State Of Rajasthan Through Officer In ... vs Arunava Sikdar Resolution ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 733 of 2022 (Arising out of Order dated 24.06.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench in IA No.327/JPR/2019 in CP No.(IB) 54(PB)/2018)

IN THE MATTER OF: State of Rajasthan Through Officer in Charge Panchu Ram Sharma, Joint Director, Industries Rajasthan Udyog Bhawan, Tilak Marg, Jaipur-302005. .... Appellant Vs 1. Arunava Sikdar, Resolution Professional, Jaipur Metals & Electricals Limited D-3, LGF, Lajpat Nagar, Part-1, New Delhi-110024. 2. Alchemist Asset Reconstruction Company Limited, A-270, 1st and 2nd Floor, Defence Colony, New Delhi, Delhi-110024. 3. Asset Reconstruction Company (India) Limited 10th Floor, the Ruby, 29, Tulsi Pipe road, Dadar West, Mumbai, Maharashtra-400028. .... Respondents

Present: For Appellant: Dr. Abhishek Manu Singhvi, Sr. Advocate Mr. Prakul Khurana, Mr. Ankit Sareen, Mr. Yash Tandon, Mr. Hemant Kothari, Mr. Gourav, Advocates

For Respondents: Mr. Abhijeet Sinha, Mr. Ashu Kansal, Ms. Heena Kochar, Advocates for R-1.

Mr. Ramji Srinivasan, Sr. Advocate, Mr. Gaurav Singh, Ms. Varsha Banerjee, Ms. Shruti Pandey, Advocates for R-2.

Mr. Abhirup Dasgupta, Mr. Ishaan Duggal, Mr. Pathik Choudhury, Advocates for R-3.

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 1 With Company Appeal (AT) (Insolvency) No. 734 of 2022 (Arising out of Order dated 24.06.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench in IA No.328/JPR/2019 in CP No.(IB) 54(PB)/2018)

IN THE MATTER OF: State of Rajasthan Through Officer in Charge Panchu Ram Sharma, Joint Director, Industries Rajasthan Udyog Bhawan, Tilak Marg, Jaipur-302005. .... Appellant Vs 1. Arunava Sikdar, Resolution Professional, Jaipur Metals & Electricals Limited D-3, LGF, Lajpat Nagar, Part-1, New Delhi-110024. 2. Alchemist Asset Reconstruction Company Limited, A-270, 1st and 2nd Floor, Defence Colony, New Delhi, Delhi-110024. 3. Asset Reconstruction Company (India) Limited 10th Floor, the Ruby, 29, Tulsi Pipe road, Dadar West, Mumbai, Maharashtra-400028. .... Respondents

Present: For Appellant: Dr. Abhishek Manu Singhvi, Sr. Advocate Mr. Prakul Khurana, Mr. Ankit Sareen, Mr. Yash Tandon, Mr. Hemant Kothari, Mr. Gourav, Advocates For Respondents: Mr. Abhijeet Sinha, Mr. Ashu Kansal, Ms. Heena Kochar, Advocates for R-1. Mr. Ramji Srinivasan, Sr. Advocate, Mr. Gaurav Singh, Ms. Varsha Banerjee, Ms. Shruti Pandey, Advocates for R-2. Mr. Abhirup Dasgupta, Mr. Ishaan Duggal, Mr. Pathik Choudhury, Advocates for R-3.

With Company Appeal (AT) (Ins.) No. 996 of 2022 (Arising out of Order dated 24.06.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench in IA No.301/JPR/2019 in CP No.(IB) 54(PB)/2018)

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 2 IN THE MATTER OF: State of Rajasthan Through Officer in Charge Panchu Ram Sharma, Joint Director, Industries Rajasthan Udyog Bhawan, Tilak Marg, Jaipur-302005. .... Appellant Vs Arunava Sikdar, Resolution Professional, Jaipur Metals & Electricals Limited D-3, LGF, Lajpat Nagar, Part-1, New Delhi-110024. .... Respondent

Present: For Appellant: Dr. Abhishek Manu Singhvi, Sr. Advocate Mr. Prakul Khurana, Mr. Ankit Sareen, Mr. Yash Tandon, Mr. Hemant Kothari, Mr. Gourav, Advocates

For Respondent: Mr. Abhijeet Sinha, Mr. Ashu Kansal, Ms. Heena Kochar, Advocates for R-1.

JUDGMENT

ASHOK BHUSHAN, J.

These three Appeal(s) have been filed by the State of Rajasthan

through Officer-in-Charge Panchu Ram Sharma, Joint Director, Industries,

challenging order dated 24.06.2022 passed by National Company Law

Tribunal, Jaipur Bench in IA No.327/JPR/2019 in Company Appeal (AT)

(Insolvency) No. 733 of 2022. Company Appeal (AT) (Insolvency) No. 734 of

2022 has been filed against the same order passed in IA No.328/JPR/2019.

Company Appeal (AT) (Insolvency) No. 996 of 2022 has also been filed

against the order of the same date passed in IA No.301/JPR/2019. All the

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 3 Appeal(s) have been heard together and are being decided by this common

judgment.

2. We need to notice background facts of the case giving rise to these

Appeal(s):

(i) The Corporate Debtor - Jaipur Metals & Electricals Limited

was incorporated in 1943 and was engaged in the

manufacturing of electrical meters, aluminium and copper

conductors etc. The Management of the Corporate Debtor was

acquired by the Government of Rajasthan in the year 1977.

Since then, the Secretary/ Joint Secretary of the Government

of Rajasthan was the Chairman/ Managing Director of the

Corporate Debtor. The Corporate Debtor was declared as relief

undertaking by Government of Rajasthan in the year 1978,

under the Rajasthan Relief Undertakings Act, 1961

(hereinafter referred as the "1961 Act"), which was extended

by Government of Rajasthan by various notifications from

time-to-time upto 07.12.2016.

