant Batra, Ms. Srishti Kapoor and Ms. Priyanka Anand, Advocates Mr. Vivek Sibal and Mr. Yash Patel, Advocate for R.P.

ORDER

08.01.2019 This appeal has been preferred by the appellant - 'Mr. Shashi

Kanth Jain', Director of 'Hindustan Paper Corporation Ltd.' (Corporate Debtor)

against the order dated 13th June, 2018 passed by the Adjudicating Authority

(National Company Law Tribunal) New Delhi Bench whereby and whereunder

the application under Section 9 of the 'I&B Code' preferred by 'M/s. Alloys &

Metals (India)' has been admitted, order of moratorium has been passed and the

'Resolution Professional' has been appointed.

2. Learned counsel appearing on behalf of the appellant submits that the

Adjudicating Authority had not provided sufficient opportunity to the 'corporate

debtor' to file reply though the notice was issued to the 'corporate debtor' and

after hearing the parties, the impugned order was passed. One Mr. Dilip

Agarwal, Advocate appears on behalf of the 'corporate debtor' and raised all the

objections.

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3. It is next contended that many of the documents were not proper or

fabricated but such objection was not raised by the 'corporate debtor' before the

Adjudicating Authority. On the other hand from the record we find that the

Demand Notice under Section 8(1) of the I&B Code, the 'corporate debtor' has

not disputed the amount claimed by the 'operational creditors' .

4. Learned counsel for the appellant submitted that the accounts have not

yet been considered but that cannot be a ground to set aside the order.

5. In "Innoventive Industries Ltd. v. ICICI Bank, (2018) - (2018) 1 SCC

407] (Civil Appeals Nos. 8337-38 of 2017)" wherein the Hon'ble Supreme

Court has held :

"20. Under Section 4 of the Code, Part II applies to

matters relating to the insolvency and liquidation

of corporate debtors, where the minimum amount

of default is rupees one lakh. Sections 6, 7 and 8

form part of one scheme and are very important for

the decision in the present case. They read as

follows:

"6. Persons who may initiate corporate

insolvency resolution process.--Where

any corporate debtor commits a default, a

financial creditor, an operational creditor or

the corporate debtor itself may initiate

corporate insolvency resolution process in

Company Appeal (AT) (Insolvency) No. 373 of 2018 3

respect of such corporate debtor in the

manner as provided under this Chapter.

7. Initiation of corporate insolvency

resolution process by financial

creditor.--(1) A financial creditor either by

itself or jointly with other financial creditors

may file an application for initiating

corporate insolvency resolution process

against a corporate debtor before the

adjudicating authority when a default has

occurred.

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

a default includes a default in respect of a

financial debt owed not only to the applicant

financial creditor but to any other financial creditor

of the corporate debtor.

(2) The financial creditor shall make an application

under sub-section (1) in such form and manner and

accompanied with such fee as may be prescribed.

(3) The financial creditor shall, along with the

application furnish--

(a) record of the default recorded with the

information utility or such other record or

evidence of default as may be specified;

Company Appeal (AT) (Insolvency) No. 373 of 2018 4

(b) the name of the resolution professional

proposed to act as an interim resolution

professional; and

(c) any other information as may be specified

by the Board.

(4) The adjudicating authority shall, within fourteen

days of the receipt of the application under sub-

section (2), ascertain the existence of a default

from the records of an information utility or on the

basis of other evidence furnished by the financial

creditor under sub-section (3).

(5) Where the adjudicating authority is satisfied

that--

(a) a default has occurred and the application

under sub-section (2) is complete, and there is no

disciplinary proceedings pending against the

proposed resolution professional, it may, by order,

admit such application;

or

(b) default has not occurred or the application

under sub-section (2) is incomplete or any

disciplinary proceeding is pending against the

proposed resolution professional, it may, by order,

reject such application:

Company Appeal (AT) (Insolvency) No. 373 of 2018 5

Provided that the adjudicating authority shall,

before rejecting the application under clause (b) of

sub-section (5), give a notice to the applicant to

rectify the defect in his application within seven

days of receipt of such notice from the adjudicating

authority.

