Tld Meai Fze vs Mr Ashish Chhawchharia & Anr

(Arising out of the Order dated 22.06.2021 passed by National Company Law Tribunal, Mumbai Bench, Court I, in I.A. No. 2081/2020, in C.P. (IB) No. 2205/MB/2019)

IN THE MATTER OF:

TLD MEAI FZE Airbus Middle East FZE, West Ring Road - Plot 20 Office - PO Box 54915 United Arab Emirates - Dubai. ...Appellant

Versus

1. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Limited. Siroya Center, Sahar Airport Road, Andheri (East), Mumbai - 400099. ...Respondent No. 1

2. Jalan Fritsch Consortium Through Mr. Murari Lal Jalan and Mr. Florian Fritsch

(i) Villa HT - 21, Emirates Hills, Dubai, UAE;

(ii) 42, Berkely Square, WIJ 5AW, London United Kingdom. ...Respondent No. 2

Present

For Appellant: Mr. Kunal Mimani, Mr. Kunal Vajani and Mr. Shubhang Tandon, Advocates.

For Respondent No. Mr. Malhar Zatakia, Mr. Dhiraj Kumar Totala, 1/RP: Ms. Aditi Bhansali, Ms. Tanya Chib, Mr. Madhur Arora and Mr. Parimal Kashyap, Advocates for R1 (RP)

For Successful Mr. Anant Singh, Mr. Burgis Shabir, Resolution Applicant: Ms. Shrishty Kaul and Mr. Aashish Vats Advocates for SRA. 2

JUDGMENT

(21st October, 2022)

Ashok Bhushan, J.

1. This Appeal has been filed by the Appellant challenging the order dated

22.06.2021 passed by the Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench, Mumbai in IA No. 2081 of 2020 in CP (IB) No.

2205/MB/2019.

2. The Corporate Debtor - Jet Airways (India) Limited has been in airline

operation since 1993. Due to various reasons Jet Airways (India) Limited

stopped its operation on 17.04. 2019. An Application under Section 7 was

filed by State Bank of India being CP (IB) No.2205/MB/2019, which Application

was admitted by NCLT, Mumbai Bench vide order dated 22.06.2019. The

Adjudicating Authority appointed Mr. Ashish Chhawachharia, as an Interim

Resolution Professional (IRP), who was confirmed as Resolution Professional

(RP) in the First Meeting of Committee of Creditors (CoC) dated 16.07.2019.

3. Public announcement was made on 24.07.2019. The first

advertisement for calling of 'Expression of Interest' from prospective

Resolution Applicant was issued on 20.07.2019. Expression of Interest was

issued in four rounds and last on 13.07.2020. The Resolution Plan submitted

by Jalan Fritesch Consortium was approved in the 17th CoC Meeting held on

03.10.2020.

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4. A Contractual Agreement between the Appellant and the Corporate

Debtor was entered into under which the Appellant had agreed to sell certain

assets viz. Ground Power Units and Conventional Pushback Tractor belonging

to the Appellant. The details pertaining to correspondences and the contract

between the parties shall be noticed hereinafter. The Corporate Debtor paid

30% of the purchase price of the Appellant's equipment. The Appellant wrote

various e-mails and letters asking for balance payment. On 04.07.2019, the

Appellant submitted its proof of claim in Form-B to the Resolution

Professional for return of the Appellant's equipment and for recovery of an

amount of USD 78,910 for use of the Appellant's equipment by the Corporate

Debtor. The Resolution Professional rejected the claim of the Appellant vide

e-mail dated 03.09.2019. The Appellant filed an M.A No. 3412 of 2019 wherein

following prayers have been made:-

"10. On 4 July 2019, the Applicant submitted its proof of claim in Form B to the Resolution Professional for return of its Ground Power Units and Pushback Tractor and for recovery of an amount of USD 78,910 for use by the Corporate Debtor of the Applicant's equipment. The Applicant's advocate sent a letter to the Resolution Professional stating in brief the transaction between the Applicant and requesting the Resolution Professional to:

(a) refrain from including the Applicant's Equipment in the list of assets of the Corporate Debtor;

(b) refrain from creating any third party rights in the Applicant's Equipment;

(c) return the Applicant's Equipment to the Applicant;

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(d) pending the return of the Applicant's Equipment, provide the necessary assistance to allow the Applicant access to the Applicant's Equipment including the necessary entry pass to service and maintain the Applicant's Equipment;

(e) provide your no objection and necessary assistance to return the Applicant's Equipment to the Applicant from the Bengaluru, Chennai and New Delhi airports."

5. M.A No. 3412 of 2019 was also replied by the Resolution Professional.

On 09.03.2021, Appellant's I.A was heard but was adjourned for further

arguments. Before the Appellant's Application could be further heard or any

order passed, the Adjudicating Authority vide impugned order dated

22.06.2021 approved the Resolution Plan submitted by 'Jalan Fritsch

Consortium'. Aggrieved against the order impugned, this Appeal has been

filed. In the Appeal, following relief has been claimed:-

(a) set aside/ quash the Impugned Order dated 22 June 2021 passed by the Hon'ble National Company Law Tribunal, Mumbai Bench, Mumbai in IA No. 2081 of 2020 in CP (IB) No.2205/MB/2019;

(b) direct the Respondents to remove the Appellant's Equipment as set out in paragraph 7.8 of the present Appeal from the list of assets of the Corporate Debtor and / or the Resolution Plan;

(c) retrain the Respondent No. 1 from alienating or creating any third party rights over the Appellant's Equipment as set out in paragraph 7.8 of the present Appeal in favour of Respondent No. 2 or any other person;

(d) direct the Respondent No. 1 to forthwith release the Appellant's Equipment as set out in paragraph 7.8 of the present Appeal to the Appellant;

Comp. Apps. (AT) (Ins.) No. 686 of 2021 5

(e) pass such further and other orders and directions as the nature and circumstances of the case may require as this Hon'ble Tribunal may deem fit and proper."

6. We may now notice certain details regarding Appellant and

transactions/correspondences between the Appellant and the Corporate

Debtor in the following paragraphs.

7. The Appellant is carrying on business of manufacturing and sale of

ground support Equipment to Airlines, Airports, Cargo Airlines, Ground

Handlers and Military Organization. In the month of February 2017, the

'Corporate Debtor approached the Appellant for purchase of Equipment i.e.,

Ground Power Units ('Power Units') and Conventional Pushback Tractor

('Tractor') and requested the Appellant to submit its proposal for the Tractor

and Power Units and accordingly, the Appellant submitted a proposal dated

18.04.2017 for the Tractor and a proposal dated 01.10.2017 of the Power

Units.

8. The following terms are included in the proposal:

"(a) payment of 30% of the purchase price by the Corporate Debtor as down payment and the payment of remaining 70% amount prior to shipment of the Appellant's Equipment;

(b) express reservation of the ownership of the Appellant's Equipment until full and final payment of the principal and interest amount by the Corporate Debtor;

(c) the Corporate Debtor to refrain from selling or mortgaging the Appellant's Equipment to any third party until the Corporate Debtor made full payment towards purchase of the Appellant's Equipment; and

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(d) express reservation of the right of the Appellant to claim the Appellant's Equipment from the Corporate Debtor in case of involuntary liquidation or judicial liquidation and if the Appellant's Equipment were not fully paid for."