(ii) The Corporate Debtor has taken various financial facilities

from different Banks, namely - IDBI, SBBJ, Central Bank of

India, State Bank of Indore and Oriental Bank of Commerce.

IDBI, State Bank of Bikaner and Jaipur, Central Bank of India,

State Bank of Indore and Oriental Bank of Commerce had

assigned their debts in favour of Alchemist Asset

Reconstruction Company Ltd. (hereinafter referred to

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 4 "Alchemist"). The debt of Central Bank of India was assigned

to Asset Reconstruction Company (India) Ltd. (hereinafter

referred to "ARCIL")

(iii) The Alchemist filed an Application under Section 7 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to

as the "IBC") on 11.01.2018. Notices were issued to the

Corporate Debtor in Section 7 Application. A reply to the

Application was also filed by the Corporate Debtor. The

Adjudicating Authority vide order dated 13.04.2018 admitted

Section 7 Application and appointed Interim Resolution

Professional ("IRP").

(iv) The Adjudicating Authority vide order dated 13.06.2019,

directed the State Government of Rajasthan as well as other

Directors, who were nominee of the workers to be impleaded in

the proceedings.

(v) The Corporate Debtor being in loss, a reference was filed before

the Board for Industrial and Financial Reconstruction ("BIFR")

for its revival and the same was registered as Case

No.03/1999. On 26.09.2002, the BIFR after giving opportunity

to Government of Rajasthan for submitting a revival proposal

for the Corporate Debtor, confirmed its opinion to wind up of

the Corporate Debtor under Section 20(1) of the Sick Industrial

Companies (Special Provisions) Act, 1985 ("SICA") and

forwarded its opinion to the High Court of Rajasthan and

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 5 Jaipur. An Appeal was filed by the Coordination Committee of

the Workers Union against BIFR order dated 26.09.2022 before

the Appellate Authority for Industrial and Financial

Reconstruction ("AAIFR"), which was dismissed on

11.05.2005.

(vi) On the opinion forwarded by BIFR, Company Petition No.19 of

2009 was registered before the Rajasthan High Court. In

Company Petition No.19 of 2009 and other connected matters,

various writ petitions were filed by the Labour Union. The High

Court vide interim order dated 26.04.2018 stayed the

implementation of the order passed by the Adjudicating

Authority dated 13.04.2018. The High Court passed a final

judgment on 01.06.2018 in which it refused to transfer the

winding up proceedings pending before it and set-aside the

order of the Adjudicating Authority dated 13.04.2018 stating

that it was passed without jurisdiction. Against the order

dated 01.06.2018 passed by the High Court, Civil Appeal No.

12023 of 2018 was filed by the Jaipur Metals & Electricals

Employees Organisation in the Hon'ble Supreme Court, which

Appeal was allowed vide judgment dated 12.12.2018. The

judgment of the High Court was set-aside and Hon'ble

Supreme Court disapproved the view of the High Court that

proceeding before NCLT was without jurisdiction. In

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 6 paragraph 18 of the judgment of the Hon'ble Supreme Court,

following was held:

"18. ... "We are of the view that the NCLT was absolutely correct in applying Section 238 of the Code to an independent proceedings instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held that the proceedings before the NCLT were without jurisdiction. On this score, therefore, the High Court judgment has to be set aside. The NCLT proceedings will now continue from the stage at which they have been left off. Obviously, the company petition pending before the High Court cannot be proceeded with further in view of Section 238 of the Code. The writ petitions that are pending before the High Court have also to be disposed of in light of the fact that proceedings under the Code must run their entire course. We, therefore, allow the appeal and set aside the High Court's judgment."

(vii) Consequent to the order passed by the Hon'ble Supreme Court,

the proceedings were revived before the Adjudicating

Authority. The RP filed an Application under Section 19, sub-

section (2) of the IBC being IA No.99/JPR/2019 seeking

directions against the State of Rajasthan and other authorities

to cooperate in the resolution proceedings.

(viii) The Government of Rajasthan filed IA No.327/JPR/2019, in

which following prayer was made by the State of Rajasthan:

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 7 "Therefore in view of the aforesaid it is most respectfully prayed before this Hon'ble Tribunal to pass necessary directions to call for the original loan agreement dated 21st March 1996 executed between JMEL and IDBI and impound that same being insufficiently stamped and direct the Resolution Professional to reject the claim of Alchemist Asset Reconstruction Company Limited while making a reference to the collector mandated under the law."

(ix) Notice was issued to Alchemist by the State of Rajasthan under

Section 37 read with Section 51 and 53 of the Rajasthan

Stamps Act directing the Alchemist to pay requisite stamps

duty on the documents which were executed as Asset Credit

Agreement and other ancillary documents as mentioned in the

notice. Writ Petition No.7747/2021 and 7748/2021 was filed

by the Alchemist in the Rajasthan High Court, challenging the

notice in which initially an interim order was passed, but

subsequently vide judgment dated 01.09.2021, the Writ

Petitions were dismissed. In D.B. Special Appeal Writ No.1032

of 2021, the Division Bench of the High Court noted that Stamp

Duty Authority had passed final orders in pursuance to show

cause notice. The Division bench passed an interim order

preventing the Respondent - State of Rajasthan and the Stamp

Duty Authority from recovering the stamp duties in relation to

the show cause notice dated 27.04.2021.

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 8

(x) An IA No.328/JPR/2019 was filed by the State of Rajasthan,

where following prayers were made:

"Therefore in the light of the above stated factual and legal position, it is most respectfully prayed before this Hon'ble Tribunal that it may kindly be pleased to set aside the action of the RP admitting the claim filed by Alchemist Asset Reconstruction Company Limited and Asset Reconstruction Company (India) Limited being time barred and pass appropriate direction pursuant thereto."

