Sylvan Commercial Private Limited vs Nitin Daga

[Arising out of the Impugned Order dated 22.03.2024 passed by the Adjudicating Authority, National Company Law Tribunal, Kolkata Bench, Court-II in I.A. No.- 15/KB/2024 in T.A. No. 8/KB/2022 and I.A. No.2/KB/2024 in TP No. 4/KB/2022]

In the matter of: Sylvan Commercial Private Limited A Company incorporated under the provisions Of the Companies Act, 1956 and having its Registered Office at: 238A, AJC Bose Road, 2nd Floor, Suit No. 2B, Kolkata, West Bengal- 700020, India. ...Appellant

Versus

1. Nitin Daga Resolution Professional of Rishra Steel Limited Appointed in terms of the Order dated 17th June, 2022 passed by the National Company Law Tribunal, Kolkata Bench ...Respondent No.1

2. The Official Liquidator High Court at Calcutta ...Respondent No.2 3. Geepee Softech Services Private Limited Through its Director House No.-54, Khasra No.74, Green Meadows Farm, Shahoor Pur, Chhattarpur Mandir Road, New Delhi India, 110074 ...Respondent No.3 4. JK Urbanscapes Developers Limited (Formerly known as "JK Cotton Limited") Through its Director Kamla Tower, Kanpur, Uttar Pradesh, India, 208001 ...Respondent No.4 Present:

For Appellant : Mr. Gaurav Mitra, Mr. Animesh Kumar, Mr. Tanay Agarwal, Mr. Kunal Godhwani, Mr. Nishant Kumar, Mr. Sumit Kumar, Mr. Aprajit, Ms. Aishwarya Modi and Ms. Palak Joshi, Advocates.

For Respondent : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Sameer Jain, Mr. Syed Fazl Askari, Mr. Akshat Jain and Mr. Saikat Sarkar, Advocates for R-1.

Mr. Sunil Fernandes, Sr. Advocate with Mr. Himanshu Satija, Ms. Ankita Shanker & Mr. Harsh Saxena, Advocates for R-3 & R-4.

Ms. Madhumita Bhattacharya, Advocate for Intervener/State of West Bengal.

JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code 2016 ('IBC' in short) by the Appellant arises out of two sperate orders

dated 22.03.2024 (hereinafter referred to as 'Impugned Orders') passed by

the Adjudicating Authority (National Company Law Tribunal, Kolkata, Bench-

II) in I.A. No. 15/KB/2024 in T.A. No.8/KB/2022 and I.A. No.2/KB/2024 in

TP No. 4/KB/2022. By the impugned orders, the Adjudicating Authority has

dismissed I.A. No.15 of 2024 upholding the rejection of claims of the Appellant

filed with the Resolution Professional and approved I.A. No.2 of 2024

approving the resolution plan of the Corporate Debtor. Aggrieved by the

impugned orders, the present appeal has been preferred by the Appellant.

2. Outlining the factual matrix of the matter, the salient events are as

under:

Page 2 of 41

Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024  The genesis of the present proceedings arises out of the winding up

orders issued by the Hon'ble Calcutta High Court on 04.06.1990 in

respect of Rishra Steel Ltd.

 A Single Judge Bench of the Calcutta High Court on 02.05.1997

approved a scheme of revival of Rishra Steel by inducting Sylvan

Commercial Pvt. Ltd. ('Sylvan' in short) as a promoter. In terms of the

revival scheme, Sylvan-present Appellant was required to make certain

investments to restart production. In terms of the above directions of

the Calcutta High Court, the Appellant was to work under the

supervision of an Administrator, namely, Shri B.L. Jain who was

appointed by the Calcutta High Court.

 The revival scheme of 02.05.1997 was set aside by the Division Bench

of the Calcutta High Court on 03.10.1997 and remitted back to the Trial

Judge for continuing on with the liquidation process. Accordingly, the

Official Liquidator ('OL' in short) took possession of the assets of the

company in liquidation. This order of 03.10.1997 recorded the fact that

the Appellant had made certain investments in the company to be

considered by the Trial Judge at the time of liquidation. The Calcutta

High Court also directed the Administrator on 19.12.1997 to submit a

Report with regard to the accounts of the company supported by the

relevant vouchers to the OL.

 On 17.01.1998, the Administrator certified the accounts submitted by

the Appellant and the expenses incurred basis an Auditor's Certificate.

Page 3 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 This Auditor's Certificate was issued by M/s Kuldeep Jaiswal & Co., the

internal Auditor of Sylvan.

 On 17.08.2006, the High Court of Calcutta directed Sylvan to file its

claim with the OL in accordance with law.

 On 26.11.2019, the Hon'ble Supreme Court directed the OL to

adjudicate the claim of the Appellant following which the Appellant

submitted its claim before the OL on 07.02.2020.

 On 24.02.2020, the OL partially admitted the claim of Sylvan for an

amount of Rs.57.68 lakhs while rejecting the remainder sum of Rs.1.57

cr.

 The finding of the OL regarding admission of only Rs.57.68 lakhs was

objected to by the Appellant following which on 06.08.2021, the Hon'ble

Supreme Court transferred the winding-up proceedings to the National

Company Law Tribunal, Kolkata Bench and directed NCLT to consider

the Report of the OL and the objections filed by the parties so as to

adjudicate on merits the claim of the Appellant. On 07.09.2022, the OL

issued a letter stating that the originals of the documents pertaining to

the claim of the Appellant had been transferred to the Resolution

Professional ('RP' in short).

 CIRP was initiated against Rishra Steel Ltd.- Corporate Debtor by the

Adjudicating Authority on 18.07.2022 with the last date of claims filing

being 01.08.2022. The CoC approved the plan of Successful Resolution

Applicant ('SRA' in short) on 15.05.2023 following which the RP filed

I.A. No. 85 of 2023 before the Adjudicating Authority for approval of the

Page 4 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 plan. The plan was remitted back to the CoC by the Adjudicating

Authority for certain procedural compliances with regard to

participation of suspended management in terms of Section 24 of IBC.

 IA No.145/KB/2023 was filed by Sylvan in the meantime before the

Adjudicating Authority to adjudicate on their claims in terms of the

order of the Hon'ble Supreme Court of 06.08.2021. On 05.10.2023, the

Adjudicating Authority while disposing of IA No.145/KB/2023 directed

Sylvan to submit its claims before the RP irrespective of claims filed by

Sylvan before the OL during the earlier winding-up process by

distinguishing it from current insolvency proceedings.

 The Appellant filed their claim of Rs. 245 cr. before the RP on

04.11.2023 to which the RP informed the Appellant on 08.11.2023 that

the claim was not submitted in the prescribed format.

 The Appellant submitted their claim in the prescribed form for Rs.245

cr. on 09.11.2023 to which the RP sent a communication to the

Appellant seeking original documents to substantiate their claim. On

14.11.2023, the RP was informed by the Appellant that the original

documents had already been transferred to the RP earlier.

 On 21.11.2023, the RP denied having received the original documents

and sought these documents from the Appellant. On 30.11.2023, the

Appellant sent an email providing original balance sheets and Auditor's

Report depicting expenses incurred by the Appellant. On 12.12.2023,

the Appellant addressed a letter to the OL seeking original copies of the

documents to prove the claim of the Appellant. The OL however sent

Page 5 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 their response on 15.01.2024 stating that all documents including

original had been sent to the RP for adjudication of claims.