9. Subsequently, after due deliberations and communications on the

quotes provided in the proposals, the 'Corporate Debtor' issued the following

Purchase Orders:

"(a) purchase order dated 14 February 2018 bearing no. 4200006780 for purchase of one Ground Power Unit GPU-414E-CUP and one Ground Power Unit GPU-

409E-CUP-28 for an aggregate amount of USD 96,700 to be delivered at Bengaluru Airport;

(b) purchase order dated 14 February 2018 bearing no. 4200006781 for purchase of two Ground Power Units GPU-409E-CUP-28 and one Ground Power Unit GPU- 414E-CUP for an aggregate amount of USD 144,300 to be delivered at Chennai Airport; and

(c) purchase order dated 08 March 2018 bearing no. 4200006833 for purchase of Conventional Pushback Tractor TMX-150-12 for an aggregate amount of USD 92,455 to be delivered at New Delhi Airport."

10. The Appellant contended that the 'Corporate Debtor' complied with the

provisions of Purchase Orders and raised the following five Invoices for supply

of the Equipment i.e., Power Units and the Tractors:

(a) Invoice dated CLY10002328 dated 25 June 2018 for supply of two Ground Power Units GPU-409E-CUP-

28 to be delivered at Chennai Airport for an amount of USD 96,200/-;

(b) Invoice dated CLY 10002329 dated 25 June 2018 for supply of one Ground Power Unit GPU-414E-CUP to be delivered at Chennai Airport for an amount of USD 48,100/-;

(c) Invoice dated CLY10002330 dated 25 June 2018 for supply of one Ground Power Unit GPU-409E-CUP-

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28 to be delivered at Bengaluru Airport for an amount of USD 48,350/-;

(d) Invoice dated CLY10002331 dated 25 June 2018 for supply of one Ground Power Unit GPU-414E-CUP to be delivered at Bengaluru Airport for an amount of USD 48,350/-; and

(e) Invoice dated CLY100023-45 dated 09 July 2018 for supply of one Conventional Pushback Tractor TMX- 150-12 to be delivered at New Delhi Airport for an amount of USD 92,455/-."

11. As per the terms and conditions of Invoices are specified once again as

mentioned hereunder:

"1. The seller expressly reserves ownership of the Equipment until full and final payment of the principal and interest;

2. The buyer shall refrain from selling the Equipment or mortgaging it to a third party until it has been fully paid for. The buyer authorizes the seller to pledge the Equipment purchased up to the amount of the sales price, the pledge lifted as soon as the price has been fully paid; and

3. The seller reserves the right to claim from its debtor in involuntary liquidation or judicial liquidation, the goods delivered but not fully paid..."

12. In view of the terms and conditions of the Invoice, there is a concluded

contract between the 'Corporate Debtor' and the Appellant. The Appellant

retained the ownership of the Appellant's Equipment shall only pass on to the

'Corporate Debtor' upon full and final payment of the amount covered by

Invoices with interest and delay if any. It was further agreed by the parties

that the Appellant have the right to claim return of the Appellant's Equipment

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in the event the 'Corporate Debtor' goes into Insolvency/Liquidation and if full

payment towards the purchase of the Appellant's Equipment was not made.

13. Prior to delivery of the Appellant's Equipment, the 'Corporate Debtor'

paid only an aggregate amount of USD 100,036.5 being 30% price of the price

of the Equipment as in terms of the proposal and Invoices. The 'Corporate

Debtor' however failed to pay the balance amount of USD 233,418.5 and the

interest amount calculated at 1% for late payment, and the Balance Purchase

Price to the Appellant. Therefore, the 'Corporate Debtor' failed to purchase the

Appellant's Equipment in terms of proposals and the Invoices. However, the

'Corporate Debtor' continued to use the details of Equipment supplied to the

'Corporate Debtor' against Purchase Orders and Invoices are mentioned as

hereunder:

Sr. Purchase Appellant's Invoices Nos. Invoice Balance No. Order Nos. Equipment amount Amount [in supplied to (in USD) USD] that the Corporate was payable Debtor (owned by Corporate by Appellant) Debtor to and their Appellant to current buy the location in Appellant's India Equipment

1. 4200006780 a. Ground CLY10002330 48,350 33,845 Dated Power Unit 14/02/2018 GPU-413E-

CUP. (Location Bengaluru) b. Ground CLY10002331 48,350 33,845 Power Unit GPU-409E-

CUP-28.

(Location:

Bengaluru)

2. 4200006781 a. Ground CLY10002328 96,200 67,340 Dated Power Unit 14/02/2018 GPU-409E-

CUP-28.

(Location:

Chennai)

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b. Ground CLY10002329 48,100 33,670 Power Unit GPU-414E-

CUP.

(Location:

Chennai)

3. 4200006833 Conventional CLY10002345 92,455 64,718.5 Dated Pushback 14/03/2018 Tractor TMX-

150-12.

(Location:

Delhi) Total 233,418.5

14. As the 'Corporate Debtor' fail to pay the Balance Purchase Price as

agreed, the Appellant addressed several emails dated 30.07.2018,

02.08.2018, 20.08.2018, 27.08.2018, 04.09.2018, 12.09.2018, 24.09.2018,

02.10.2018, 16.10.2018, 09.12.2018, 03.01.2019, 14.01.2019, 24.01.2019

and 28.01.2019 within four days and 29.01.2019 to the 'Corporate Debtor'

calling upon the 'Corporate Debtor' to pay the Balance Purchase Price but the

'Corporate Debtor' failed to pay the Balance Purchase Price by email dated

29.01.2019 indicated that the Appellant is on their list of priorities and will

make payment at the first opportunity. Later the Appellant addressed letters

dated 16.10.2018, 09.12.2018, 13.12.2018, 20.02.2019 and 05.04.2019 to

the 'Corporate Debtor' calling upon the 'Corporate Debtor' to make payment

of the Balance Purchase Price if the 'Corporate Debtor' wanted to purchase

the Appellant's Equipment. However, the 'Corporate Debtor' failed and

neglected to make payment of the balance amount as such the Equipment

with the 'Corporate Debtor' were not purchased and if ownership to those

Equipment never passed to the 'Corporate Debtor' in view of the terms and

conditions of Purchase Orders and Invoices. Finally, a Notice dated

01.06.2019 much before the initiation of Corporate Insolvency Resolution

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Process ('CIRP') of the 'Corporate Debtor' was issued calling upon the

'Corporate Debtor' to return the Appellant's Equipment immediately.

Thereafter vide Order dated 20.06.2009 passed by the Learned Adjudicating

Authority in CP 2205(IB)/MB/2019, CP 1968(IB)/MB/2019 and CP

1938(IB)/MB/2019, of the 'Corporate Debtor' was commenced. Again, the

Appellant addressed another letter dated 02.07.2019, to the 'Corporate

Debtor' seeking no objection of the 'Corporate Debtor' for return of the

Equipment. Upon commencement of CIRP against the 'Corporate Debtor', the

Appellant also lodged its Claim in Form 'B' with the first Respondent that the

'Corporate Debtor' simply use the Appellant's Equipment without completing

purchase of the Equipment.

15. As the 'Corporate Debtor' failed to make full payment of the Purchase

Price and the Appellant continued to remain as owner of the Equipment in

terms of the Invoice and other conditions of purchase since total price of the

Equipment was not paid. Therefore, showing the Equipment in the list is

erroneous by the CIRP. Thereupon the Notice was issued to the Counsel dated

04.07.2019 by the first Respondent inter alia requesting to referring from

including the Appellant's Equipment in the list of assets of the 'Corporate

Debtor':

"(a) refrain from including the Appellant's Equipment in the list of assets of the Corporate Debtor;

(b) refrain from creating any third party rights in the Appellant's Equipment;

(c) return the Appellant's Equipment to the Appellant;

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(d) pending the return of the Appellant's Equipment, provide the necessary assistance to allow the Appellant access to the Appellant's Equipment including the necessary entry pass to service and maintain the Appellant's Equipment;

(e) provide no objection and necessary assistance to return the Appellant's Equipment to the Appellant from the Bengaluru, Chennai and New Delhi airports."

