Suzlon Synthetics Limited vs Stressed Assets Stabilization Fund & ...

Suzlon Synthetics Ltd. Having its office at J & k Textile Park, Govindsar Indl. Area, Hatli More, Kathua-184101. J&K ... Appellant

Versus

Ṣtressed Asset Stabilization Fund Having its registered office at: 3rd Floor, D wing, IDBI Tower, WTC Complex, Cuffee Parade, Colaba, Mumbai-400005. ... Respondent No. 1

I C Textiles Limited Through Mr. Sandeep Khaitan, 29, Strand Road, Mohta House, First floor, Kolkata-700001. ... Respondent No. 2

Present

For Applicant: Ms. Purti Gupta, Advocate.

For Respondents: Mr. P.K. Mullick, Advocate for R-1 Mr. Utsav Mukherjee, Advocate for R-2

JUDGMENT

(Date: 11.11.2022)

[Per.: Dr. Alok Srivastava, Member (Technical)]

The present appeal has been filed under Section 61 of the

Insolvency & Bankruptcy Code, 2016 (in short 'IBC') by the

Appellant who is aggrieved by the Order dated 14.03.2022 Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 1 of 10 (hereinafter called the Impugned Order) passed by the

'Adjudicating Authority' (National Company Law Tribunal, Kolkata

Bench) in CP (IB) No. 1567/ KB/ 2019.

2. The Appellant company, which claims to be a financial

creditor has assailed the Impugned Order by which the

Adjudicating Authority has admitted Section 7 application filed by

the Financial Creditor- Stressed Asset Stabilization Fund (in short

'SASF') against the 'Corporate Debtor'- IC Textiles Limited.

3. The Appellant's case is that he is a secured financial creditor

of the corporate debtor, who is assignee of the debts of IFCI owed

to the corporate debtor and is pari passu charge holder of the said

debts. He has claimed that Respondent No. 1- SASF, which is a

financial creditor, had entered into a 'One Time Settlement' (in

short 'OTS') and the corporate debtor had paid a substantial

amount to SASF in pursuance of the OTS and only an amount of

Rs. 88.75 Lakhs remained due and payable by the corporate

debtor to SASF under the OTS, and therefore, SASF wrongfully

revoked the OTS and subsequently filed an application under

Section 7 of the IBC, which was admitted by the Impugned Order.

4. The Appellant has stated that the provision of the IBC

cannot be used for recovery of pending amount as has been held

by Hon'ble Supreme Court in many judgments, and therefore, the Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 2 of 10 Section 7 petition in the present case is mala-fide and filed only for

the purpose of recovery and not for insolvency resolution of the

corporate debtor. He has also stated that by bringing the

corporate debtor under Corporate Insolvency Resolution Process

(in short 'CIRP') the other financial creditors of the corporate

debtor, including the Appellant Company, are being defrauded as

they will not be able to get repayment of their due debts from the

corporate debtor.

5. We note that the Appellant- Suzlon Synthetics Limited has

filed this appeal claiming to be a financial creditor who is adversely

affected by the admission of Section 7 application. The Appellant

was not a party before the Adjudicating Authority, but since it has

claimed to be adversely affected by the Impugned Order, we

decided to hear this appeal.

6. The Learned Counsel for the Appellant has argued that the

financial creditor- SASF has stated an exorbitant debt amount of

Rs. 39,30,000,000 (Thirty Nine Crores and Thirty Lakhs Only), in

Part IV of the Section 7 application in Form-1, whereas in reality

there was an OTS entered into between the corporate debtor and

SASF, and in pursuance of this OTS a substantial amount was

paid by the corporate debtor to the financial creditor-SASF and

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 3 of 10 only an amount of Rs. 88.75 Lakhs remained due and payable to

the financial creditor-SASF.