 On 19.12.2023, the RP communicated to the Appellant rejecting their

claim. Consequent upon rejection of their claim, the Appellant filed IA

No. 15 of 2024 in TA No. 8/KB/2022 on 07.01.2024 challenging the

rejection of their claims. IA No. 15 of 2024 was rejected by the

Adjudicating Authority on 22.03.2024 and the rejection of the claim by

the RP was upheld.

 In the meantime, the CoC had approved the resolution plan submitted

by the Successful Resolution Applicant ('SRA' in short) with 100% vote-

share on 21.12.2023. The Adjudicating Authority approved the

resolution plan of the SRA on 22.03.2024 which had been placed before

its consideration by the RP vide IA No. 2 of 2024 in T.P. No. 4/KB/2022.

 Aggrieved by the orders passed by the Adjudicating Authority in IA No.

15 of 2024 and IA No. 2 of 2024, the Appellant has come up in appeal.

3. Making his submissions on behalf of the Appellant, Shri Gaurav Mitra,

Ld. Counsel submitted that the Adjudicating Authority had committed an

error in approving the resolution plan of the Corporate Debtor at a time when

the RP failed to consider the claims of Sylvan though it had incurred expenses

amounting Rs.2.15 crore in refurbishing plant and machinery, restoring

electricity, rebuilding infrastructure and paying off creditors in pursuance of

orders of the Single Bench of Calcutta High Court dated 02.05.1997. It was

asserted that these expenses had been made under the supervision of a court

appointed Administrator who had certified these expenses and accepted the

Page 6 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 expenses claimed by the Appellant amounting Rs.2.15 cr. While admitting that

the Division Bench of Calcutta High Court had set aside the Single Bench

Order on 03.10.1997, it was asserted that the Division Bench had taken notice

that the Appellant had made considerable investments. Directions had been

issued thereafter by the Calcutta High Court on 17.08.2006 allowing Sylvan

to lodge their claims with the OL which was affirmed by the Hon'ble Apex

Court on 26.11.2019. However, as the OL admitted their claim only partially,

this was challenged by them before the Hon'ble Apex Court which transferred

the matter to NCLT, Kolkata for adjudication on 06.08.2021 while also

directing that the OL's report and objections thereto of the Appellant be also

considered.

4. Elaborating further it was stated that in pursuance of the orders of the

Hon'ble Supreme Court, the Adjudicating Authority had entrusted the RP to

collate the claims of the Appellant. The Appellant had submitted their claim

of Rs.245 Cr. in the prescribed format before the RP on 09.11.2023 along with

supporting documents. It was further asserted that though the OL had already

sent the original records to the RP as borne out by their communications dated

07.09.2022 and 15.01.2024, it was added that the RP falsely denied receipt of

the original records relating to the claim accounts and arbitrarily rejected the

claim on 19.12.2023. This conduct of the RP was in violation of Regulation 13

of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,

2016 (hereinafter referred to as 'CIRP Regulations'). It was also submitted

that the rejection of the claim of the Appellant by the RP though these claims

Page 7 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 had already been judicially acknowledged is violative of the principles of

equity, transparency and fairness.

5. It was vehemently contended that the Appellant cannot be made to

suffer loss due to reversal of judicial order. In support of their contention,

reliance was placed on the judgments of the Hon'ble Supreme Court in Motors

& Investments Ltd. v. New Bank of India & Ors. (1997) 11 SCC 271 in

which it was held that when a court-sanctioned sale was set aside, the

purchaser was entitled to restitution. It was also pointed out that in a similar

set of facts, the Hon'ble Supreme Court in South Eastern Coalfields Ltd. v.

State of MP & Ors (2003) 8 SCC 648 had held that no party shall suffer

because of an act of court.

6. It was also contended that the rejection of their claim by the RP was

challenged by them in IA No. 15 of 2024. However, the Adjudicating Authority

wrongly dismissed I.A. No. 15 of 2024 and proceeded to approve the resolution

plan. The Adjudicating Authority could not have decided on the application

for approval of the resolution plan without first deciding on the challenge to

the wrongful rejection of their claims by the RP. The approval of the resolution

plan without considering the claim of the Appellant undermine the sanctity of

the resolution process and compromises its purity. Reliance was placed on the

judgment of the Hon'ble Supreme Court in Greater Noida Industrial

Development Authority v. Prabhjit Singh Soni & Anr. (2024) 6 SCC 767

to contend that the RP was under a statutory obligation to verify the claims

on the basis of records available before it and that the Appellant was a creditor

superior to even secured creditor in terms of the Single Bench order. It was Page 8 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 contended that rejection of their claims by the RP tantamount to material

irregularity, hence, the Appellant has challenged the resolution plan.

7. Refuting the contentions made by the Appellant, Shri Abhijeet Sinha,

Ld. Senior Counsel representing the RP submitted that the Appellant was not

entitled to refund of any amount which it had invested in the Corporate Debtor

company as the orders of the Single Bench of the Calcutta High Court had

clearly stipulated that the liability created by Sylvan shall be their own liability

and not that of the company or the OL. Further, it was pointed out that when

the Single Bench order of 02.05.1997 clearly held Sylvan to be a 'promoter', it

could not claim to be a creditor but was present in the capacity of investor-

promoter. While such a claim by an investor-promoter was permissible for

collation under Section 528 of the Companies Act, 1956 in winding-up

proceedings, IBC only recognizes admission of claim only in respect of

creditors. Much emphasis was laid on the fact that the Report of the

Administrator, basis a certificate issued by the internal Auditor of Sylvan,

without any independent assessment/verification made by the Administrator

cannot be held to have substantiated the claim of Sylvan.

8. Furthermore, when the Hon'ble Supreme Court on 06.08.2021 vide its

orders transferred the winding-up proceedings to the NCLT, it was clear that

the Hon'ble Supreme Court intended further adjudication of the claims to be

made not under the winding-up provisions of the Companies Act but under

the provisions of the IBC. The Adjudicating Authority on 05.10.2023 had

thereafter passed an order holding that with the commencement of CIRP,

Sylvan was required to file a proper claim afresh in accordance with the IBC. Page 9 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 In such circumstances, all prior assessment of the claim made by the

Administrator or by the OL stood superseded and rendered irrelevant. It was

also emphatically asserted that neither the decision of the Single Bench,

Division Bench of the Calcutta High Court or the Hon'ble Supreme Court had

adjudicated on the right of the Appellant to be entitled to refund of the

amounts allegedly spent/invested by them in the company.

9. Contrary to the claims made by Sylvan, the RP was never provided with

the relevant documents by the OL in respect of the purported claims made by

Sylvan. In any event, dispensing with the procedural requirement of filing

claims does not arise. Inspite of being aware of the CIRP proceedings, the

Appellant for inexplicable reasons was not prompt in filing their claim. The

Appellant had not filed their claim by the last date for filing which came to an

end on 01.08.2022. They filed their claim only after the Adjudicating Authority

directed them to file their claim vide its order dated 05.10.2023 and that too

only after it was followed by another reminder from the RP on 01.11.2023.

10. It is asserted by the RP that inspite of repeated requests made the RP

and opportunities given to the Appellant, they failed to provide sufficient

evidentiary proof by way of bank statements; proofs of disbursement; vendor

invoices linked to the Corporate Debtor; invoices with regard to services

provided to the Corporate Debtor to substantiate their claims. It has also been

contended that the Appellant has claimed an exorbitant and unsustainable

interest claims of Rs. 213 cr. as against a principal amount of Rs. 2.15 cr. The

claim of interest was unsupported by any contract or document. There is no

substantiation of the services rendered by the Appellant or to show that the Page 10 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 Corporate Debtor had been a recipient or beneficiary of their services. Most

invoices were uncorroborated, artificially generated and not even related to

revival of the Corporate Debtor but were of a frivolous nature. Under such

circumstances, the RP could not have accepted these claims without proper

verification. In support of their contention, reliance has been placed on the

judgment of this Tribunal in Umesh Kumar v. Narendra Kumar Sharma in

CA (AT)(Ins) No. 100 of 2024 in which it has been held that the RP is expected

to exercise due diligence while examining invoices and could exercise the

discretion of seeking additional information for this purpose.