16. An email is also sent to the first Respondent by its email dated

03.09.2019, and rejected the Appellant's Claim assigning reasons.

17. The Appellant filed an Application in MA No. 3412 of 2019 seeking a

direction against the Respondent No. 1 to remove the asset from the list of

assets of the 'Corporate Debtor' and to return the assets of to the Appellant,

before the Adjudicating Authority. The Respondent No. 1 filed Reply dated

12.02.2020 alleging that the Appellant's Equipment form part of the fixed

assets of the 'Corporate Debtor' therefore they cannot be removed from the

list of fixed assets of the 'Corporate Debtor'. After approving of the Resolution

Plan by the CoC an Application is filed before the Adjudicating Authority in

I.A. No. 2081/2020 under Section 31 of the IBC which was allowed on contest.

Without disposing MA No. 3412/2019 filed by the Appellant herein. Aggrieved

by the Order, the Respondent filed this Appeal raising several contentions

mainly contended that the ownership remains with the Appellant in the event

of Insolvency and of the 'Corporate Debtor', the total price is not paid as

agreed and that the ownership in the goods did not pass to the 'Corporate

Debtor', thereby inclusion of those priorities in the list of fixed assets of the

'Corporate Debtor' is contrary to the provisions of IBC and that the Appellant

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is entitle to take back those Equipment strictly in terms of the Invoice but the

Adjudicating Authority did not consider these facts in proper prospective

committed an error in approving the Resolution Plan by Adjudicating

Authority allowing I.A. No. 2081/2020 by Impugned Order, requested to set

aside the Order in I.A. No. 2081/2020.

18. The erstwhile Resolution Professional/first Respondent filed Counter

Affidavit denying material allegations while disputed the entitlement of the

Appellant to paying return of the Equipment referred in earlier para 3, the

Respondent also admitted about the written communication both by way of

letters and emails.

19. The Appellant submitted that proof of Claim on 04.07.2019, where it is

stated as follows:

"(a) The Appellant was owed a sum of USD 78,909.5 (INR 54,32,564) as charges for using the Equipment;

(b) The Equipment was not to be included in the list of assets of the Corporate Debtor;

(c) The Equipment was to be returned to the Appellant, and the Respondent was asked to provide a no-

objections certificate in this regard; and

(d) The Appellant's claim of USD 78,909.5 be accepted by the Respondent."

20. The Appellant has annexed the proposal of terms offered to the

'Corporate Debtor' by the Appellant, the Purchase Orders issued by the

'Corporate Debtor' invoices for sale of Equipment of the 'Corporate Debtor'

and correspondence with the 'Corporate Debtor' in relation to purportedly

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outstanding Purchase Price of the Equipment along with the proof of Claim.

A bare reading of the email correspondence relied upon by the Appellant, it is

evident that there was no discussion that the 'Corporate Debtor' had ever

agreed for sale to be modified to be construed as an arrangement for so-called

use of the Equipment, in the event of failure of the 'Corporate Debtor' to make

the full and final payment and that there is no evidence whatsoever to prove

that such advance of 30% paid by the 'Corporate Debtor' can be utilized as an

adjustment for use of such Equipment. The Appellant did not explain as to

how a sum of USD 178,946 has been arrived for usage charge are under what

contract the Appellant is entitled to claim such charges for so-called use of

Equipment.

21. The contract between the Appellant and the 'Corporate Debtor' for the

purchase of Equipment. The Appellant's claim was in a nature of rental

charges for the use of Equipment, which was a fundamental deviation from

the original Agreement. None of the documentation provided for an

amendment to the contract between the 'Corporate Debtor' and Appellant. The

'Corporate Debtor' continued to bear costs of risks of loss, theft, or destruction

of the Equipment. The Equipment also appeared on the fixed assets register

of the 'Corporate Debtor' as on March 31, 2018, 2019 and June 20, 2019. The

Respondent No. 1, was in his capacity as the Resolution Professional,

obligated in law to preserve the value of the Corporate Debtor's assets. He was

therefore unable to return the Equipment, owing to his obligations under law.

Returning the Equipment and paying rental charges for its usage would defeat

an essential purpose of IBC i.e., to balance interests of all stakeholders, such

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that the consequences of non-payment by the 'Corporate Debtor' were equally

shared by all Creditors. Jurisprudence suggested that where a 'Corporate

Debtor' had paid a part of the purchase consideration due for an asset (prior

to commencement of Insolvency), and the seller thereafter sought return of

the assets, the Resolution Professional may not be bound to return the assets

notwithstanding any terms of Agreement entered into prior to Insolvency

commencement. The title to the Equipment appeared to be with the 'Corporate

Debtor'. The Appellant was therefore urged to revise the proof of claim, setting

out the actual amount owed by the Corporate Debtor. Such revised claim

would be verified in a fair manner, and once admitted, could be settled as part

of the CIRP. The 'Corporate Debtor' would however retain title to the

Equipment.

22. The Respondent admitted about the admission of the Claim of the

Appellant in the Resolution Plan are not entitled to the relief claim in the

Appeal and requested to dismiss the Appeal filed by the Appellant on the

various other grounds also.

23. Respondent No. 2 also filed a Reply denying the material allegations

inter alia contended that the copy of Resolution Plan was scrupulously

obtained by the Appellant and filed along with this Petition. Under a Scheme

of IBC, the Resolution Plan can only be shared by the RP with the participation

of the CoC as held in by the Apex Court in 'Vijay Kumar Jain' Vs. 'Standard

Chartered Bank & Ors.'1 and that there is no illegality in the Resolution

1 (2019) 20 SCC 455

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Plan submitted by the SRA and the Impugned Order cannot be set aside for

the following reasons:

"a. The Resolution Plan of the Successful RA was submitted on the basis of the information provided by the Respondent No. 1 (RP), including the information forming part of the information memorandum and the data room.

b. Based on information provided by the Respondent No. 1 (RP), the Successful RA understands that the Equipment appears in the fixed assets register of the Corporate Debtor, as on 31 March 2018, 31 March 2019 and 20 June 2019.

c. The Resolution Plan submitted for the Corporate Debtor by the Respondent No. 2 includes the following provisions in respect of the 'Ground Support Equipment and other Vehicles' of the Corporate Debtor:

"8.2.10. Ground Support Equipment and other Vehicles The Corporate Debtor has ground support Equipment located at various locations (list of which is provided by the Resolution Professional in the data roomhttps://dataroom.ethosdata.com/and is included herein by reference and not specifically enclosed to avoid repetition. The Resolution Applicant has not come across information in relation to the maintenance status of such Equipment, majority of which are vehicles and we have assumed that their condition would have largely depleted or would deplete by the time the Resolution Plan is approved. The Resolution Applicant proposes to take delivery of all such Ground Support Equipment on "as-in-where-is- whatever-is-left. Subsequent, to the approval of the Resolution Plan, the Applicant will decide on the manner of utilizing such Equipment (if possible) or replacing it with new Equipment to support its operation.