7. The Learned Counsel for the Appellant has further

submitted that the Impugned Order in paragraph 56 notes that the

Applicant/SASF has claimed of sum of Rs. 10,82,94,94,335/- as

due and payable by the corporate debtor and if such a large claim

is considered for SASF, the amounts claimed by the other financial

creditors including the Appellant would become very small in

proportion and thus, the Appellant along with other financial

creditors would suffer a huge financial loss in case the CIRP were

to proceed against the corporate debtor. She has contended that,

therefore, this is not a fit case for initiating CIRP of the corporate

debtor, and for SASF should take action against the corporate

debtor for recovery of the said amount of Rs. 88.75 lakhs.

8. The Learned Counsel for the Respondent No. 1- SASF has

argued that the Appellant has no locus standi to file this appeal as

the section 7 petition was filed by SASF and the CIRP has been

initiated after admission of the said Section 7 application. He has

further argued that in the CIRP against the corporate debtor, in

due course claims of all creditors will be obtained which will be

duly scrutinized by IRP after every creditor submits proof with

regard to its claim when the Appellant will also get an opportunity

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 4 of 10 to file his claim before the IRP which will be duly scrutinized and

finalized and thus no prejudice will be caused to the financial

interest of the Appellant. He has also argued that the promoters/

erstwhile director/ guarantors of the corporate debtor have not

filed any appeal against the Impugned Order when it is the

corporate debtor against which the Impugned Order has been

passed and the Appellant appears to be acting as a front for the

promoters of the corporate debtor.

9. The Learned Counsel for the Respondent No. 1/ SASF has

also submitted that the Section 7 application is not barred by

limitation and the Adjudicating Authority has categorically dealt

with the aspect of limitation in paragraphs 48 to 57 of the

Impugned Order, and held that the application was well within

limitation. He has referred to the balance sheets of the corporate

debtor for FY-2003-04, 2012-13, 2015-16 and 2018-19 and the

prosecution of the BIFR case by the corporate debtor between the

period 24.09.2004 to 01.12.2016 to claim that this period is

exempted for limitation purposes and the balance sheet entries

provide acknowledgement of the debt of Respondent No. 1 and in

view of all these facts the Section 7 application is well within

limitation.

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 5 of 10

10. The tribunal put a fair question to the Learned Counsel for

the Appellant as to how the Impugned Order, which is against the

corporate debtor adversely affects the interest of the Appellant.

The Learned Counsel for the Appellant has replied that the only

reason why such an order of admission of Section 7 application

and initiation of CIRP against the corporate debtor affects the

Appellant and other financial creditors is because the Adjudicating

Authority has, in paragraph 56 of the Impugned Order also

decided on the amount due and payable to Respondent No. 1-

SASF as Rs. 10,82,94,94,335/-, whereas in view of the fact that

the corporate debtor has actually paid a substantial amount by

way of partial payment of the OTS amount to Respondent No. 1-

SASF, and its liability is only to the tune of Rs. 88.75 Lakhs. She

has submitted that if such a huge claim of Respondent No. 1 is

taken in the CIRP, the relative claims of other financial creditors

including the Appellant would become proportionately very small

which would adversely affect the financial interest of the Appellant

and other financial creditors and Respondent No. 1 would also get

a disproportionately high voting share.

11. We reproduce paragraph 56 of the Impugned Order

hereunder, wherein, as claimed by the Appellant, the Adjudicating

Authority has given views on the claim of Respondent No. 1:-

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 6 of 10 "56. Further, the Applicant claims that as on 1st June 2019, a sum of Rs. 10,82,94,94,335/- is due and payable by the Corporate Debtor.

However, the Corporate Debtor has only admitted to its liability to the tune of Rs. 88,75,000/-. In this regard, we would like to mention that even without delving into the calculation of the amount stipulated by the Applicant, it is evident from the admission of the Corporate Debtor that a financial debt under section 5 (8) of the Code is due to the Financial Creditor. The exact amount of such financial debt, in the instant case, becomes immaterial as longas the amount admitted by the Corporate Debtor itself is more than the minimum amount stipulated under Section 4(1) of the Code, i.e., Rupees one lakh, at the relevant time."