11. It was further submitted that the Adjudicating Authority had bestowed

the indulgence of allowing the Appellant to file their claim even at the stage of

approval of the resolution plan by the Adjudicating Authority. No prejudice

was caused to the Appellant since adequate opportunity was provided to

submit their claim. However, the RP is not expected to wait indefinitely for any

claimant to submit their claims. The process of plan approval cannot remain

an open-ended and a never-ending process at the whims and fancies of a

solitary claimant who falters to file the claim despite being shown leniency to

submit belated claims. It was therefore contended that now that the resolution

plan stood approved and the CIRP stood concluded, consideration of belated

and unsubstantiated claim by the Appellant cannot be allowed as it would

undermine the sanctity of the stringent timelines of the IBC and render topsy-

turvy a duly approved resolution plan.

12. Echoing similar arguments, Shri Sunil Fernandes, Ld. Senior Counsel

representing the SRA submitted that the resolution plan submitted by the SRA Page 11 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 along with addendum was approved by the CoC with 100% majority vote on

15.05.2023. Though the resolution plan had been remitted back by the

Adjudicating Authority to the CoC on 05.10.2023, this was on account of

technical non-compliance. Subsequently, all procedural compliances in terms

of the IBC had been met and the reconstituted CoC had approved the

resolution plan of the SRA with 100% vote share on 22.12.2023 which was

thereafter approved by the Adjudicating Authority on 22.03.2024. The failure

of the Appellant to submit their claims within the given timeframe cannot

entitle them to any relief at a belated stage. The present appeals by Sylvan

seek to modify/create additional liability in a resolution plan which is already

being implemented which if allowed would jeopardise the revival of the

Corporate Debtor. This is a classic case of hydra head popping-up after the

approval of the resolution plan which is hit by judicial precedent in

Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta

and Others (2020) 8 SCC 531 and Ghanshyam Mishra and Sons Pvt Ltd

v. Edelweiss Asset Reconstruction Company Ltd & Ors. (2021) 9 SCC

657.

13. The SRA through the resolution plan revived the corporate debtor

steering it back to the life from a state of liquidation since 1989. It was

therefore contested that by raising bald allegations of material irregularities,

the Appellant was derailing the resolution of the Corporate Debtor which had

come on track after a prolonged period of remaining under liquidation process.

The challenge to the resolution plan on the ground of material irregularities

was a bald allegation made by Sylvan-Appellant without any specific Page 12 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 documentary evidence. It was contended that the Appellant was interested

only in delaying the revival of the Corporate Debtor at a time when the

Adjudicating Authority acting in consonance with the intent and objective of

IBC had revived the Corporate Debtor whose CIRP had commenced way back

on 18.07.2022 by approving their resolution plan.

14. It was further asserted that the SRA had not only infused the committed

amount but had cleared the entire admitted claims of creditors including

government dues under the resolution plan without making any haircut. Not

only were the admitted claims honoured but done within the committed

timelines in accordance with the clauses of the resolution plan. The plan had

also been consummated to the satisfaction of the Monitoring Committee. In

support of their contention, reliance has been placed on the judgment of this

Tribunal in Bharat Petroresources Ltd. v. Monnet Ispat and Energy Ltd.

in CA (AT) (Ins) No. 550 of 2018 wherein challenge to a resolution plan was

rejected on implementation of the plan having taken place.

15. We have also heard Ms. Madhumita Bhattacharya, Ld. Advocate for the

State of West Bengal who has filed an impleadment application. It was

submitted that subject land measuring 37.56 acres under Mouza-Rishra and

Konnagar, Hooghly was allowed to be retained by the Corporate Debtor for the

purpose of running the mill. Hence, the Corporate Debtor was only a retainer

and not the owner of the said land, thus the RP could not have dealt with this

asset in the CIRP of the Corporate Debtor.

Page 13 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

16. We have exhaustively heard all the parties and duly considered the

arguments advanced by the Learned Counsels representing them and perused

the records carefully.

17. At the very outset we would like to deal with the impleadment

application filed by the Govt. of West Bengal which was vehemently opposed

by both the RP and the SRA. It was submitted that the Intervenor had earlier

filed IA No. 165 of 2023 before the Adjudicating Authority praying for rejection

of the resolution plan of the SRA on the ground that the subject land was

being transferred to a third party via the said resolution plan. This application

had already been dismissed by the Adjudicating Authority on 05.10.2023

which not having been challenged by the present Intervenor has attained

finality. The intervenor also did not challenge the order passed by the

Adjudicating Authority on 22.03.2024 approving the resolution plan of the

SRA. It was contended that this is an indirect attempt under the garb of an

impleadment application to seek relief which cannot be claimed at this stage.

The present impleadment application, at this belated stage, in an appeal filed

by an unrelated third party on uncommon grounds to reopen settled matters

cannot be countenanced. We, therefore, do not find any merit in the

impleadment application filed by the Govt. of West Bengal and dismiss the

same.

18. Coming to our analysis and findings, to begin with, we would like to

observe from the chronology of events that the entire matter has protracted

historical roots commencing from 1990 spanning more than three decades. It

is equally significant to note that the litigious journey has traversed a maze of Page 14 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 judicial proceedings including the Single Bench and Division Bench of

Calcutta High Court, Hon'ble Supreme Court, NCLT and also the

instrumentalities of a court appointed Administrator and an OL. More

importantly, the contentious dispute between the parties has meandered its

way through the regime of liquidation proceedings conducted under the

provisions of Companies Act to the regime of insolvency proceedings regime

under special legislative enactment of IBC.

19. For a proper and holistic appreciation of the issue at hand, it may be

worthwhile to track the multiple layers of judicial proceedings and

consequential orders/directions churned out from the time the Corporate

Debtor underwent liquidation proceedings and capture the essence of each

these orders/directions.

20. The first in the sequence of court proceedings purportedly bearing

relevance on the present matter is the decision of the Single Bench of the

Calcutta High Court dated 02.05.1997. The relevant excerpts of the said order

are as extracted below:-

".......

c) The said Promoter Company will restart production for the purpose of providing employment to the workers of the Company in liquidation and will carry on business by utilising the assets, properties, plants and machinery of the said Company under the supervision and control of Shri B.L Jain, a retired Judge of the Court who will act as Administrator and for his services will be entitled to monthly remuneration ........

l) Any liability created by the said promoter company in course of running management and/or controlling the said company will be the exclusive liability of the said promoter company and same shall not be the liability of the official Liquidator or the said company in

Page 15 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 liquidation or the company in liquidation. Similarly, if any asset is newly created by the promoter, such asset shall belong to the promoter.

..........

p) In the event of the possession of the factory premises, assets and properties of the said company in liquidation being retaken by the Official Liquidator for any default in payment made by the said promoter company and in the event of the scheme framed by this order being abandoned, the promoter will not be entitled to the refund of all moneys invested by him for alteration, renovation and addition to plant & machinery to bring the same into running condition after the dues of the Allahabad Bank and the authorities mentioned in Sections 529A of the Companies Act, 1956 have been duly satisfied, and in that event the administrator, appointed herein will stand discharged. The dues of the said promoter company in other words, will be paid in preference to the dues of the unsecured creditor/creditors.

q) The said promoter company under the supervision of said administrator Shri B. L. Jain, the administrator will prepare and submit to the court the annual audited accounts and all sums brought in by the said promoter company shall be clearly specified in such account and the administrator will also file his own report to Court. The said promoter company shall have second charge over the assets of the company and all materials to the extent investment has been made by him........"