The amounts proposed to be paid by the Resolution Applicant in terms of this Resolution Plan includes the cost of acquisition of all the assets owned by the Corporate Debtor which will be acquired by the Resolution Applicant on an "as-

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is-where-is-whatever-is" basis and there will be no separate amounts payable by the Resolution Applicant for any of the assets owned by the Corporate Debtor, whether or not specifically included in this Resolution Plan."

d. It is submitted that from a reading of the aforesaid clause, it is clear that the Resolution Plan as approved by the Hon'ble Adjudicating Authority only provides for delivery of the assets which are owned by the Corporate Debtor (as per the information provided by the RP) on an 'as is where is basis' and does not seek to appropriate any third-party assets. The Successful RA categorically denies the averments of the Appellant to the effect that the Successful RA has sought to illegally appropriate the assets belonging to the Appellant over which the Corporate Debtor has no right or interest. As mentioned above, the Successful RA understands that the Equipment in question was reflecting in the books of the Corporate Debtor as its assets.

e. Without prejudice to the above, it is most respectfully submitted that the matters relating to admission or rejection of the claim of the Appellant and the title of the Equipment basis such claim falls within the domain of the RP and per se do not merit any separate response from the Successful RA. Any dispute that the Appellant may have qua such admission or rejection or title of the Equipment may be decided and settled by an appropriate forum. However, pendency of such issue in any forum does not have any bearing on the Impugned Order.

f. It is further submitted that the Resolution Plan as approved by the Hon'ble Adjudicating Authority is compliant with provisions of the Code and the CIRP Regulations. Contention of the Appellant that the title of the Equipment belongs to the Appellant does not make the Resolution Plan illegal or against the provisions of the Code, and thus, the Impugned Order does not warrant any interference by this Hon'ble Appellate Tribunal on this ground.

g. It is pertinent to mention that pursuant to the approval of the Resolution Plan by the Impugned Order, the Successful RA is taking steps towards completion of the Conditions Precedent at the earliest

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possible so that it can implement the approved Resolution Plan and revive the Corporate Debtor as a 'going concern' as per the requirements of the Code. Further, given the past financial history of the Corporate Debtor, which eventually led to the commencement of its CIRP, the Successful RA is investing a lot of time in re-building trust with the suppliers and vendors to do business with the Successful RA, as the new management of the Corporate Debtor. It may be noted that aviation is a very close business community with limited manufacturers (Boeing/ Airbus) and aircraft lessors. Over the last 90 days, the Successful RA has been in discussions with both the manufacturers and majority of the aircraft lessors to work with it and is currently at the stage of closing agreements for taking on lease aircrafts from them. In terms of the Impugned Order, the Successful RA filed an application before the Hon'ble Adjudicating Authority, seeking extension of time by another 90 days for completion of Conditions Precedent and by way of an order dated 29 September 2021, the time period for completion of Conditions Precedent was extended by another 90 days. It is humbly submitted that any interference with the Impugned Order at this critical stage will hamper the timely implementation of the Resolution Plan and jeopardise the successful resolution and revival of the Corporate Debtor."

On the basis of above pleadings, the Respondent No. 2 requested to

dismiss the Appeal.

24. During hearing, the Learned Counsel for the Appellant while reiterating

the contentions in the Appeal draw the attention of this Tribunal to the terms

and conditions of the Purchase Order and Invoice to establish that the

ownership of Equipment remain with the Appellant and entitle to recover the

Equipment in the event, the 'Corporate Debtor' went into Liquidation of CIRP.

He further draws the attention of this Tribunal in several occasion of Sale of

Goods Act, 1930, to establish the ownership remain in the goods i.e.,

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Equipment thereby the inclusion of the Equipment in the Resolution Plan is

contrary to the provisions of IBC requested to allow the Appeal setting aside

the Order in IA No. 2081/2020 in C.P. (IB) No.- 2205/MB/2019 passed by

the Learned Adjudicating Authority. Whereas the Learned Counsel for the first

Respondent vehemently contended that the goods are imported goods when

the goods were handed over the Bill of Lading ('BOL'), it is a complete the sale

transaction of the Equipment and a BOL can be said to be a title transfer

document. As such, the 'Corporate Debtor' became owner of the Equipment

being claimed by the Appellant in the present Appeal under the Miscellaneous

Application pending before the Adjudicating Authority according to the

Appellant.

25. Learned Counsel for the Appellant placed reliance on the Judgement of

the Apex Court in 'Hurbut John Amies' Vs. 'Jal P. Virji'2, 'Pawan Hans

Helicopters Ltd.' Vs. 'Aes Aerospace Ltd.'3, Sagar Warehousing

Corporation & etc.' Vs. 'Pawan Hans Helicopters Ltd. & Ors.'4,

'Suchetan Exports Private Limited' Vs. 'Gupta Coal India Limited &

Ors.'5, 'Commissioner of Income Tax, Madras' Vs. 'Mysore Chromite

Limited'6, 'M/s. Kahn and Kahn of Delhi' Vs. 'M/s. Premsukh Das Rup

Narain'7, 'Weather Makers Pvt. Ltd.' Vs. 'Parabolic Drugs Ltd.'8,

'Embassy Property Developments Private Limited' Vs. 'State of

2 1923 SCC OnLine Bom 97 : AIR 1924 Bom 41 3 2008 (103) DRJ 174 4 2008 SCC OnLIne Del 927 5 (2011) 13 SCC 83 6 (1955) 1 SCR 849 7 1931 SCC OnLIne Lah 46 8 CA 206/2019 in C.P. (IB) - 102/CHD/2018

Comp. Apps. (AT) (Ins.) No. 686 of 2021 19

Karnataka & Ors.'9, and 'Municipal Corporation of Greater Mumbai' Vs.

'Abhilash Lal & Ors.'10.

26. The Respondent relied on the Judgement in 'J.V. Gokal & Co. Pvt.

Ltd.' Vs. 'Assistant Collector of Sales Tax (Inspection) & Ors.'11, 'State

Bank of India' Vs. 'ARGL Limited'12, 'Chairman Board of Trustees,

Cochin Port Trust' Vs. 'Arebee Star Maritime Agencies Private Limited

& Ors.'13 and 'Gujarat Urja Vikas Nigam Limited' Vs. 'Amit Gupta &

Ors.'14. On the strength of the law laid down in the above Judgements, the

Counsel for the Appellant requested to dismiss the Petition while submitting

that the Petitioner being an unpaid vendor of Equipment is 'Operational

Creditor' are entitled to Claim the amount as per the procedure.

Point:

27. Considering revival contention, perusing the material the points need

to be answered are as follows:

(i) Whether delivery of BoL to the 'Corporate Debtor' be construed as transfer of title to goods?

(ii) Whether the Appellant TLD MEAI FZE continued to be the owner in view of the terms and conditions of Purchase Orders and Invoices on account of alleged failure of the Respondent to pay the balance of price of Equipment?

(iii) Whether the Appellant claiming to be an 'Operational Creditor' entitle to make a request to remove the Equipment from the list of fixed asset of 'Corporate Debtor' in the CIRP and claim return of those Equipment under the provisions of IBC?

9 (2020) 13 SCC 308 10 (2020) 13 SCC 234 11 AIR 1960 SC 595 12 (IB) - 531(PB)/2019 13 (2021) 11 SCC 641 14 (2021) 7 SCC 209

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28. The major contention for the Learned Counsel for the Appellant is that

on account of delivery of BoL along with the goods, the property of goods i.e.,

Power Units and Tractors have not been transferred to the 'Corporate Debtor'

and the Appellant is still an owner of those Equipment. Whereas the Counsel

for the Appellant totally relying on the terms and conditions of Invoices or

Purchase Orders to claim ownership of property even after delivery of the BoL

along with the Equipment since the Equipment is an important Equipment.

He also contended that only on payment of the balance of sale consideration

for the purchase of the Equipment by the Respondent, the property of the

goods will transfer and till then the Appellant continues to be the owner of the

property.