(xi) Another IA No.301/JPR/2019, was filed by the State of

Rajasthan, in which Application prayer was made to substitute

the Resolution Professional Mr. Arunava Sikdar with a new RP.

The prayer in the said Application is as follows:

"Therefore, in the light of the above stated factual and legal position, it is most respectfully prayed before this Hon'ble Tribunal to pass necessary directions substituting the Present RP Mr. Arunava Sikdar with a new RP to continue with the ongoing Corporate Insolvency Resolution Process in the matter of Jaipur metals and Electricals Limited."

(xii) All the above three Applications, came to be heard by the

Adjudicating Authority and have been rejected by the

impugned orders dated 24.06.2022. Aggrieved by which orders

these Appeal(s) have been filed by the State of Rajasthan.

3. We have Dr. Abhishek Manu Singhvi, learned Senior Counsel

appearing for the Appellant; Shri Abhijeet Sinha, learned Counsel appeared

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 9 for Resolution Professional; Shri Ramji Srinivasan, learned Senior Counsel

appeared for Alchemist; and Shri Abhirup Dasgupta, learned Counsel

appeared for ARCIL.

4. Dr. Abhishek Manu Singhvi, learned Senior Counsel appearing for

the Appellant challenges the impugned order on two separate grounds. It

is submitted that RP while verifying claims of Alchemist and ARCIL has

verified the claims by relying on documents, which were not admissible as

per Section 39 of the Rajasthan Stamp Act, 1998, which provision provided

that "Instruments not duly stamped are inadmissible in evidence". The RP

while verifying the claims under Regulation 8 of CIRP Regulations is duty

bound to consider only admissible evidence. If the loan documents and

security documents of Alchemist and ARCIL, which were under-stamped,

the claims of Alchemist and ARCIL would become inadmissible. It is

submitted that competent Authority, Deputy Inspector General,

Registration & Stamp (Tax Evasion) has passed four different orders dated

17.09.2021, 18.11.2021 and 26.11.2021 (two orders) under Sections 37

and 53 of the Rajasthan Stamp Act, 1998, where a demand of around

Rs.629 crores has been raised against the Corporate Debtor. All these facts

were placed before the Adjudicating Authority, but Adjudicating Authority

held that existence of debt can be proved by different documents and

Adjudicating Authority do not wish to impinge in the domain of the

Collector or the High Court. The Adjudicating Authority has not analyzed

any such documents, which proves evidence of debt. It is submitted that

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 10 issue of under-stamped was not before the Hon'ble Supreme Court, when

it delivered its judgment on 12.12.2018.

5. Dr. Singhvi further submits that the claims filed by Alchemist and

ARCIL were barred by time. It is submitted that date of NPA of Corporate

Debtor was 30.09.1997 and Corporate Debtor was notified as a relief

undertaking from 03.10.1998 to 07.12.2016. The Corporate Debtor was

de-notified as relief undertaking from 07.12.2016. It is submitted that

reliance of Alchemist and ARCIL on provisions of Section 4(1) (b) of the 1961

Act is misplaced. It is submitted that the term "because" and "for such suit

or proceeding" has been used in relation to only those remedies which are

contemporaneous at that point of time. The remedy of filing Section 7

Application under the IBC came into existence only on 01.12.2016, hence,

the exclusion, if any available could not have been applied to the remedies

under the IBC, which came into existence subsequent to denotification of

the Corporate Debtor from the category of relief undertaking. The IBC being

not in force until 01.12.2016, the same could not have been initiated. The

defense taken by the Respondents under 1961 Act is not available for IBC.

It is further submitted that assignee Alchemist itself has filed Writ Petition

No.13461/2010 before the Rajasthan High Court, challenging notification

under the 1961 Act beyond 07.12.2018, since the prescribed period of 20

years under the 1961 Act stood expired. When the Alchemist itself is

challenging the validity of Notification, it cannot be permitted to take benefit

of the Notification. The Adjudicating Authority ought to have awaited the

outcome of the Writ Petition, pending in the Rajasthan High Court. The

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 11 Alchemist cannot be allowed to reprobate and approbate at the same time.

Further, principle of estoppel of conduct is also applicable to the Alchemist,

since it has challenged validity of the Notification in the High Court, which

Writ Petition is still pending. Hence, Alchemist is estopped by their own

conduct from taking any benefit from the said Notification. It is further

submitted that in Form-C, which was filed by the Alchemist and ARCIL

before the RP, submitting their claims, there was no mention of 1961 Act

and RP took the defense on his own without even asking from Alchemist

and ARCIL. It is further submitted that issue before the Hon'ble Supreme

Court in Appeal, which was decided on 12.12.2018, did not pertain to

limitation of filing Section 7 Application and the admission of Section 7

Application by Adjudicating Authority does not mean automatic admission

of claims of Financial Creditors by RP. The RP has to independently assess

the claim of the Financial Creditors. The balance sheet for the period

between 01.04.2002 and 31.03.2010, that is of nine years were prepared

along with the balance sheet of the year ending 2010, hence, no

acknowledgement under Section 18 of the Limitation Act can be valid from

the balance sheet. The acknowledgement has to be made before the period

of limitation expires. During the period from 01.04.2002 to 31.03.2010,

there was no acknowledgement.