(Emphasis supplied)

It is clear from the above Single Bench order that Sylvan was inducted by the

Calcutta High Court to revive Rishra Steel Ltd. and make certain investments

to restart production under the supervision of Shri B.L. Jain, the Court

appointed Administrator. This revival scheme expressly stipulated that any

liability incurred by Sylvan would be at their own risk and not reimbursable

by the Corporate Debtor or OL. The Administrator was to also file a report

before the Court of all the sums brought in by Sylvan and Sylvan would enjoy

second charge over the assets of the Corporate Debtor to the extent of

investment made by it.

Page 16 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

21. The revival scheme was challenged before the Division Bench of Calcutta

High Court which in its order dated 03.10.1997 directed that the affairs of the

Corporate Debtor was to return to the OL and remitted the matter back to

Trial judge. The relevant excerpts of the said order is as reproduced below:

"..........

For the foregoing, reasons, the impugned order cannot be sustained and is set aside. The matter is remitted back to the learned Company Judge for passing a fresh order in accordance with law and after giving an opportunity of hearing to all concerned. The learned Company Judge may issue an appropriate advertisement. The official liquidator shall take over possession of the properties in question and shall take all steps to preserve the same efficiently and diligently.

The learned trial Judge is requested, keeping in view the peculiar facts and circumstances of this case, to give top most priority to the hearing of the matter and disposed of the same at his earliest convenience. We are not unmindful of the fact that in the meantime the Respondent no 1 has incurred certain expenditures. The learned trial Judge, we are sure, would consider the said question as also the question that the workmen are out of employment for a long time. They have also not been paid their dues and allegedly (illegible text) out of starvation and as such it would be fit and proper that the matter is disposed of at an early date......."

(Emphasis supplied)

When we read the Division Bench order, it is unmistakeably clear that the

order of the Single Bench has been "set aside" and therefore rendered null and

void. Be that as it may, the Division Bench Order while directing the matter

back to the Trial Judge and also directing the OL to take possession of the

properties of the Corporate Debtor also made a significant observation that

Sylvan had incurred certain expenditure on the Corporate Debtor which has

to be kept in mind.

Page 17 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

22. At this stage, it would suffice to note that in terms of an order of the

Calcutta High Court dated 19.12.1997, the Administrator submitted a Report

on the accounts of the Corporate Debtor on 17.01.1998. The Report is placed

at pages 196-202 of Appeal Paper Book ('APB' in short). When we peruse the

above Report of the Administrator, we notice that the Administrator recorded

that copies of cash vouchers, journal vouchers, labour vouchers etc. in ten

boxes were received towards accounts of the Corporate Debtor, with the

originals continuing to remain part of the records of the Corporate Debtor. The

Administrator further admitted that his report of accounts of Sylvan

expending Rs.2.15 cr. was submitted on the basis of "Certificate of Auditors"

and the "Statement of Affairs" as submitted by the internal auditors of the

Corporate Debtor.

23. By a subsequent order of the Calcutta High Court dated 17.08.2006,

Sylvan was given the liberty to lodge its claim in the ongoing liquidation with

the OL in accordance with law. In the ongoing liquidation proceedings, the

Hon'ble Supreme Court vide its order dated 26.11.2019 also took note of the

investment of certain amounts made by Sylvan in the Corporate Debtor and

directed adjudication of these claims. The relevant excerpts of the order of

Hon'ble Supreme Court are as reproduced below:

"Date: 26-11-2019 ...Having heard learned counsel appearing for the parties and upon perusal of the record, we are of the view that the claim of newly added respondent viz., Sylvan Commercial Pvt. Ltd., that it has invested certain amount in the company during the period when they were in- charge of the company, needs to be adjudicated upon. The appropriate authority for such adjudication is the official liquidator who is present before us today.

Page 18 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 In the circumstances, we direct the official Liquidator respondent no.2 of the Calcutta High court who is represented by Mr. Sanjoy Kumar Ghosh, learned counsel, to adjudicate the claim dated 09.07.2008 of the new added respondent viz M/s Sylvan Commercial Pvt. Ltd., within a period of three months from today."

(Emphasis supplied)

From a plain reading of the above orders, we find that Hon'ble Supreme Court

had only observed that certain amount had been invested by Sylvan which

required adjudication by OL while leaving it to the OL to crystallize the amount

purportedly invested by the Sylvan- Appellant in the Corporate Debtor.

24. In pursuance of the directions of the Hon'ble Supreme Court, the claim

of Sylvan of Rs.2.15 cr. was adjudicated upon by the OL as may be seen at

page 206-213 of APB. The relevant portion of OL's report on adjudication of

Sylvan's claim is as reproduced below:

" .........

Subsequently, hearings have been held on 14.01.2020, 05.02.2020 and 07.02.2020 when the parties for and against the claim have been heard, extensively. Stack of documents relating to the said claim of Sylvan Commercial Pvt. Ltd. were submitted in 11 files bearing Nos. Vol. 1 to Vol. 11 in two sets, one comprising the photocopies of vouchers/ invoices/bills and the other comprising the originals thereof. The photocopies of the documents comprising in 11 volumes (contained in 11 files) have also been served on the ARC Holdings Ltd. and M/s Deccan Traders Pvt. Ltd. As directed by Official Liquidator, both M/s ARC Holdings Ltd. and M/s Deccan Traders Pvt. Ltd., meanwhile, filed their respective written objections to the claim of Sylvan Commercial Pvt. Ltd.

............

CONCLUSION Therefore, upon lawful adjudication, an expenditure to the tune of Rs.57,86,335.00 has been found to be in order based on the supporting vouchers and invoices and, thus, admitted as legitimate claim of Sylvan Commercial Pvt. Ltd. while claim of Sylvan Commercial Pvt. Ltd. amounting to Rs.1,57,81,878.54 is rejected."

(Emphasis supplied) Page 19 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 The OL in its report dated 24.02.2020 clearly mentions admittance of Rs.57.68

lakhs as expenditure incurred by Sylvan while giving detailed reasons for

rejection of the balance claim of Rs.1.57 Cr. including setting out reasons for

rejection of interest component.

25. Objections on the report of OL was filed before the Hon'ble Supreme

Court by Sylvan. The matter was heard by the Hon'ble Apex Court and the

relevant excerpts of the order passed on 06.08.2021 is as reproduced below:

".......By an Order dated 26.11.2019, this Court directed the Official Liquidator to adjudicate the claim of Sylvan Commercial Pvt. Ltd. within a period of three months. The Official Liquidator submitted a report to this Court to which objections have been filed by the Ist respondent and M/s. Sylvan Commercial Pvt. Ltd. ..........

Proviso to Section 434 (1) (c) of the Companies Act contemplates transfer of proceedings relating to winding up of companies pending before any court to the NCLT at the request made by a party. Company Petition No.519 of 1989 shall be transferred to the NCLT, Kolkata Bench. Needless to say that the report filed by the Official Liquidator and the objections filed to the said report by the parties shall be considered by the NCLT.

In view of the pendency of the Company Petition for a very long period of time, we direct the NCLT to dispose of the Company Petition expeditiously........."