29. In view of these contentions, it is appropriate to advert to the definition

of "document of title to goods" under Section 2(4) of Sale of Goods Act, 1930,

which reads as follows:

"2(4) "document of title to goods" includes a bill of lading, dock-warrant, warehouse-keepers certificate, wharfingers' certificate, railway receipt, multimodal transport document, warrant or order for the delivery of goods and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented;"

30. A bare perusal of the definition of "documents of title to goods", it is

clear that the BoL is a document of title to goods. Delivery of such document

of title amounts to transfer of title to goods to the consignee but the Learned

Counsel for the Appellant contended that in view of the specific provisions of

Comp. Apps. (AT) (Ins.) No. 686 of 2021 21 Sale of Goods Act, 1930, the title is not deemed to have been passed since the

Equipment were transferred based on Agreement to sell the Equipment.

31. He relied on certain Judgements in support of his contention in 'Harbut

John Amies' (referred Supra), wherein the Hon'ble Bombay High Court held

that "the contract is for sale by the defendant to the plaintiff when the sale

was based on instalment purchase and when there is a condition that the

purchaser shall not dispose of the vehicle before payment of full price, the

purchaser was to insure the Car and assign the policy to the seller; that in

default of observance by the buyer of any other conditions aforesaid the seller

had the right to determine the contract and seize and take the possession of

the car until payment is made in full, the ownership of the car in the facts of

the above Judgement has not deemed to have been transferred. But that is

the case of instalment purchase till the payment of last instalments, the

ownership remains with the seller."

32. He has also drawn the attention of this Tribunal in 'Pawan Hans

Helicopters Ltd.' (referred Supra), in paras 16-22, the Court discussed

about the scope of Agreement to sell as defined under Section 4 of the Sale of

Goods Act, 1930, and rights of the unpaid vendor under Section 45 and 51.

The Hon'ble Delhi High Court based on the facts and circumstances of the

case has held as follows:

"Section 19 of the Sale of Goods Act, 1930 specifically provides that the property passes when it is intended to pass. Section 19(1) stipulates that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be

Comp. Apps. (AT) (Ins.) No. 686 of 2021 22

transferred. In this context, it would be pertinent to reiterate that clause 7 of the addendum of 24.09.1999 specifically stipulated that the title of the goods would only pass to the purchaser (respondent) once that full payment of GBP 9,00,000 under the said agreement was received by the vendor (petitioner) upon the delivery of the package FOB Mumbai for shipment to U.K. Admittedly, the petitioner has not received the agreed price of GBP 9,00,000. The intendment under the said clause is clear that unless and until the petitioner received the full price for the said goods, the property in them would not pass to the respondent and would continue to vest in the petitioner. In the light of Section 19 of the Sale of Goods Act, 1930, it can be safely concluded, at this stage, that the property was intended to pass only upon the full payment of GBP 9,00,000 by the respondent to the petitioner. That has not happened, therefore, the property has not passed to the respondent. This being the position, the agreement dated 16.06.1999 alongwith its addenda would only be regarded as an agreement to sell within the contemplation of Section 4(3) of the Sale of Goods Act, 1930, and not as a sale. The agreement to sell has not matured into a sale inasmuch as the conditions that were required to be fulfilled, subject to which the property in the goods was to be transferred, have not been fulfilled. Therefore, in law, no sale has taken place and the parties had only entered into an agreement to sell."

33. In another Judgement in 'Sagar Warehousing Corporation & etc.'

(referred Supra), the same principle is reiterated in para 6 & 7 held as

follows:

"6. Let us consider the above submissions in the light of the findings and the view taken by the learned Single Judge. The learned Single Judge on a consideration of the agreement terms between Pawan Hans and AES reached the conclusion that the property in the good was to pass only upon entire sale consideration being paid. This is a common ground that entire sale consideration has not been paid and only Rs. 4,50,000 has been paid. Under Section 9 of Sale of Goods Act, 1930 property in goods pass when intended to be passed. Section 19(1) of Sale of Goods

Comp. Apps. (AT) (Ins.) No. 686 of 2021 23

Act, 1930, clearly provides that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. In terms of the agreement between Pawan Hans and AES property was to pass only upon payment of the sale consideration. Since only a sum of Rs. 4,50,000 has been paid, the property in goods has not passed on to AES and continues to vest in Pawan Hans.

7. Perusal of the agreement clearly shows that transporter was to be appointed and nominated by AES and the goods were to be transported by the 'appointed transporter' so nominated. In the instant case, FF had been nominated and appointed by the AES. Accordingly, FIF could only be the agent of AES and not that of Pawan Hans. There was no privity of contract between Pawan Hans and FJF or SWC. There is no merit in the contention of appellant-FJF that it dealt with Pawan Hans on a principal to principal basis or appointment of FJF was under the agreement by Pawan Hans. FJF had been appointed by the AES as the approved transporter. Correspondence exchanged also reveals that the liability for charges of FF or that of SWC was to be borne by AES, even if payment was contemplated to be made through Pawan Hans upon bills being presented. In the instant case, payment of sale consideration not having been made to Pawan Hans, the question of payment by Pawan Hans of the bills presented by FJF would not arise since the same was the liability of AES. We are of the view that the order passed by the learned Single Judge subserves the ends of justice and is fair and equitable. Besides the same would clearly fall within the ambit of Section 9(2)(a) and (e) of the Arbitration and Conciliation Act, 1996 as the order is in respect of goods which are the subject matter of an arbitration agreement and the order of restraint on appellants, who are not parties to the arbitration agreement is intended to preserve and protect the goods. The plea of the learned Single Judge having exceeded his jurisdiction is misconceived. The helicopters in question had been lying at the ware house since December, 1999 with no prospect of AES taking delivery of the same, having gone into liquidation. The goods because of lying unused would be subjected to attrition and it would be a national waste."

Comp. Apps. (AT) (Ins.) No. 686 of 2021 24

34. He also relied on para 7 of the Judgement of the Hon'ble Supreme Court

in 'Commissioner of Income Tax, Madras (referred Supra), as follows:

"7. Learned Solicitor-General appearing in support of this appeal contends that having regard to the terms of the contracts the sales must be regarded as having taken place in British India. The facts strongly relied on by him are (i) that the price and delivery of goods were on F.O.B. terms, (il) that in the European contracts the insurance, if any, was to be the concern of the buyers and (ill) that payment of the 80 per cent or 90 per cent as the case may be was made in Madras by the Eastern Bank Ltd., Madras, to the assessee company on the delivery of the documents. All these facts taken together indicate, according to his submission, that the property in the goods passed at Madras and the sales accordingly were completed in British India. We are unable to accept this line of reasoning. According to Section 4 of the Indian Sale of Goods Act a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price and where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. By sub-section (4) of that section an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Section 18 of the Act clearly indicates that in the case of sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods, are ascertained. In the present case, the contracts were always for sale of unascertained goods. Skipping over Sections 19 to 22 which deal with contract of sale of specific goods we come to section 23 which lays down that where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. It is suggested that as

Comp. Apps. (AT) (Ins.) No. 686 of 2021 25

soon as the assessee company placed the goods on board the steamer named by the buyer at the Madras Port the goods became ascertained and the property in the goods passed immediately to the buyer. This argument, however, overlooks the important word "unconditionally" used in the section. The requirement of the section is not only that there shall be appropriation of the goods to the contract but that such appropriation must be made unconditionally. This Is further elaborated by Section 25 which provides that where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms the contract appropriation reserve the right or disposal of the goods until certain conditions are fulfilled. In such a case, notwithstanding the delivery of the goods to the buyer, or to a corner or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller fulfilled. The question in this case, therefore is: was there an unconditional appropriation of the goods by merely placing them on the ship?