12. A perusal of the above-stated paragraph 56 of the impugned

order makes it clear that the Adjudicating Authority has only

recorded the claim of the Applicant and has only unambiguously

stated that it is not delving into the calculation of the amount

stipulated by the Applicant in Section 7 application, and further

the exact amount of financial debt is immaterial as long as the

amount admitted by the corporate debtor is more than the

minimum amount stipulated under Section 4(1) of the IBC i.e.

Rs. 1 Lakh at the relevant time of filing Section 7 application.

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 7 of 10

13. We also look at the scheme provided in the IBC as to how

the claims are to be invited, received and finalized after due

verification by the IRP/RP. Sub-sections (e) and (g) of sub-section

(2) of Section 25 of the IBC stipulate that the Resolution

Professional has to maintain an updated list of claims and prepare

information memorandum in accordance with Section 29. Further

the Insolvency & Bankruptcy Board of India (Insolvency Resolution

Process For Corporate Person) Regulations, 2016 lays down the

modality of invitation of claims by the IRP/RP, starting with public

announcement as per Regulation 6 and filing of claims by

operational and financial creditors as per Regulations 7 & 8.

Thereafter, Regulation 10 and Regulation 12 provide the procedure

for substantiation of claims and submission of proof of claims and

Regulation 13 relates to verification of claim and Regulation 14

relates to determination of the amount of claim. Thus, we see that

there is a very clear, unambiguous and rational procedure outlined

in the IBBI (Insolvency Resolution Process For Corporate Person)

Regulations, 2016 regarding receipt of claims and thereafter their

verification and finalization.

14. In the light of detailed provisions in Chapter IV (Proof of

Claims) in the Insolvency & Bankruptcy Board of India (Insolvency

Resolution Process For Corporate Person) Regulations, 2016 as

explained in the aforementioned paragraphs, the invitation, Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 8 of 10 submission and verification of claims of operational and financial

creditors, workmen and employees and other creditors is quite

clear. In so far as the facts included in the Section 7 application in

Form 1 application is concerned, the financial creditor as to

provide information about the debt which is due and payable and

also the date and record of default. There is no requirement in the

adjudication of Section 7 application to calculate and fix the exact

amount of debt in default of repayment. It is only to be seen

whether the amount in default is more than the minimum or

threshold value that is prescribed in Section 4 (1) of the IBC.

15. In view of the aforesaid discussion, and on perusal of

paragraph 56 of the Impugned Order, we find that Appellant has

not been able to make a case that the Adjudicating Authority had

fixed a precise amount of the claim of Respondent No. 1-SASF and

thereby caused adverse impact on the financial interest of

Appellant. For reasons discussed in detail in earlier paragraphs.

We find no substance in the Appeal and dismiss it.

16. We also note that this Appeal has been filed by the

Appellant- Suzlon Synthetics Limited, claiming to be adversely

affected by the Impugned Order. It is a fact that the Section 7

admission order is directed at the corporate debtor. When we look

at the reasons and grounds raised by the Appellant in this

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 9 of 10 appeal, it does not become apparent as to why the Appellant had

filed this appeal. Finding no ostensible and good reason for the

Appellant to assail the Impugned Order, we feel that this action of

the Appellant has caused totally unnecessary wastage of the time

available to this Bench for consideration of cases under IBC, when

there are many cases waiting for their turn to be heard in appeals.

We are of the view that there should be some deterrent to

discourage such frivolous litigation. We, therefore, impose a cost

of Rs. 2 lakhs on the Appellant which should be deposited in the

Prime Minister's Relief Fund within 15 days of this order. The

details regarding deposition of Rs. 2 lakhs shall be provided to the

Registry of this Tribunal within one month of this order.

17. The Appeal is disposed of with the above-mentioned

directions.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical) New Delhi 11th November, 2022

Sim

Company Appeal (AT) (Insolvency) No. 662-663 of 2022 Page 10 of 10