The Hon'ble Supreme Court had merely directed transfer of the report of OL

on the claims of Sylvan to NCLT without making any observations on the

amount claimed by Sylvan or applicability of any interest thereon. This order

of Hon'ble Apex Court also marks a defining watershed moment in that the

ongoing adjudication of claims of the Sylvan under the Companies Act ended

and transitioned to adjudication by NCLT under the IBC insolvency regime.

Page 20 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

26. Having referred the matter to the fold of the NCLT, the matter was heard

by NCLT acting as the Adjudicating Authority and an order was passed on

05.10.2023, the relevant excerpts which are as reproduced below:-

"5. The Applicant has annexed several invoices/bills to the said application in question, and even if we consider the fact that the Applicant had filed its claim with the Official Liquidator, and the Official Liquidator had accepted its claim, but the same was done during the winding up period.

6. After the case was transferred to this Adjudicating Authority and the Rishra Steel Limited was admitted into Corporate Insolvency Resolution Process, which is not related to the winding up proceedings. After publication of notice in Form A by the Insolvency Resolution Professional, inviting claims from creditors, it was the responsibility of the Applicant to file its claim in the respective form with the Resolution Professional irrespective of the fact that the Official Liquidator had admitted its claim or not. In the entire pleadings, the Applicant has not stated of doing so, but has continuously sought for production of its documents.

7. After transfer of winding up petitions to the NCLT, the same is treated under the Insolvency and Bankruptcy Code, 2016 ("Code") and hence, the process under the Code is to be followed, which has not been done in the present case. Hence, we do not find any merit in allowing the prayer of the Applicant to direct the Resolution Professional to produce the invoices, that was submitted to the official Liquidator, which in turn has been given to Resolution Professional.

8. Be that as it may, in view of the order of the Hon'ble Supreme Court

06 August 2021, and the order wherein we have sent the Resolution Plan for reconsideration by the CoC, we direct the Applicant to file its claim before the Resolution Professional, and the Resolution Professional is directed to collate the claim accordingly."

(Emphasis supplied)

27. In the above orders, we notice that the Adjudicating Authority has

clearly mapped the distinction between the methodology followed in the

treatment of claims of Sylvan by the OL as part of winding-up proceedings and

the modalities proposed to be adopted under the IBC regime through the

Page 21 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 medium of the RP. In terms of Section 18(b) of the IBC, since the RP is

entrusted with the duty of receiving and collating the claims submitted by

creditors, the Adjudicating Authority directed the Appellant-Sylvan to file their

claims in the requisite Form before the RP.

28. When we look at the Claim Form-B which had been filed with the RP by

Sylvan as Operational Creditor, the principal amount claimed is Rs.2.15 Cr.

along with interest of Rs.243.32 Cr. The documents which have been referred

to by Sylvan to substantiate their claim includes the Report of the

Administrator and the accompanying Auditor's Certificate; invoices, bills

showing materials bought for the upkeep of the factory premises to start

production as well as copy of the interest calculation sheet. The said Claim

Form also states that all the above documents pertaining to the claim of Sylvan

had been submitted to the RP by the OL and that the claim can be verified

from those documents lying with the OL. The Claim Form may be seen at

pages 868-877 of APB.

29. It is the contention of the RP that in terms the order of the Single Bench

on the event of the Corporate Debtor going back to the hands of the OL or on

the abandonment of the revival scheme, the right to refund on the part of

Sylvan would stand extinguished. It is also their contention that the role of

Sylvan was that of a promoter who had agreed to undertake commercial risk

while making investment in the Corporate Debtor. Moreover, no evidence of

service rendered had been placed on record before the RP. Hence their claim

did not qualify to be that of an Operational Creditor in terms of the statutory

construct of IBC. It was also contended that the Report of the Administrator Page 22 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 certifying the claim stood clearly supervened by the orders of the Division

Bench of the Calcutta High Court which had directed Sylvan to file their claim

with the OL. The partial admission of the claim by the OL could not have been

accepted by the RP since the OL had acted in terms of the provisions of the

Companies Act which did not entail proper scrutiny or substantiation of the

evidence of actual disbursement.

30. When we look at the relevant portions of the impugned order of the

Adjudicating Authority as reproduced below, we find that the Adjudicating

Authority while rejecting the claim of Sylvan inter alia relied on the findings of

the Single Bench order to take a stand that Sylvan fell in the category of an

investor and not a financial creditor or operational creditor of the Corporate

Debtor and therefore no claim of financial debt or operational debt could have

been made by them.

"35. In view of this Order, we now proceed to examine the claim made by the applicant.

.......

e. On careful examination of the said Order of the Hon'ble High Court at Calcutta we understand that the appointment of Sylvan is in the nature of investor coming and running the factory for ultimate ownership.

h. We are of the view that the applicant herein is not a financial creditor or operational creditor of the company in any way and therefore, no claim as financial debt or operational debt can be made. i. We are of the view that it is only with reference to money spent in creation of new asset/modification or restoration of any asset, reimbursement is contemplated that too after paying all the dues of Allahabad Bank and authorities mentioned in Section 529A of the Companies Act, 2013. This is as per our understanding of Para (l) and

(p) of the order of the Honorable High Court dated 02/05/1997...."

(Emphasis supplied) Page 23 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

31. We are not inclined to agree with the above finding returned by the

Adjudicating Authority since this finding is fixated around the orders of the

Single Bench which order having been clearly set aside by the Division Bench

lacked the force of law and thus could not have been relied upon. We would

also like to clarify that any contention made by the Appellant or the RP by

relying upon any part of the judgment of Single Bench also does not meet with

our countenance.

32. Having so said, we however cannot be oblivious of the fact that the

Division Bench of the Calcutta High Court had taken cognisance of the fact

that investments had been made by the Appellant in pursuance of a court-

mandated revival scheme. Even though the revival scheme did not survive, it

does not wipe away the factual position of expenses having been incurred by

the Appellant-Sylvan in the affairs of the Corporate Debtor. Furthermore, on

19.12.1997, it was the Calcutta High Court which directed the Administrator

to submit report on the accounts of Sylvan to the OL. Subsequently on the

directions of the Calcutta High Court on 17.08.2006 and of the Hon'ble Apex

Court on 26.11.2019, the OL actually verified the Administrator's Report and

acknowledged/admitted expenditure incurred by the Appellant to the tune of

Rs.57.68 lakhs. We also notice that when the finding of the OL on

Administrator's Report was challenged before the Hon'ble Supreme Court, the

latter in its order dated 06.08.2021 did not shun or reject the report of the OL

on the claims of Sylvan but only referred it to the NCLT. From a reading of the

order of the Hon'ble Supreme Court dated 06.08.2021 it becomes clear that

Page 24 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 the Hon'ble Apex Court had not rejected or disregarded the Report of the OL

but had only desired that the Report be appraised by the NCLT.

33. Given this factual backdrop that expenses incurred by Sylvan on the

Corporate Debtor has been acknowledged up to the level of the Hon'ble

Supreme Court, we do not find substance in the findings returned by the

Adjudicating Authority that the Appellant cannot have right to claim financial

or operational debt qua the Corporate Debtor. The emphasis laid in the

impugned order on the Single Bench order of the Calcutta High Court that the

amount invested was not reimbursable is misplaced as the Single Bench order

had already been set aside. By the same logic that the Single Bench order was

overturned, we also hasten to add that the contention of the Appellant that

their status as creditor was even superior to that of a secured creditor by

relying on this order is misplaced. We would also like to add that the ratio of

Prabhjit Soni judgement is also not applicable in the facts of this case

because in that case Greater Noida was claiming status of secured creditor by

operation of law and for reasons of having statutory charge over the assets

which is not the case here.