It is true that the price and delivery was F.O.B., Madras but the contracts themselves clearly required the buyers to open a confirmed irrevocable Bankers credit for the requisite percentage of the invoice value to be available against documents. This clearly indicated that the buyers would not be entitled to the documents that is, the bill of lading and the provisional invoice, until payment of the requisite percentage was made upon the bill of exchange. The bill of lading is the document of title to the goods and by this term the assessee company clearly reserved the right of disposal of the goods until the bill of exchange was paid. Placing of the goods on board the steamer named by the buyer under a F.O.B. contract clearly discharges the contractual liability of the seller as seller and the delivery to the buyer is complete and the goods may thenceforward be also at the risk of the buyer against which he may cover himself by taking out an insurance. Prima facie such delivery of the goods to the buyer and the passing of the risk in respect of the goods from the seller to the buyer are strong indications as to the passing also of the property in the goods to the buyer but they are not decisive and may be negatived, for under Section 25 the seller may yet reserve to himself the right of disposal of the goods until the fulfilment of certain conditions and thereby prevent the passing of property

Comp. Apps. (AT) (Ins.) No. 686 of 2021 26

in the goods from him to the buyer. The facts found in this case are that the assessee company shipped the goods under bill of lading issued in its own name. Under the contract it was not obliged to part with the bill of lading which is the document of title to the goods until the bill of exchange drawn by it on the buyers' Bank where the irrevocable letter of credit was opened was honoured. It is urged that under the provision in the contract for weighment and assay, which was ultimately to fix the price unless the buyer rightly rejected the goods as not being in terms of the contract, the passing of property in the goods could not take place until the buyer accepted the goods and the price was fully ascertained after weighment and assay. It is submitted that being the position, the property in the goods passed and the sales were concluded outside British India, for the weighment, sampling, assay and the final fixation of the price could only take place under all these contracts outside British India. Itis not necessary for us to express any opinion on this extreme contention. Suffice it to say, for the purposes of this case, that in any event upon the terms of the contracts in question and the course of dealings between the parties the property in the goods could not have passed to the buyer earlier than the date when the bill of exchange was accepted by the buyers' Bank in London and the documents were delivered by the assessee company's agent, the Eastern Bank Ltd., London, to the buyers Bank. This admittedly, and as found by the Appellate Tribunal, always took place in London. It must, therefore, follow that at the earliest the property in the goods passed in London where the bill of lading was handed over to the buyers' Bank against the acceptance of the relative bill of exchange. In the premises, the Appellate Tribunal as well as the High Court were quite correct in holding that the sales took place outside British India and, ex hypothesi, the profits derived from such sales arose outside British India."

35. Learned Counsel for the Appellant relied on paras 29-31 of the

Judgement of Lahore High Court in 'M/s. Kahn & Kahn of Delhi' (referred

Supra), wherein it is observed as follows:

Comp. Apps. (AT) (Ins.) No. 686 of 2021 27

"29. The appellants' counsel laid particular stress on the last named case. It is a judgement of their Lordships of the Privy Council in In re The Parehim, in which it was held that the incidence of risk as between buyer and seller is a very strong indication as to which of them owns the property in the goods. At the same time, their Lordships held that the substantial question for consideration always is whether the parties did not intend that the property should pass at the time the risk was assumed, and their Lordships did contemplate:

"cases in which the property shill be in the one and the risk in the other of the two contracting parties."

30. While therefore their Lordships have laid down that the incidence of risk is a good test in determining in which of the two parties the property in the goods vests it is not a conclusive test, and the question always is as to the intention of the parties as other circumstances may show that the property in the goods sold was retained by one party in spite of the fact that they were shipped or booked and thereafter remained at the risk of the other party.

31. In the present case, the dominion over the goods, that is the right to dispose of the same, was retained by the sellers. They did not intend that the goods should he delivered to the purchasers till they had paid for the same. It is however contended that they merely intended to retain a lien on the goods, but there is no good evidence of this. The present case is somewhat like Bal Kishan Basheshar Nath v. S.M. Fazal Ilahila, in which, under almost similar circumstances it was held by a Division Bench of this Court that the property in the goods did not pass to the purchasers. It may be mentioned that in that case the parties had entered into a C.I.F. contract. This view receives support from the observations of Mulla, J. in A.I.R. 1923 Bom. 92 and A.I.R. 1923 Bom. 125. Having regard to all these circumstances in my opinion the property in the goods was retained by the sellers and did not pass to the purchasers, and consequently the suit in the present form was not competent. I would therefore dismiss this appeal."

Comp. Apps. (AT) (Ins.) No. 686 of 2021 28

36. Learned Counsel also relied on the Judgement of the National Company

Law Tribunal, Chandigarh Bench in 'Weather Makers Pvt. Ltd.' (referred

Supra) wherein in paras 9-11 it is observed as hereunder:

"9. Heard the rival submission and perused the records of the case. One of the facts is not in dispute that the Applicant had supplied raw material which is in possession of the Corporate Debtor, now under insolvency, hence controlled by the appointed Ld. Resolution Professional. The Applicant has expressed an apprehension that the raw material being a chemical, is perishable in nature, hence requires to be protected before it expires or gets destroyed by any chemical reaction.

9.1 In the light of the factual matrix narrated above, a legal question has been raised that whether the raw material in possession of the Corporate Debtor, should not be allowed to be returned on commencement of "Moratorium"? On one hand the Ld. RP has taken the shelter of the provisions of section 14(1)(d) of the IBC, but on the other hand the Applicant has placed reliance on the Explanation under section 18(1)(f) of IBC. At the outset, at this juncture, in our opinion the facts and circumstances of the case lead us to hold that the provisions of section 18 are more appropriate to address the legal issue in hand. Reasons follow herein below.

9.2 First we shall deal with the provisions of section 14(1)(d), wherein the terminology used is "Property"

and not "Asset". This section says that on commencement of insolvency by an order of Adjudicating Authority prohibition is to be imposed in respect of recovery of any property by an Owner or a Lessor where such property is occupied by or in possession of the Corporate Debtor. In this section the reference is in respect of a "Property" which is duly defined u/s 3(27) of IBC, means money, goods, land, actionable claim, etc. As far as the CoC is concerned, it was resolved by 100% voting not to release the goods belonging to Sun Pharmaceutical Industries Ltd. The said decision of CoC was declared in a routine manner although the question was that whether it was a case of "Recovery" by an owner of the property. In strict

Comp. Apps. (AT) (Ins.) No. 686 of 2021 29

sense, the claim of the Applicant is not for recovery of money/goods.

10. The statute has mandated vide section 18(1)(f) that the Interim Resolution Professional shall perform several duties such as 'take control and custody of any asset over which the Corporate Debtor has ownership rights as recorded in the Balance Sheet of the Corporate Debtor'. Tangible assets whether movable or immovable is within the category of "Assets" as defined in this section vide insertion of an Explanation. Through this explanation an exception is carved out that for the purpose of this section i.e. section 18(1)(f) the followings shall not constitute an Asset and therefore, an Asset owned by a third party, however, in possession of the Corporate Debtor, held under trust or under contractual arrangement. In short, an Asset belonging to an Operational Creditor, however, in possession of a Corporate Debtor shall not be treated as an Asset, therefore, the RP shall not be allowed to take control and custody over the said Asset. In the light of this provision if we examine the facts of this case, it is not in dispute that the Operational Creditor M/s. Sun Pharmaceutical Ltd. has supplied the raw material which is in possession of the Corporate Debtor i.e. Parabolic Drugs Ltd. should be released without delay being perishable in nature, following section 18(1)(f) r/w Explanation.