6. Shri Ramji Srinivasan, learned Senior Counsel appearing for

Alchemist, refuting the submissions of learned Counsel for the Appellant

submits that debt of Alchemist is admitted debt and not denied even by the

Appellant. The impugned order clearly records the factum of disbursal of

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 12 the debt and the debt being due and payable. The submission of the

Appellant as regards inadmissibility of the documents annexed with the

claim are liable to be rejected. It is submitted that all the documents

forming part of the Alchemist claim has been duly considered at the time

of passing of the admission order and said order having been upheld by the

Hon'ble Supreme Court, the documents, which have been admitted in the

proceeding, cannot be questioned on account of being insufficiently

stamped. Reliance has been placed on Section 40 of Rajasthan Stamp Act.

It is submitted that RP exercise limited jurisdiction at the time of admission

of claim and the duty of RP is to collate and verify the claims only. Under

Regulation 8 of the CIRP Regulations, Financial Creditor can prove its

financial debt on the basis of other relevant documents. The documents

issued by the State Government including the Information Memorandum

issued by the Government of Rajasthan CERSAI Certificate, which was filed

along with the claim Form, fully proved the debt of Financial Creditor. The

Corporate Debtor, in its reply to Section 7 Application has admitted the

liabilities of the Alchemist. The learned Counsel for the Respondent has

also placed reliance on the Notification issued by the Government of

Rajasthan dated 08.03.2017 and 10/11.04/2018, which clearly exempts

assignment agreement entered with Asset Reconstruction Companies from

payment of Stamp Duty. In fact, the initiation of proceedings against the

Corporate Debtor, who was party to the document entered between the

Corporate Debtor and the erstwhile lender is hit by Section 14 of the IBC.

The order passed by Deputy Inspector General has not attained finality and

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 13 are pending adjudication before the Rajasthan High Court. It is submitted

that claim of Financial Creditors were fully proved from other documents

on the record and subsequent to admission of Section 7 Application as well

as admission of the claim, State cannot be allowed to say that for deficiency

of stamp duty, the claim of the Financial Creditor be rejected. Replying to

the submission of the learned Counsel for the Appellant with regard to

claim being barred by limitation, it is submitted the the Corporate Debtor

was Notified as relief undertaking from 03.10.1998 to 07.12.2016.

Therefore, from 30.09.1997 till 02.10.1998 only a period of one year and

two days have elapsed. The Corporate Debtor was de-notified as relief

undertaking on 07.12.2016 and from the said date till the filing of Section

7 Application, period of one year and 34 days have elapsed. Thus, the

Application was clearly within the period of three years as prescribed under

Article 137 of the Limitation Act. The Rajasthan Relief Undertakings

(Special Provisions) Act, 1961 clearly supports the calculation of the period

by Alchemist. The learned Senior Counsel has also relied on Section 4(1)

(b) and 4(2) of the 1961 Act. The Appellant himself has clearly submitted

before the Adjudicating Authority that Corporate Debtor was continuously

Notified as relief undertaking from 03.10.1998 to 07.12.2016. The

Financial Creditor filed OA No.10/2003, OA No.50/2004 and OA

No.223/2013, but no proceedings could take place on account of Corporate

Debtor being a relief undertaking under the 1961 Act. In view of overriding

effect of Section 238 of IBC, initiation of DRT and SARFAESI proceedings

is no bar in filing Section 7 Application, the Alchemist filed its claim on

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 14 11.01.2018 in response to public notification issued by IRP. The Appellant

in its Information Memorandum dated 14.07.2018 clearly stated that IDBI

as its Financial Creditor, which also contains an admission that debt has

been assigned to Alchemist, which amounts to clear admission of debt by

the State also.

7. The learned Counsel appearing for ARCIL has adopted the arguments

made by the learned Senior Counsel Shri Ramji Srinivasan. It is further

submitted that against Respondent No.3, although a notice was issued,

pointing out deficiencies in the documents, but no proceedings were

undertaken under the Rajasthan Stamp Act against the ARCIL.

8. The learned Counsel for the RP also supported the impugned order

and submits that claims of Alchemist and ARCIL were duly verified and

accepted by the RP in accordance with law. There were various materials

on record including the admission of the Corporate Debtor, which proved

the existence of 'debt' and 'default'. Section 7 Application having been

admitted and which admission order having been affirmed by the Hon'ble

Supreme Court, the Appellant cannot be allowed to negate the 'debt' and

'default' in the same proceedings before the Adjudicating Authority.

9. We have considered the submissions of learned Counsel for the

parties and have perused the record.

10. The arguments advanced by the parties are in two major heads,

which need to be separately considered. We proceed to consider the first

submission pertaining to insufficient stamp duty challenge under the

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 15 Rajasthan Stamp Act and thereafter, the challenge to the claim being

barred by time.

11. The Adjudicating Authority in its impugned order has noted the

details of the loan taken by the Corporate Debtor from four different Banks,

which were assigned to Alchemist and ARCIL. In paragraph 5(f), the

assignments have been noticed in following manner:

"5.(f) The Corporate Debtor had taken loans from four different banks, viz. State Bank of Bikaner & Jaipur, State Bank of Indore, IDBI Bank, and Central Bank of India ('CBI') under various loan agreements. The said loans were registered to AARCL and Asset Reconstruction Company India Limited ('ARCIL'), as follows:

Date Particulars 29.09.2007 CBI assigned its loan to ARCIL vide assignment agreement 11.10.2007 IDBI Bank assigned its loan to AARCL by assignment agreement 29.03.2017 SBBJ assigned its loan to AARCL vide assignment agreement 31.03.2018 State Bank of Indore assigned its loan to AARCL vide assignment agreement

While the State Bank of Rajasthan refers to loans as having been bought; the common understanding is assignment to the respective banks."