34. This brings us to the next limb of the argument canvassed by the

Appellant that when the claim of the Appellant had been recognized by the

High Court of Calcutta as well as the Hon'ble Supreme Court and the claims

had already been certified by the Administrator and even partially admitted

by the OL, it clearly substantiated that the Appellant had made investments

in the Corporate Debtor. It was submitted that the claim of the Appellant was

rejected by the RP without consideration of the report of the OL which Page 25 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 examination was integral to the order of the Hon'ble Supreme Court dated

06.08.2021.

35. Repelling the argument of the Appellant that rejection of their claim was

in the teeth of binding judicial orders, it has been contended by the RP that

the Adjudicating Authority had acted in deference to the directions of the

Hon'ble Apex Court of 06.08.2021 to independently look at the report of the

OL. Elaborating further it was submitted that the Adjudicating Authority had

thereafter passed an order dated 05.10.2023 holding that the claim of Sylvan

was required to be adjudicated under the statutory construct of IBC and

directed the Appellant to file their claims accordingly before the RP. This order

of the Adjudicating Authority passed on 05.10.2023 not having been

challenged by the Appellant, it was contended by the RP that the same had

acquired finality and constituted the foundational basis thereinafter for

determining the manner in which claims had to be filed by the Appellant and

its adjudication.

36. We have already noticed the order of the Adjudicating Authority dated

05.10.2023 at para 26 above. The Adjudicating Authority had clearly observed

therein that post-transfer of the matter to it by the Hon'ble Apex Court, the

IBC regime was required to be followed and the claims submitted during

winding-up proceedings to the OL, even though accepted partially, would not

suffice for the purpose.

37. In pursuance of the order of Adjudicating Authority dated 05.10.2023,

the Appellant was required to file a fresh claim under the IBC dehors any claim

Page 26 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 previously submitted by the Appellant under the winding-up regime. This

order not having been challenged has attained finality and cannot be reopened

at this stage. The very fact that the Hon'ble Supreme Court had transferred

the winding-up proceedings under the Companies Act to the NCLT and

directed adjudication under the statutory provisions of IBC, we are inclined to

agree with the inference drawn by the Adjudicating Authority that the

assessment of the OL having been done under the Companies Act, the same

was now required to be seen again from the prism of the IBC. We therefore do

not find any irregularity in the RP asking the Appellant to file their claims.

38. This brings us to the bone of contention between the Appellant and the

RP which stems from the manner of collation of claims and the issue of

timeliness in the filing of claims. Submission has been pressed by the RP that

CIRP of the Corporate Debtor had commenced even before the order of

Adjudicating Authority dated 05.10.2023. The public announcement for

claims was made on 20.07.2022 with the last date of claim being 01.08.2022.

The Appellant had not filed their claim within the stipulated timeline of

01.08.2022. The Appellant filed their claim only after the Adjudicating

Authority directed them to file their claim vide its order dated 05.10.2023 and

that too only after being reminded by the RP on 01.11.2023. Thereafter, the

Appellant filed claim for the first time on 04.11.2023. However, as the claim

was filed wrongly, the Appellant revised their claim in Form-B on 09.11.2023.

Apart from the delay in filing their claim, it was contended by the RP that the

Appellant had failed to provide bank statements; proofs of disbursement;

vendor invoices linked to the Corporate Debtor; invoices with regard to Page 27 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 services provided to the Corporate Debtor inspite of repeated requests made

to them and ample opportunities given to produce the same. The invoices were

not addressed to the Corporate Debtor and therefore not having any nexus

with the Corporate Debtor, the same could not be accepted as authentic. There

is nothing placed on record to show that the Corporate Debtor had been a

recipient or beneficiary of any services provided by the Sylvan. Many of the

invoices were not related to revival of the Corporate Debtor but were of a

frivolous nature like alcohol, cigarettes, mithai, pan-parag, payment of bribe

etc. The exaggerated nature of the claim is also evident from the fact that as

against a claim made of Rs.2.15 cr., the Appellant had added thereto an

interest amount of Rs.243.32 cr. Emphasis was also laid that the interest had

been charged without any supporting contract or agreement between the

Appellant and the Corporate Debtor. No proof had also been furnished to show

that these payments were actually made by Sylvan against these invoices. The

absence of bank statements, payment confirmations or delivery receipts also

put a question mark on the evidentiary value of these invoices under the IBC

framework. Thus, when the burden of substantiating claims rested on the

Appellant which however remained unmet, under such circumstances, the RP

could not have accepted these claims without proper verification and was

obligated to seek additional information for this purpose.

39. It is the counter contention of the Appellant that all the documents in

support of their claim had been provided by them to the OL which the OL had

transferred to the RP. On 14.11.2023, the RP had been informed by the

Appellant that the original documents had already been transferred to the RP Page 28 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 earlier. Further, on 30.11.2023, the Appellant sent an email providing original

balance sheets and Auditor's Report depicting expenses incurred by the

Appellant. Hence the repeated demand of original documents made by the RP

was an impossible request to be met by the Appellant since all these

documents were in the custody of the OL who in turn had already handed over

the same to the RP. Hence when relevant documents required for adjudication

of their claims was already available with the RP including documents

evidencing the disbursal of money from the Appellant to the Corporate Debtor,

no further substantiation was required on their part. It was asserted that not

only had they submitted substantiated claims but had submitted these claims

well within the timeline. Denying the allegation of frivolous claims, it was

added that interest amount computed cannot be looked upon as an exorbitant

amount since they have been waiting for last 28 years for recovery of their

investment made towards revival of the Corporate Debtor on the express

directions of the Calcutta High Court. When the Appellant has been out of

pocket for its rightful claims for such a long period, there was nothing unusual

on their part in claiming interest.

40. When we look at the impugned order passed by the Adjudicating

Authority, we find that the grounds on which the claims of Sylvan have been

rejected are that there was no proof of disbursement for any of the bills

submitted; no agreement on payment of interest and considerable delay in

submission of claims. For easy reference, we are reproducing the relevant

portions of the impugned order as under:

Page 29 of 41

Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 "35. In view of this Order, we now proceed to examine the claim made by the applicant.

.....

f. Therefore, it appears that there is no debt owed by either liquidator or Rishra Steel Limited to Sylvan based on the transaction carried out pursuant to the Order of the Hon'ble High Court at Calcutta. When that being the case, the question of claiming any money from the resolution professional of Rishra Steel Limited as reimbursement for day-to-day running of business does not arise. Even otherwise there is no agreement on payment of interest and consequently, the entire claim of interest will have to be rejected forthwith.

g. With reference to principal amount, we are unable to understand as to how official liquidator has admitted a partial claim for an amount of Rs. 57 lakhs which in our view, is not supported by any contract or document which entails Sylvan for claiming day to day expenditure incurred for running the factory. Even otherwise, the applicant has not produced proof of disbursement for any of the bills submitted. We have perused copies of some of the bills and see that they are unrelated to the business.

j. Further, we also find that that there has been a considerable delay in submitting the claim under the pretext that all the documents have been submitted by the Official Liquidator to Resolution professional and yet Resolution professional kept asking for several other documents. We would rely upon the judgment of the Hon'ble Apex Court in RPS Infrastructure Ltd. v. Mukul Kumar, reported at (2023) 10 SCC 718: 2023 SCC OnLine SC 1147 at page 724, held that "the mere fact that the adjudicating authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon. As described above, in Essar Steel, the Court cautioned against allowing claims after the resolution plan has been accepted by the COC." l. We are of the view that any expenditure to be reimbursed should be backed by a contract (court order in this case) apart from proof of disbursements. Neither there is any contract, nor the court order supports their case for reimbursement of such expenses and therefore no fault can be attributed on the part of Resolution professional. m. In view of the above, looking at any angle, we find no merit in the application, and accordingly dismiss it."