11. A question is to be answered that what are the areas of operation of Sec. 14 vis-a-vis Sec. 18 of IBC. A fine distinction is available between these two enactments. The area of operation of Sec. 14 is in respect of property which is occupied or in possession of the Corporate Debtor. The property as defined U/s 3(27) of the Code includes money, goods, land, actionable claims etc. If the property as defined in Sec. 3 is in possession of the Corporate Debtor, then such property cannot be recovered from the Corporate Debtor by the owner of the property on commencement of Moratorium. This is the general rule through which the Corporate Insolvency Resolution Process proceedings are being triggered on admission of an insolvency petition. Under the insolvency Code, later on an exception is provided U/s 18 (Explanation) against this general rule. However, the area of operation of Sec. 18 is distinct from Sec. 14. There is a fine distinction as appearing in Sec. 18 r/w

Comp. Apps. (AT) (Ins.) No. 686 of 2021 30

explanation that for the purpose of this section the term "asset" shall not include an asset owned by third party in possession of Corporate Debtor, either (1) under trust, or under (il) contractual arrangements including bailment. Therefore, it is clear that the ambit of application of this explanation is confined to these two types of assets, i.e. either a trust asset or an asset in possession owing to contractual arrangement. Hence, a conclusion can be drawn that the exception as carved out through this explanation against the general rule of S. 14, which is limited in its operation in respect of these two types of assets only, although as per the main provision, an asset owned by a third party but in possession of the Corporate Debtor shall not be included U/s 18(1)(f) which prescribes taking control over the properties as described therein. Next is the question that whether the raw material which is supplied by the applicant for manufacturing of a drug in possession of the Corporate Debtor can be an asset to be held as a trust property or under contractual arrangement. Our concern is limited to an arrangement which is undisputedly a contractual arrangement, which in general prescribes the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished be returned or otherwise disposed off according to the directions of the person delivering them."

37. In 'Embassy Property Developments Private Limited' (referred

Supra), Counsel for the Appellant relied on paras 39-41 as follows:

"39. But the said argument cannot be sustained for the simple reason that the duties of a resolution professional are entirely different from the jurisdiction and powers of NCLT. In fact Section 20(1) cannot be read in isolation, but has to be read in conjunction with Section 18(1)(f)(vi) of the IBC, 2016 together with the Explanation thereunder. Section 18(1)(f)(vi) reads as follows:

"18. Duties of interim resolution professional. (1) The interim resolution professional shall perform the following duties, namely-

(a)-(e) * * * *

Comp. Apps. (AT) (Ins.) No. 686 of 2021 31

(f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor. or with information utility or the depository of securities or any other registry that records the ownership of assets including-

(i)-(v) * * *

(iv) assets subject to the determination of ownership by a court or authority:

(g) * * *

Explanation.-For the purposes of this section, the term "assets" shall not include the following, namely-

(a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment;

(b) assets of any Indian or foreign subsidiary of the corporate debtor: and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator.

40. If NCLT has been conferred with jurisdiction to decide all types of claims to property. of the corporate debtor. Section 18(1)(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights. subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements. is specifically kept out of the definition of the term "assets" under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use the expression "property". Another important aspect is that under

Comp. Apps. (AT) (Ins.) No. 686 of 2021 32 Section 25(2)(b) of the IBC. 2016. the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows:

"25. Duties of resolution professional. (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor.

(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions:

(a) * * *

(b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings;"

(emphasis supplied)

This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5).

41. Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right."

38. He also relied in para 33 of the Judgement in 'MCGM' (referred Supra)

wherein it is stated as under:

"33. The show-cause notice in this case preceded admission of the insolvency resolution process. In view of the clear conditions stipulated in the contract, MCGM reserved all its rights and its properties could not have therefore, in any manner, been affected by the

Comp. Apps. (AT) (Ins.) No. 686 of 2021 33

resolution plan. Equally in the opinion of this Court, the adjudicating authority could not have approved the plan which implicates the assets of MCGM especially when SevenHills had not fulfilled its obligations under the contract."

39. Based on the principle laid down in the above Judgements, it is clear

that the intention of the parties to the Agreement to sell goods is the basis to

determine whether the property of goods passes to the buyer or not. More

particularly when the sale is under Agreement to sell as defined under Section

4 of the Sale of Goods Act, 1930. Whereas the Counsel for the Respondent

would draw the attention of this Tribunal in 'J.V. Gokal & Co.' (referred

Supra), the Constitutional Bench of the Supreme Court referring the

Judgement of Lord Justice Bowen in 'Sanders Bros.' Vs. 'Maclean &

Company'15, in para 13 concluded that the seller had to meet their liability

to the foreign companies with whom they opened Letters of Credit and the

Government must have been anxious to get the title to the goods so that the

sellers might not divert the goods towards their other commitments or to other

buyers for more tempting prices. Under the contract legal safeguard for

securing the goods of agreed specifications was provided for in the earlier

causes and therefore there was no reason for postponing the passing of the

property in the goods to the buyer till the goods were actually delivered in the

port. The sellers on their side would have been anxious that the property

should pass when the goods were on the High seas, for otherwise they would

be compelled to pay sales tax. Nor RD clauses of the contracts relied upon by

15 [1883] 11 QBD 327 (CA)

Comp. Apps. (AT) (Ins.) No. 686 of 2021 34

the respondents inconsistent with the property in the goods passing in

accordance with the mercantile usage. The liability undertaken by the sellers

to meet the expenses relating to stevedorage, lightrage, where necessary,

hiring of cranes, dock dues, and pilotage, at the time of delivery of the goods,

on which reliance is placed to indicate a contrary, intention, in our view, has

nothing to do with the question raised, for that liability, can rest with the

sellers, even after the property in the goods has passed to the buyers; nor

clauses, 9 to 11 on which strong reliance is placed by the learned counsel for

inconsistent with the property in the goods passing to the buyer; they could

legitimately be made applicable to a point of time when the property in the

goods has not passed to the buyer. If the sellers fail to observe the

performance of any provisions of the contracts before the property in the

goods passed to the buyer, under clause 9 of the contracts, the buyer can

cancel the contract. So too, under clause 11, if any contemplated mishap

takes place, on the high seas by force majeure, the seller shall send a

cablegram to that effect, and the buyer is empowered to cancel the whole of

the contract or a part of it. This also applies to a point of time before the

property in the goods has passed to the buyer. If, on the other hand, the seller

delivers the shipping documents against payment, and thereafter if he does

not deliver the goods at the port, the buyer may have other name IDs for the

recovery of damages, etc. But that right is not covered by either clause 9 or

clause 11 of the contract. A scrutiny of all the terms of the contract does not

indicate the intention that the property in the goods shall not pass to the

buyer, notwithstanding delivery of shipping documents against payment.

Comp. Apps. (AT) (Ins.) No. 686 of 2021 35

40. In 'Chairman, Board of Trustees, Cochin Port Trust' (referred

Supra), in para 72, the Apex Court relied on the earlier Judgement in 'J.V.

Gokal & Co.' (referred Supra), held that "it is important to understand the

legal effect of a bill of lading. This has been set out by a five-Judge Bench of

this Court in J. V. Gokal & Co. (P) Ltd. (referred Supra), as "... A bill of

lading is a writing, signed on behalf of the owner of the ship in which goods

are embarked, acknowledging the receipt of the goods, and undertaking to

deliver them at the end of the voyage subject to such conditions as may be

mentioned in the bill of lading'. It is well-settled in commercial world that a

bill of lading represents the goods and the transfer of it operates as a transfer

of the goods. The legal effect of the transfer of a bill of lading has been

enunciated by Bowen, L.J., in 'Sanders Bros.' (referred Supra). The law as

to the indorsement of bills of lading is as clear as in my opinion the practice

of all European merchants is thoroughly understood. A cargo at sea while in

the hands of the carrier is necessarily incapable of physical delivery. During

this period of transit and voyage, the bill of lading by the law merchant is

universally recognised as its symbol, and the indorsement and delivery of the

bill of lading operates as a symbolical delivery of cargo. Property in the goods

passes by such indorsement and delivery of the bill of lading, whenever it is

the intention of the parties that the property should pass just as under similar

circumstances the property would pass by an actual delivery of the goods.