12. It is relevant to notice that Adjudicating Authority in its admission

order dated 13.04.2018 has noted in detail, the details of financial debt as

given in Part-IV of the Application. Various loan agreements, hypothecation

deeds, mortgage deeds executed between the Corporate Debtor and the

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 16 Financial Institutions has been noticed in paragraph 13 and 14 of the order

dated 13.04.2018, which is to the following effect:

"13. The applicant has placed on record the following documents in support of IDBI debt:

• Copy of the Asset Credit Agreement dated 23.03.1995 executed between the Corporate Debtor and IDBI upto the maximum sum of Rs.474 lakh for purchase of assets from time to time under the Credit Scheme of IDBI.

• Copy of loan agreement dated 23.03.1995 executed between the corporate Debtor and IDBI for an amount of Rs.200 lakhs towards working Capital Facility.

• Copy of the Deed of Hypothecation dated 23.03.1995 executed between the Corporate Debtor and IDBI for availing the credit facilities amounting to Rs.200 lakh.

• Copy of the Joint Mortgage deed dated 07.04.1995 executed by Shri Gopal Singh, Director, and the Corporate Debtor (JMEL) in respect of deposit of title deeds of immovable and hypothecation of movables with reference to credit facilities availed from various Financial Creditors.

• Copy of the Loan agreement dated 21.03.1996 executed between the corporate Debtor and IDBI for availing the credit facility for an amount of Rs.150 lakh for purchase of equipments.

• Copy of the Deed of Hypothecation dated 21.03.1996 executed between the Corporate Debtor and IDBI for availing the credit facilities amounting to Rs.150 lakh.

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 17 • Copy of the Joint mortgage deed dated 29.04.1996 executed by Shri Gori Shankar Pathak, Director and the Corporate Debtor in respect of deposit of titles deeds of immovable and hypothecation of movables with reference to credit facilities availed from various financial Creditors.

• Copy of Memorandum of entry dated 11.04.1996 wherein Mr. Gori Shanker Pathak, Director, of the Corporate Debtor submitted the title of documents at the office of IFCI (acting for itself and other financial creditors).

• Copy of assignment agreement dated 11.10.2017 executed between IDBI and AARCL assigning the debt in favour of AARCL.

14. Similarly in support of the SBBJ debt (now SBI) the following documents have been placed on record:

• Copy of the sanction letter dated 11.11.1994 issued by SBBJ to the Corporate Debtor granting the credit facilities i.e. Fund Based Limits totalling to Rs.720 lakhs and Non-Fund Based limits totalling to Rs.1090 Lakh.

• Copy of the Agreement dated 21.11.1994 for Cash credit hypothecating goods by The Corporate Debtor.

• Copy of Hypothecation Agreement for debts and Assets dated 21.11.1994.

• Copy of Demand Promissory note dated 21.11.1994 promising SBBJ to pay an amount of Rs.20.66 Cr. • Copy of Hypothecation agreement dated

21.11.1994 executed by the Corporate Debtor for securing the credit facilities including guarantees

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 18 amount to Rs.5.00 Cr. And letter of credit limit not exceeding the sum of Rs.3.90 Crore.

• Copy of letter of undertaking dated 21.11.1994 by the Corporate Debtor giving further charge over the property (movable or immovable) including the uncalled capital.

• Copy of Sanction letter dated 30.04.1996 issued by SBBJ to the Corporate Debtor renewing the sanctioned credit faculties fund Based Limits totalling to Rs.720 Lakhs and Non-Fund Based Limits totalling to Rs.1050 Lakh.

• Copy of Demand Promissory Note dated 14.06.1996 by The Corporate debtor in favour of SBBJ to pay a sum of Rs.20.58 Crore.

• Copy of Hypothecation agreement dated 14.06.1996 for debts and Assets hypothecation by the Corporate Debtor.

• Copy of the Agreement dated 14.06.1996 for Cash Credit Hypothecating goods by the Corporate Debtor.

• Copy of assignment agreement dated 11.03.2016 executed on 29.03.2017 between SBBJ and AARCL assigning the debt in favour of AARCL."

13. It is also relevant to note that apart from aforesaid documents, the

Applicant also relied on the Certificates of Registration for modification of

charge under Section 132 read with Section 135 of the Companies Act,

1956 issued by Registrar of Companies, Rajasthan modifying the charge

created by IDBI in favour of M/s Dhir & Dhir Asset Reconstruction and

Securitisation Company Ltd. (now Alchemist). Certificate of CERSAI with

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 19 respect to assets of the Corporate Debtor, wherein the security held by

Alchemist was also filed. Further, audited financial statements of the

Corporate Debtor for the financial year ending on 31.03.2013 was also

relied. In this respect, paragraph 22 of the order dated 13.04.2018 is as

follows:

"22. The audited financial statement of the respondent company for the financial year ending 31 March 2013 clearly reveals that a total amount of Rs.391,72,98,134/- is due and payable to all the financial creditors including IDBI and SBBJ. The audited financial statement for the year ending 31.03.2013 also reveals that the outstanding dues of IDBI Bank and SBBJ have been assigned to the applicant AARCL. There is thus clear admission that consequent to the assignment of the outstanding dues of IDBI Bank and SBBJ, the applicant AARCL comes within the purview of 'financial creditor' in order to maintain the present application preferred under section 7 of the Code. Besides the material on record clearly goes to show that the respondent corporate debtor has committed default in payment of the outstanding loan amount."