(6) The corporate insolvency resolution process shall

commence from the date of admission of the

application under sub-section (5).

(7) The adjudicating authority shall communicate--

(a) the order under clause (a) of sub-section (5) to

the financial creditor and the corporate debtor;

(b) the order under clause (b) of sub-section (5) to

the financial creditor, within seven days of

admission or rejection of such application, as the

case may be.

8. Insolvency resolution by operational

creditor.--(1) An operational creditor may, on the

occurrence of a default, deliver a demand notice of

unpaid operational debtor copy of an invoice

demanding payment of the amount involved in the

default to the corporate debtor in such form and

manner as may be prescribed.

(2) The corporate debtor shall, within a period of ten

days of the receipt of the demand notice or copy of

Company Appeal (AT) (Insolvency) No. 373 of 2018 6

the invoice mentioned in sub-section (1) bring to the

notice of the operational creditor--

(a) existence of a dispute, if any, and record of the

pendency of the suit or arbitration proceedings

filed before the receipt of such notice or invoice in

relation to such dispute;

(b) the repayment of unpaid operational debt--

(i) by sending an attested copy of the record of

electronic transfer of the unpaid amount from the

bank account of the corporate debtor; or

(ii) by sending an attested copy of record that the

operational creditor has encashed a cheque issued by

the corporate debtor.

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

"demand notice" means a notice served by an

operational creditor to the corporate debtor

demanding repayment of the operational debt in

respect of which the default has occurred."

21. Section 12 provides for a time-limit for completion

of the insolvency resolution process and reads as

follows:

"12. Time-limit for completion of insolvency

resolution process.--(1) Subject to sub-section

(2), the corporate insolvency resolution process

Company Appeal (AT) (Insolvency) No. 373 of 2018 7

shall be completed within a period of one hundred

and eighty days from the date of admission of the

application to initiate such process.

(2) The resolution professional shall file an

application to the adjudicating authority to extend

the period of the corporate insolvency resolution

process beyond one hundred and eighty days, if

instructed to do so by a resolution passed at a

meeting of the committee of creditors by a vote of

seventy-five per cent of the voting shares.

(3) On receipt of an application under sub-

section (2), if the adjudicating authority is satisfied

that the subject-matter of the case is such that

corporate insolvency resolution process cannot be

completed within one hundred and eighty days, it

may by order extend the duration of such process

beyond one hundred and eighty days by such

further period as it thinks fit, but not exceeding

ninety days:

Provided that any extension of the period of

corporate insolvency resolution process under this

section shall not be granted more than once."

29. The scheme of Section 7 stands in contrast with

the scheme under Section 8 where an operational

creditor is, on the occurrence of a default, to first

Company Appeal (AT) (Insolvency) No. 373 of 2018 8

deliver a demand notice of the unpaid debt to the

operational debtor in the manner provided in

Section 8(1) of the Code. Under Section 8(2), the

corporate debtor can, within a period of 10 days of

receipt of the demand notice or copy of the invoice

mentioned in sub-section (1), bring to the notice of

the operational creditor the existence of a dispute

or the record of the pendency of a suit or arbitration

proceedings, which is pre-existing--i.e. before

such notice or invoice was received by the

corporate debtor. The moment there is existence of

such a dispute, the operational creditor gets out of

the clutches of the Code."

6. It is not in dispute that the 'debt' is payable by the 'corporate debtor'

and the 'corporate debtor' is defaulted in payment of the 'debt' and the records

were complete, we find no ground to interfere with the impugned order.

7. In absence of any merit, the appeal is dismissed. No cost.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/sk/

Company Appeal (AT) (Insolvency) No. 373 of 2018