And for the purpose of passing such property in the goods and completing the

title of the endorsee to full possession thereof, the bill of lading, until complete

delivery of the cargo has been made on shore to someone rightfully claiming

Comp. Apps. (AT) (Ins.) No. 686 of 2021 36

under it, remains in force as a symbol, and carries with it not only the full

ownership of the goods, but also all-rights-created by the contract of carriage

between the shipper and the shipowner., It is a key which in the hands of a

rightful owner is intended to unlock the door of the warehouse, floating or

fixed, in which the goods may chance to be'. Section 1 of the Bills of Lading.

Act, 1856 is also important, which states:

"1. Rights under bills of lading to vest in consignee or endorsee.-

Every consignee of goods named in a bill of lading, and every endorsee of a bill of lading to whom the property in the goods therein mentioned shall pass, upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself."

41. In view of the principle laid down in the above two Judgements delivery

of BoL to the buyer by the seller is sufficient to transfer property of goods i.e.

Equipment in the present case, but it is always subject to contract of sale.

This view is supported by the oldest Judgement of England Court's in

'Lickbarrow' Vs. 'Manson'16, held that "in mercantile custom BoL has been

considered as the document of title. This custom was recognized by the

common law in 'Lickbarrow' (referred Supra), where it was held that the

document of BoL enhance the property to the goods to be transferred to the

transferee of BoL. This approach makes that the BoL is a document of title. A

contrary view is taken by the Kings Bench in another Judgement. Moreover,

all the transfer of goods may not be intended to be transfer the ownership.

16

1775-1802 ALL England Report 1 (Kings Bench).

Comp. Apps. (AT) (Ins.) No. 686 of 2021 37

For example, shipment may amount to no more than an in house movement

of goods between two branches of the same firm located in different countries.

In such a case, there is no delivery of goods themselves to the assignee after

the ship is arrived. Again the Court in 'RM Goode, Proprietary Rights and

Insolvency in Sales Transactions'17 observed that in fact the reality is

neither the document nor the document with the intention is capable to

transfer ownership to its holder. BoL has no relationship with the passing of

ownership or with the intention of transferer. Ownership passes by a virtue

of contract of sale. Thus, there is any amount of conflict in the views expressed

by the different Courts and commentaries of different authors but as per

decision of the Hon'ble Supreme Court goods passes property of the goods is

deemed to have been transferred on delivery of the BoL. Another view is that

delivery of BoL is nothing but giving constructive possession of goods to the

buyer but not passing a title to the goods however it depends upon the

intention of the parties or contract if any between them to pass such title to

the goods. In the instant case, there is a contract on sale conditions

incorporated both in the Purchase Orders or Invoices as follows:

17

(2nd Edition Sweet & Maxwell 1989) 60

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Comp. Apps. (AT) (Ins.) No. 686 of 2021 39

42. Similarly, the certain conditions were incorporated in Invoices:

43. All these conditions in the Purchase Order and Invoices would show

that till payment of the price of Equipment by the buyer, the ownership will

remain with the seller. In the instant case, the 'Corporate Debtor' paid only

30% on the date of contract of sale and later the balance of 70% of sale

consideration was not paid. Therefore, strictly in terms of the Purchase Order

and the conditions of Invoices the ownership will remain if the Appellant

herein is seller of the Equipment to the buyer i.e., 'Corporate Debtor'. If the

intention of the parties is gathered from the terms and conditions

incorporated both in Purchase Orders and Invoices, the title to the goods to

the transferred only of sale consideration of the Equipment and therefore the

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delivery of BoL is only transfer of possession of the goods not ownership or

title to the goods. Though, BoL is treated as document of title to goods under

Section 2(4) of the Sale of Goods Act, 1930.

44. According to Section 45 of Sale of Goods Act, 1930, defined unpaid

seller as follows:

"45. "Unpaid Seller" defined. - (1) The seller of goods is deemed to be an "unpaid seller" within the meaning of this Act -

(a) when the whole of the price has not been paid or tendered;

(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

(2) In this Chapter, the term "seller" includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price."

45. In the present case, the 70% of the sale price of Equipment was not

paid by the 'Corporate Debtor' to the Appellant/Seller and the seller would fall

within the definition of unpaid seller as defined under Section 45 of the Sale

of Goods Act, 1930. The unpaid seller is entitle to claim lien when the goods

for the price while he is in possession of them. Section 46 of Sale of Goods

Act, 1930, deals with unpaid seller's right and they are enumerated as under:

"46. Unpaid seller's sights.--(1) Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods

Comp. Apps. (AT) (Ins.) No. 686 of 2021 41

may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law--

(a) a lien on the goods for the price while he is in possession of them;

(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them;

(c) a right of re-sale as limited by this Act.

(2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer."

46. In the present facts, the buyer i.e., the 'Corporate Debtor', became

insolvent and CIRP is initiated against him. If Sections 46 & 50 of the Sale of

Goods Act, 1930, are construed strictly and the buyer i.e., the 'Corporate

Debtor' became insolvent, the unpaid seller i.e., the Appellant herein is

entitled to stop the Equipment in the transit in possession of the 'Corporate

Debtor'. Still the unpaid seller is entitled to recover the price by filing a suit

for recovery of price under Section 55 or file a suit for specific performance

under Section 58 of Sale of Goods Act, 1930.

47. If the terms and conditions of the Purchase Order or Invoices as

mentioned in the earlier paras if construed strictly the title to the goods

remained with the Appellant and mere delivery of BoL does not amount to

transfer of ownership in the goods since the delivery of goods is based on

contract of sale. As such, the intention of the parties to the contract of sale is

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to pass ownership in the goods only on full payment of sale consideration

agreed by the parties.

48. In view of the foregoing discussions, we arrive at the conclusion that

the intention of the parties to the contract of sale was to pass ownership of

the goods only on full payment of sale consideration agreed by the parties.

Admittedly, only 30% of the sale consideration was paid and 70% is balance.

The Application filed by the Applicant being M.A No. 3412 of 2019 although

was heard by the Adjudicating Authority but could not be decided before

approval of the Resolution Plan. We need to consider this Appeal and issue

appropriate order.

49. In view of what has been said above, we hold that the Appellant still

continues to be owner of the equipment and the equipment being not assets

of the Corporate Debtor ought not to have been included in the assets of the

Corporate Debtor. As per the Resolution Plan, the assets are with the

Corporate Debtor, hence, the assets as set out in paragraph 7.8 of the Appeal

need to be handed over to the Appellant. The Successful Resolution Applicant

as well as the Monitoring Committee which is chaired by the Respondent No.1

are directed to handover the assets to the Appellant. We are of the view that

the Appellant is not entitled for any amount as claimed in the Application for

usage of the assets. The Successful Resolution Applicant and the Monitoring

Committee shall render appropriate assistance to the Appellant or its

representative to return the Applicant/ Appellant's equipment from the

Bengaluru, Chennai and New Delhi Airport. Necessary no objection and other

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documents be issued by the Successful Resolution Applicant and the

Monitoring Committee. We make it clear that all expenses for return of the

equipment shall be borne by the Appellant. We while upholding the impugned

order passed by the Adjudicating Authority dated 22.06.2021 dispose of this

Appeal with aforesaid directions.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

Anjali

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