14. The Adjudicating Authority considering the relevant documents

pertaining to loans extended by the Banks as well as noticing the

assignment in favour of Alchemist and ARCIL has admitted Section 7

Application. The order of admission passed by Adjudicating Authority has

been affirmed by the Hon'ble Supreme Court vide its judgment dated

12.12.2018 as noted above. It is after order of the Hon'ble Supreme Court

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 20 setting aside judgment of the High Court, the CIRP was revived before the

Adjudicating Authority, when the Application No. 327/JPR/2019 filed by

the Appellant for summoning and impounding the documents and

agreements dated 21.03.1996 executed between the Corporate Debtor and

the IDBI, same being insufficiently stamped. It is relevant to notice that in

Application, prayer was confined to Agreement dated 21.03.1996. The

claims of Alchemist and ARCIL were admitted by the RP after considering

the relevant documents filed along with the Form-C. The Adjudicating

Authority in the impugned order has clearly held that the existence of debt

is proved by different documents irrespective of numerous under/ over/

correctly stamped documents. In paragraph 25 of the impugned order

dated 24.06.2022, following has been observed by the Adjudicating

Authority:

"25. However, in light of pleadings, submissions made and overall assessment of the matter, we hold and concur with the view that existence of a debt can be proved by different documents/ means irrespective of numerous (under/ over/ correctly) stamped instruments, and, inter-alia, more so in this case, several diverse documents and admission of debt in pleadings, which have already been considered at the stage of admission clearly establishing debt in favour of AARCL and ARCIL. In view of entirety of the foregoing, the Application of the State of Rajasthan is rejected."

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 21

15. In the financial statement of the Corporate Debtor for the year ending

on 31.03.2013, there is clear admission of debt towards Alchemist, which

is a sufficient acknowledgement of debt by the Corporate Debtor. The

learned Counsel for the Financial Creditor has relied on Notification dated

08.03.2017 and 10/11.04/2018, by which exemption was granted from the

stamp duty in assignment agreement entered in favour of any Asset

Reconstruction Companies from payment of Stamp Duty. The said

Notification at best apply to assignments, which were made subsequent to

the said Notification.

16. The learned Counsel for the Appellant has placed much emphasis on

the orders passed by Deputy Inspector General, Registration & Stamp (Tax

Evasion) dated 17.09.2021, 18.11.2021 and 26.11.2021 (two orders), by

which demand of an amount of Rs.629 crores have been raised. As noticed

above, the said order is under scrutiny by the High Court. More so, the RP

has taken into consideration various other documents, which were filed

along with Form-C, also in addition to the assignments Deeds. The

proceedings under the Rajasthan Stamp Act are separate and independent

proceedings to the proceedings under the IBC initiated by the Financial

Creditors under Section 7 of the IBC. The admission of claim by the RP,

took place much before the proceedings initiated under the Stamp Act and

which were based on other relevant materials as noted above cannot be

faulted on the ground that Stamp Authorities have declared deficiencies in

several documents relied by Financial Creditors. We, thus, are not

persuaded to agree with the submission of learned Counsel for the

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 22 Appellant that on the ground of orders passed by Stamp Duty Authorities,

the admission of claims by RP of the Financial Creditors need to be rejected.

The Adjudicating Authority has elaborately considered the submission of

Applicant/ Appellant and has rightly rejected the IA No.327/JPR/2019.

17. Now, we come to the second ground of attack made by learned

Counsel for the Appellant that claim of the Financial Creditors is barred by

time.

18. We have noticed that Corporate Debtor was declared NPA on

30.09.1997 and the Application under Section 7 was filed on 11.01.2018.

The limitation for filing an Application under Section 7 is three years under

Article 137 of the Limitation Act. The learned Counsel for the parties have

raised submission in regard to Rajasthan Relief Undertakings (Special

Provisions) Act, 1961. The question to be answered before us is whether

the Financial Creditors can take benefit of limitation as per the provisions

of Section 4(1)(b) read with 4(2) of the 1961 Act, or the said benefit is not

available to the Financial Creditor? For appreciating the submission, we

need to notice the relevant provisions of the 1961 Act. The Rajasthan Relief

Undertakings (Special Provisions) Act, 1961 was enacted to make special

provisions to enable certain industrial undertakings to attain revival and to

offer continued employment to their employees, by declaring them as relief

Undertakings, and for other matters connected therewith. Section 4, which

is relevant for the present case, is as follows:

"4. Power to specify industrial relation and other facilities temporarily for relief undertaking.--(1) Notwithstanding any law, usage,

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 23 custom, contract, instrument, decree, order, award, submission, settlement, standing order or other provisions whatsoever, the State Government may, by notification in the official Gazette, direct that--

(a) in relation to any relief undertaking and in respect of the period for which the relief undertaking continues as such under sub-section (2) of section 3--

(i) All or any of the laws mentioned in the Schedule to this Act or any provisions thereof shall not apply (and such relief undertaking shall be exempted therefrom) or shall, if so directed by the State Government, be applied with such modifications (which do not however affect the policy of the said laws) as may be specified in the notification; and

(ii) all or any of the agreements, settlements, awards or standing orders made under any of the laws mentioned in the Schedule to this Act which may be applicable to the undertaking immediately before it was acquired or taken over by the State Government or before the issue of the notified order in respect thereof under section 18-A of the Industries (Development and Regulation) Act, 1951 (Central Act 65 of 1951), or before any loan, guarantee, or other financial assistance was provided to it, by the State Government, shall be suspended in operation, or shall, if so directed by the State Government, be applied with such modifications as may be specified in the notification; and

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 24

(b) no suit or other legal proceeding shall be instituted or commenced or if pending, shall be proceeded with, against any industrial undertaking during the period in which it remains a relief undertaking.

Explanation.--"Legal proceeding" means any proceeding under any law before any court, tribunal, officer, authority or arbitrator, started on a plaint, petition of appeal, application, reference, or otherwise. 2 Provided that a notification issued under this Act shall have no effect in respect of any law, legal proceedings, agreement, settlement, award, standing order or the like relating to the payment of wages to the workmen of the industrial undertaking specified in the said notification:

Provided further that with the issuance and publication of notification under section 3 or section 4 of the Act, the State Government shall, in no case, be liable for payment of the wages or any other financial obligations or otherwise on behalf of the industrial undertaking specified in the said notification.