(Emphasis supplied) Page 30 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

41. Before we come to our analysis and findings, it may be necessary to

notice whether the Appellant had been able to substantiate their claims. We

have no doubts that the RP had sent several communications to the Appellant

seeking basis and evidence to substantiate their claims along with original

documents. However, we also notice that the Appellant had been forthcoming

in making available whatever documents/materials available with it to the RP.

We also find that it was unreasonable on the part of the RP to insist on original

documents from the Appellant particularly when the Corporate Debtor was in

the hands of the OL during the winding up proceedings prior to the matter

being transferred to NCLT. The OL had also sent a letter to the RP on

07.09.2022 (at page 1082 of APB) and 10.10.2022 (at page 83 of reply of RP)

intimating the handing over all available records and original files to RP.

Further we find that there is an order by the Adjudicating Authority dated

20.03.2023 wherein it is noted in no uncertain terms that all documents had

been handed over by the OL to the RP. The relevant order is as placed below:

20TH MARCH, 2023 ORDER

1. Ld. Counsel for the applicant present. Mr. A. Akash, Assistant Official Liquidator, on behalf of the Official Liquidator, Kolkata present.

2. Mr. A. Akash, Assistant Official Liquidator submits that all documents relating to this matter have been handed over to Mr. Nitin Daga, RP.

3. Issue notice to Mr. Nitin Daga, RP by speed post and e-mail, regarding documents forwarded by the Official Liquidator to the RP including the latest report.

4. List the matter on 03/05/2023.

(Emphasis supplied) Page 31 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 We do not find any evidence of the above order having been challenged at any

stage by the RP. Hence, we not persuaded enough to accept the contention of

the RP that it was not having access to the documents handed over by the OL.

42. We now may advert our attention to the orders of the Hon'ble Supreme

Court dated 06.08.2021 wherein the latter had directed that the report of the

OL admitting part of the claim along with the objections of the Appellant

thereto was to be considered by the NCLT as the Adjudicating Authority. The

above order of the Hon'ble Supreme Court cannot be construed in any manner

to hold that it gave immunity to the RP from examining the report of the OL.

Quite to the contrary, we do not find any mention made by the RP that it had

gone through the report of the OL. When we peruse the report of the OL dated

24.02.2020, the report clearly acknowledges that it received documents in 11

files in two sets comprising of original and photocopies. It is noteworthy that

OL gave detailed reasons for accepting only part of the claims and rejecting

the balance Rs.1.57 Cr. claim of Sylvan. The grounds for rejection were that

several vouchers/invoices were beyond the scope of settlement. OL had also

noted that though substantial amount was claimed on account of purchase of

tools and machinery, no supporting documents of delivery receipts of such

machines/tools were available nor money receipts from parties were available

on record. Hence, only expenditure of Rs.57.86 lakhs was admitted by the OL

based on supporting vouchers and invoices while the remaining claim amount

of Sylvan was rejected. Even the issue of levy of interest was considered by the

OL and observed that there was no stipulation for payment of interest in the

revival scheme. Further, the interest charged was not only exaggerated but Page 32 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 the rate of interest charged was found to be inconsistent varying between 18%

to 24% and hence found to be unacceptable. It may also not be out of place to

mention here that the Appellant while coming before the Hon'ble Supreme

Court challenging the report of the OL had also not raised the issue of interest

on their claim and the Hon'ble Supreme Court also did not make any remarks

or observation on the applicability of any interest on the claim amount. That

being the case the Appellant cannot be seen to rely on the judgements of

Motors & Investments Ltd. and South Eastern Coalfields Ltd. supra to

claim interest amount of Rs. 243 Cr on a principal amount of Rs. 2.45 Cr. in

which the issue of interest had been actively considered by the Hon'ble Apex

Court. In fine, we therefore do not hesitate to add that the report of the OL

appears to be reasonable and desrved cognisance.

43. Prima facie, this shows that there was sufficient application of mind on

the part of the OL in examining the tenability of the claims of the Appellant

and that being so, the RP ought to have clearly spelt out the reasons for

accepting/rejecting the report of the OL. Merely because the claims were to

be collated and verified by the RP in terms of IBC and CIRP Regulations does

not mean that the report of the OL was to be outrightly rejected and junked

sans justifiable reasons. We are therefore of the view that the report of the OL

deserved more focussed and serious consideration of the RP.

44. It is pertinent to add here that during the course of hearing before this

Tribunal, the Learned counsel for the SRA had orally offered to pay Rs.57.68

lakhs to the Appellant to cover the claim admitted by the OL during liquidation

without touching the total plan value and proceeds already earmarked for Page 33 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 distribution to the creditors. The SRA however offered to pay this amount

subject to the Appellant not pressing any further claims. However, we must

also add that the offer was not found to be acceptable by the Appellant. We

find that this offer of modus vivendi proposed by the SRA is a practical

suggestion which would put a quietus to the ongoing protracted litigation and

can be a meaningful step in securing the ends of justice for all stakeholders.

45. This now brings us to the question of the Appellant on the alleged

infirmity in the decision of the Adjudicating Authority to have approved the

plan without first deciding on the wrongful rejection of their claims. It is the

case of the Appellant that merely because the resolution plan has been

approved, the Appellant cannot be disentitled of reliefs to which they had a

right under law. It was contended that because of this material irregularity,

their challenge to the approval of the resolution plan should be sustained.

46. Per contra, it is the contention of both RP and SRA that the Appellant

was trying to derail and scuttle the resolution plan of the Corporate Debtor

with the motive of creating additional liability in the resolution plan which

would affect the viability and feasibility of the plan and jeopardise the revival

of the Corporate Debtor. It was emphatically asserted by the RP that the CIRP

process was conducted in a fair and non-discriminatory manner and the

allegations made by the Appellant were unsubstantiated. It was added by the

SRA that there is an imperative need to impart finality to the resolution

process as the legislative intent behind IBC is to freeze all the claims so that

the resolution applicant starts on a clean slate. In the present case, the plan

Page 34 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 has already been implemented to the satisfaction of the creditors and the

Monitoring Committee.

47. Coming to the statutory construct of the IBC, Section 30(2)(b) of IBC

requires every resolution plan to provide for payment of at least the liquidation

value to all operational creditors. Further Regulation 38(1)(b) of the CIRP

Regulations provides that liquidation value must be paid to operational

creditors prior in time to all financial creditors and within thirty days of

approval of resolution plan by the NCLT. The ultimate discretion of how much

to pay to each class or sub-class of creditors lies with the CoC which cannot

be subjected to judicial review as long as the decision of the CoC reflects that

it has taken into account maximization of assets of the Corporate Debtor and

that the interest of all stakeholders including operational creditors have been

adequately balanced. Thus, as the law stands today, no exception can be

taken to any such plan which provides for payment to Operational Creditor in

accordance with Section 30(2)(b) of the IBC read with Regulation 38(1)(b) of

the CIRP Regulations.