(2) The period, during which any suit or legal proceeding cannot be instituted or commenced because of the provisions of clause (b) of sub-section (1), shall be excluded in computing the period of limitation prescribed by the Indian Limitation Act, 1908 (Central Act 9 of 1908), or any other law for the time being in force, for such suit or proceeding."

19. The Corporate Debtor was notified as relief undertaking from

03.10.1998 to 07.12.2016. The IBC came into force from 01.12.2016. The

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 25 present Application has been filed on 11.01.2018. The period of limitation

of three years for filing an Application under Section 7 commenced from

the date Corporate Debtor was declared as Non-Performing Asset, i.e.

30.09.1997. The submission which Dr. Singhvi has much pressed is that

the benefit of 1961 Act shall not be applicable for filing Section 7

Application, since the benefit under Section 4, sub-section (2) can be

claimed only for remedies, which were contemporaneous at the relevant

time. It is submitted that IBC having been enforced from 01.12.2016, any

period prior to the said, cannot be claimed for the purpose of limitation in

Section 7 Application. It is true that The Rajasthan Relief Undertakings

(Special Provisions) Act, 1961 was enacted in 1961 and Section 4, sub-

section (2) provides that the period, during which any suit or legal

proceeding cannot be commenced because of the provisions of clause (b) of

sub-section (1), shall be excluded in computing the period of limitation

prescribed by the Indian Limitation Act, 1908. For determining the

limitation for filing Section 7 Application, we have to revert to provisions of

Limitation Act, which has been made expressly applicable by Section 238A.

We in the present case are to determine the period of limitation for filing

Section 7 Application, for which the provisions of Limitation Act have to be

looked into. Since the limitation as per Article 137 for filing Section 7

Application is three years, we, thus, have to look into the provisions of

Limitation Act and Section 4, sub-section (2) of the 1961 Act, which provide

for exclusion of period of limitation, which has direct concern with the

computation of the limitation as per Limitation Act and is relevant and

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 26 cannot be ignored. The submission of learned Counsel for the Appellant

that since the IBC come into force on 01.12.2016, Section 4(2) has to be

read only with the remedies which are contemporaneous, cannot be

accepted. As noted above, period of limitation for filing an Application

commenced on 30.09.1997, which is much before the enforcement of IBC.

It is well settled that IBC does not give any fresh period of limitation for

filing any Application and no fresh lease of life can be given to the State or

dead claim by the enforcement of IBC. But when the Applicant has still

balance period of limitation for filing an Application under Section 7 on the

principle of computation of limitation as per provisions of 1961 Act, the

said benefit cannot be denied. As noted above, the period of limitation

commenced on 30.09.1997 and Corporate Debtor was declared a relief

undertaking on 03.10.1998 and continued till 07.12.2016. The period,

which could be counted for filing Section 7 Application from 30.09.1997

was one year and 2 days. The period of limitation, which cannot be

computed and was arrested by virtue of Section 4, sub-section (2), which

again recommenced with effect from 08.12.2016, when the Corporate

Debtor was de-notified from relief undertaking from 07.12.2016, so from

07.12.2016 to 11.01.2018 the period of one year and 34 days have elapsed.

Thus, the Application under Section 7 was filed within a period of two years

and 36 days from the date of commencement of the limitation, which is well

within three years. We, thus, are of the view that admission of the claim of

Alchemist cannot be said to be barred by time and Adjudicating Authority

has rightly rejected IA No.328/JPR/2019.

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 27

20. Now, we come to the third Application, i.e., IA No.301/JPR/2019,

which was filed for substitution of RP. It is pleaded case of the parties that

vote share of State of Rajasthan is only 4% in the Committee of Creditors.

As per the provisions of Section 27, sub-section (2), the RP can be replaced

only by a vote of 66% of vote share. Section 27, sub-section (2) is as follows:

"27(2) The committee of creditors may, at a meeting, by a vote of sixty-six per cent of voting shares, resolve to replace the resolution professional appointed under section 22 with another resolution professional, subject to a written consent from the proposed resolution professional in the specified form."

21. Learned counsel for the Appellant has submitted that present is a

case where the Adjudicating Authority ought to have exercised its inherent

powers under Rule 11 for removal of the Resolution Professional. Reliance

has been placed on the judgment of this Tribunal in "Srigopal Choudary,

Resolution Professional of Shree Ram Urban Infrastructure Ltd. Vs.

SREI Equipment Finance Ltd., Company Appeal (AT) (Ins) No. 1443 of

2022" decided on 10.01.2023. In the above case, the Adjudicating

Authority has removed the Resolution Professional by the impugned order

and submission was raised before this Tribunal that the Appellant could

have been removed only in accordance with the procedure prescribed under

Section 27 of the I&B Code under a resolution of the CoC. This Tribunal

considered the submission of the parties and upheld the order of removal

of Resolution Professional noticing the peculiar facts and circumstances of

the said case. This Tribunal held that in the said case request was made

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 28 by the Financial Creditor to the Resolution Professional to convene the

meeting of CoC with agenda of removal of the Resolution Professional but

despite the request from the Financial Creditor, the Resolution Professional

sat tight over the matter and did not convene the meeting. In the peculiar

circumstances applications were filed by the Financial Creditor praying for

removal of the Resolution Professional. In Para 12 of the judgment

following has been observed:

"12. Besides hearing the learned counsel for the parties we have examined the material available on record particularly the impugned order. It is reflected from the impugned order that the CIRP was initiated long back in 2019, however, for more than one and half years, no step was taken by the Appellant/RP for revival of the CD or even for generating funds. There is no order of any 'Stay' regarding the convening of the said 'Meeting' placed before us. The CoC Meeting was delayed for such a long time. This conduct is sufficient to draw an adverse inference against the appellant as it has been noticed that though the applicant/respondent No.1 had intimated the RP for convening Meeting for removal of the RP, the appellant did not respond to the request of the applicant nor did he convene any 'Meeting', compelling the applicant to approach the Adjudicating Authority for passing order for replacing of the RP. It is true that Section 27 empowers CoC for replacement of the RP but if there is a peculiar situation in which the RP, who under Regulation 18 of the IBC CIRP Regulation 2016, himself is sitting tight over the matter for convening Meeting of CoC, the Adjudicating Authority who is also the appointing authority of IRP cannot be allowed to be a mere spectator. So far as judgment of Veeral Controls

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 29 Pvt Ltd (Supra) on which reliance was placed by learned senior counsel for the appellant, in view of the peculiar facts and circumstances of the present case, i.e. more than one and half year delay in convening 1st CoC Meeting, sitting tight over request for holding CoC Meeting for removal of RP etc, this appellant may not get any assistance from the said judgment."

22. This Tribunal has also extracted in the judgment an email dated

03.10.2021 where specific request was made to the Resolution Professional

to call for a meeting of the CoC with an agenda to replace the current

Resolution Professional with another Resolution Professional. The

Resolution Professional, who was expected to convene the meeting, avoided

to convene the meeting. In Paras 13 and 14 of the judgment following was

held:

"13. In the present case the RP who was expected to convene the CoC Meeting was avoiding to convene the 'Meeting' despite a request made by the applicant/respondent herein vide email dated 06.10.2021 for convening the 'Meeting' with agenda to remove the RP. Accordingly the applicant was left with no option but to approach the Adjudicating Authority and the Adjudicating Authority has rightly exercised its inherent jurisdiction. Moreover it is settled law that one who appoints can also remove/dismiss the appointee. This position is further clarified on examination of Section 16 of The General Clauses Act, 1897 which is quoted herein below:

"16. Power to appoint to include power to suspend or dismiss.-Where, by any Central Act or

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 30 Regulation, a power to make any appointment is conferred, then, unless a different intention appears, the authority having for the time being power to make the appointment shall also have power to suspend or dismiss any person appointed whether by itself or any other authority in exercise of that power."

The Hon'ble Supreme Court in M/s. Heckett Engineering Co. Vs. Their Workmen reported in (1977) 4 SCC 377 has held that the Appointing Authority can also dismiss the appointee."

23. The judgment of this Tribunal in Srigopal Choudary's case was in

peculiar facts and circumstances where the Resolution Professional did not

convene the meeting for consideration of agenda for removal of Resolution

Professional, hence, application had to be filed before the Adjudicating

Authority for removal of Resolution Professional. In the above case, the

Adjudicating Authority exercised its inherent power under Rule 11 for

passing order. The facts and circumstances under which the order of this

Tribunal was passed in Srigopal Choudary's case is entirely different

from the facts and circumstances of the present case. Present is a case

where the Appellant has only 4% vote share in the Committee of Creditors

and no member of the CoC apart from the Appellant has made any request

for convening any meeting for consideration of agenda for removal of the

Resolution Professional. We, thus, are of the view that reliance placed on

the judgment of "Srigopal Choudary, Resolution Professional of Shree

Ram Urban Infrastructure Ltd. Vs. SREI Equipment Finance Ltd." by

the Appellant is misplaced.

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 31

24. In the Written Submission filed on behalf of the Appellant various

allegations and facts have been placed doubting/alleging collusion of the

Resolution Professional with the Financial Creditor. Various applications

were filed before the Adjudicating Authority which were considered by the

Adjudicating Authority and orders passed, which had also received

approval of this Appellate Tribunal, as noted above. Appellant is also

making allegation that Resolution Professional has admitted the claim

which were time barred claims and which were based on insufficiently

stamped documents. Both the above issued have sufficiently been

considered by us in the foregoing paragraphs and we have upheld the

decision of the Resolution Professional.

25. The Committee of Creditors, till date has not passed any Resolution

for change of RP. There being no Resolution of the Committee of Creditors

for replacing the RP, the Adjudicating Authority did not commit any error

in rejecting IA No.301/JPR/2019. While rejecting IA No.301/JPR/2019 by

a separate order of the same date, i.e., 24.06.2022, following was observed

by the Adjudicating Authority in paragraph 8 and 9:

"8. This Application has been filed by State of Rajasthan through Joint Director Industry who holds 4% shares in Committee of Creditors for change of Resolution Professional alleging certain allegations against the RP.

9. As per Section 27(2) of IBC such Resolution can only be passed by minimum 66% of votes by the members of Committee of Creditors. In this case no such proposal of change of Resolution Professional has been placed before the CoC by the Applicant. The Applicant as only

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 32 made allegations and failed to provide substantial proof of the same. The Hon'ble NCLAT has categorically held that if there is an explicit provision in the Code for change of Resolution Professional the same should be followed. It also held that the ingredients of Section 27 of the Code are self-explanatory and admits of no exception. Therefore, the present application filed by the State of Rajasthan is dismissed."

26. In view of the above, we do not find any error in the order of the

Adjudicating Authority in rejecting IA No.301/JPR/2019.

27. In view of the foregoing discussions, we are of the view that the orders

passed on 24.06.2022 rejecting IA Nos.327/JPR/2019 and IA

No.328/JPR/2019 and order of the same date passed by Adjudicating

Authority in rejecting IA No.301/JPR/2019 do not suffer from any error,

warranting interference in these Appeal(s). There are no merits in these

Appeal(s), all the Appeal(s) are dismissed. Parties shall bear their own

costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

21st February, 2023

Ashwani

Company Appeal (AT) (Insolvency) Nos. 733, 734 & 996 of 2022 33