48. As per requirement of Regulation 38 of CIRP Regulations, a resolution

plan has to contain a statement as to how it has dealt with the interest of all

stakeholders, including the Financial Creditor and the Operational Creditor of

the corporate debtor. We have noticed that in paragraph 42 of the impugned

order of the Adjudicating Authority, the treatment of financial creditors,

operational creditors, workmen, employees, Government dues and

Operational Creditor, other than Government dues, employees and workmen

and Sylvan has been provided for under the heading 'H' which reads as under: Page 35 of 41

Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 "42. The amounts provided for the stakeholders under the Resolution Plan as provided in Form "H" are as under:

Sl. Category Sub-Category Amount Amount Amount Amount No of of Claimed Admitted Provided Provide Stakehol Stakeholder under d to the der* the Plan Amount Claimed (1) (2) (3) (4) (5) (6) (7)

1. Secured (a) Creditors NIL NIL NIL NIL Financial not having a Creditor right to vote under Sub-

section (2) of section 21

(b) Other than

(a) above:

(i) who did not NIL NIL NIL NIL vote in favour of the resolution Plan

(ii) who voted in favour of the Rs. Rs. Rs. 100% resolution plan 27,465. 2.950.14 2,950.14 88 Lakh Lakh Lakh

Total [(a) + (b)] Rs. Rs. Rs. 100% 27,465.88 2.950.14 2,950.14 Lakh Lakh Lakh

2. Unsecured (a) Creditors NIL NIL NIL NIL Financial not having a Creditors right to vote under Sub- section (2) of section 21

(b) Other than (a) above:

(i) who did not NIL NIL NIL NIL vote in favour of the resolution Plan

Page 36 of 41

Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

(ii) who voted NIL NIL NIL NIL in of favour the resolution plan

Total[(a) + (b)] NIL NIL NIL NIL

3. Operation (a) Related NIL NIL NIL NIL al Party of Creditors Corporate Debtor

(b) Other than

(a) above:

(i)Government Rs. 9.30 Rs. 9.30 Rs. 9.30 100% Lakh Lakh Lakh

(ii) Workmen Rs. 1.00 NIL NIL NIL Lakh

(iii)Employees Rs. 54.25 Lakh NIL NIL NIL

Rs. (iv) Other than 24547.9 7 NIL NIL NIL (I, ii, and iii) Lakh i.e., Sylvan Commercial Private Limited

Total[(a) + (b)] Rs. 24612. Rs. 9.30 Rs. 9.30 100% 52 Lakh Lakh Lakh

4. Other NIL NIL NIL NIL NIL debts and dues Grand Total Rs. Rs. Rs. 100% 52,078.40 2,959.45 2,959.45 Lakh Lakh Lakh

49. In the present factual matrix, the CoC in its commercial wisdom has

decided after due deliberations not to allocate any amount to the operational

creditors other than the government dues while following the waterfall

mechanism under Section 53 of IBC. Thus, even if we proceed on the

Page 37 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 assumption that the RP had wrongly rejected the claims of the Appellant, this

rejection could not have caused any prejudice to the interests of the Appellant.

Thus, even if the Appellant had filed their claims before the RP, no amount

would have been payable to them since they would could not have been

allocated more than Nil amount which was due to Operational Creditors in

terms of the resolution plan. The Appellant would not have been entitled to

any proceeds of distribution under the resolution plan since the liquidation

value payable to them as Operational Creditors would also have remained Nil.

Thus, the provisions in the resolution plan cannot be said to violate in any

manner the provisions of Section 30(2)(b).

50. It is well settled that Adjudicating Authority can interfere with the

commercial wisdom of CoC only when Resolution Plan violates any of the

provisions of Section 30(2)(b). As long the statutory provisions of the IBC and

the CIRP Regulations framed thereunder are complied with, it is the

commercial wisdom of the requisite majority of the CoC which is to negotiate

and accept a resolution plan. Such opinion expressed by the CoC after due

deliberations in the meetings through voting is the collective business decision

and constitutes an expression of the CoC's commercial wisdom. And it is here

that primacy of the commercial wisdom of the CoC comes into play.

51. We may also notice a judgment of the Hon'ble Supreme Court in Civil

Appeal Nos. 3665-3666 of 2020 in the matter of Ngaitlang Dhar vs. Panna

Pragati Infrastructure Private Limited & Ors. where in para 31, the

following has been held:-

Page 38 of 41

Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 "It is trite law that 'commercial wisdom' of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the processes within the timelines prescribed by the IBC. It has been consistently held that it is not open to the Adjudicating Authority (the NCLT) or the Appellate Authority (the NCLAT) to take into consideration any other factor other than the one specified in Section 30(2) or Section 61(3) of the IBC. It has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC's 'commercial wisdom' is non justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of the IBC. This position of law has been consistently reiterated in a catena of judgments of this Court, including:

(i) K. Sashidhar v. Indian Overseas Bank and Others

(ii) Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta and Others,

(iii) Maharashtra Seamless Limited v. Padmanabhan Venkatesh and others,

(iv) Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another.

(v) Ghanashyam Mishra and Sons Private Limited Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director & Ors."

52. We are also guided by the legal precepts propounded by the Hon'ble

Supreme Court in Jaypee Kensington Boulevard Apartments Welfare

Association & Ors. Vs NBCC (India) Ltd. & Ors. in Civil Appeal No. 3395

OF 2020 which reads as under:

"The limitations on the scope of judicial review are reinforced by the limited ground provided for an appeal against an order approving a resolution plan, namely, if the plan is in contravention of the provisions of any law for the time being in force; or there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; or the debts owed to the operational creditors have not been provided for; or the insolvency resolution process costs have not been

Page 39 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024 provided for repayment in priority or the resolution plan does not comply with any other criteria specified by the Board."

53. There is neither any material irregularity nor contravention of any

provisions of law by the CoC which has been justifiably substantiated by the

Appellant. In the present case when no valid grounds have been made out to

challenge the approval of the resolution plan, the Adjudicating Authority

cannot meddle with the business decision of the CoC. Furthermore, the

resolution plan having been approved by 100% of vote share by the CoC, such

plan cannot be interfered with by the Adjudicating Authority merely on the

grounds that the claims of the Appellant had been rejected at a time

particularly so when no amount has been specified for Operational Creditors

in terms of liquidation value. Once all the mandatory requirements of a plan

have been duly complied with and taken care of, judicial review cannot be

extended to analyse and look into the dissatisfaction evinced by any particular

creditor or stakeholder. We have no doubts in our mind that the plan has been

rightly approved by the Adjudicating Authority. We are of the firm view that

the Adjudicating Authority did not commit any error in approving the

resolution plan and therefore concur in the impugned order of the

Adjudicating Authority approving the resolution plan.

54. Given this backdrop, we dispose of the Appeal in the following terms:

(i) The resolution plan as approved by the Adjudicating Authority vide

impugned order in I.A. No 2 of 2024 is affirmed. The SRA may

proceed further in terms of the approved resolution plan.

Page 40 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024

(ii) The impugned order dismissing the I.A. No.15 of 2024 is partially

modified. To secure the ends of justice, the claims admitted in the

erstwhile liquidation proceedings by the erstwhile Official Liquidator

to the tune of Rs. 57.68 lakhs is allowed to be reimbursed by the

SRA as offered by the SRA.

(iii) In terms of the aforesaid voluntary offer proposed to be performed

by the SRA, while making this payment, SRA will ensure that this

payment does not affect the overall proceeds of distribution already

approved in respect of all creditors in terms of the approved plan.

The payment of Rs. 57.68 lakhs shall be made by the SRA within 30

days from the date of this order subject to the Appellant agreeing not

to press any further their claims or interest and on any other terms

and conditions as found to be mutually acceptable.

(iv) All other pending I.A.s stand closed. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) Place: New Delhi Date: 18.09.2025

Harleen/ Abdul

Page 41 of 41 Company Appeal (AT) (Insolvency) No. 995 & 996 of 2024