Vandana Garg vs Mysore Petro Chemicals Limited

Ms. Vandana Garg ...Appellant Resolution Professional of Raguleela Builders Private Limited

Vs

Mysore Petro Chemicals Limited ...Respondent

(Arising out of Order dated 18.12.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Court No.-V, Mumbai) in I.A. No. 2725/2022 in C.P. (IB) No. 498(MB)/2021)

For Appellant: Mr. Rajiv Kumar Pandey, Mr. Aalok Jain, Advocates For Respondent: Ms. Ronita Bhattacharya, Advocate

JUDGEMENT

Per Justice N. Seshasayee, Member (Judicial)

This appeal is preferred by the Resolution Professional of the corporate debtor,

in which he challenges the Order of the Adjudicating Authority dated 18.12.2023

allowing an application in I.A. 2725 of 2022 filed by the respondent herein for

considering its claim of ₹ 5,20,22,000/- based on the Order of the Maharashtra 2

Real Estate Regulatory Appellate Authority (for brevity would be referred to as

RERAA). The RERAA has directed the CD to pay the respondent herein

₹5,20,22,000/-.

The Facts

2. The material facts are:

a) On 02.07.2015, the respondent had entered into an agreement for the

purchase of a commercial unit with the CD. As per the agreement the

unit was to be handed over to the respondent on 30.09.2015. The

respondent has fully paid the consideration payable for the office unit

to be purchased. The CD, however, did not deliver the unit as agreed

upon.

b) The respondent, therefore, preferred a complaint with the RERA and

vide its order dated 08.10.2020, the RERA dismissed the said complaint

of the respondent. Challenging the said Order, on 17.12.2020, the

respondent preferred an appeal to RERAA. Notice was ordered.

According to the respondent, a notice was sent to the promoter of the

project, the corporate debtor to be, through speed post, was served on

it on 19.12.2020.

c) While the appeal preferred by the respondent was pending before the

RERAA, CIRP commenced against the promoter of the project, vide the

Order of the Adjudicatory Authority dated 04.10.2021. With that

moratorium under Sec.14 of the Code came into force, IRP replaced the

Board of the Corporate Debtor.

3

d) The IRP issued public notice inviting claims. The last date for preferring

the claim was 05.11.2021. And the last date for filing belated claims

in terms of Regulation 12 of the IBBI (CIRP) Regulations was

19.01.2022.

e) Be that as it may, on 30.06.2022, the RERAA allowed the appeal

preferred by the respondent and directed the corporate debtor to pay a

sum of. ₹5,28,22,000/- with interest at the rate of State Bank of India's

highest Marginal Cost Lending Rate plus 2% on the amount paid by the

Respondent Company. On the following day, i.e., on 01.07.2022, the

respondent e-mailed the appellant and informed them about the

compensation ordered by the RERAA, and requested the appellant, the

RP of the CD, to guide it to prefer the claim, and followed it with a

reminder on 12.07.2022. Eventually, on 19.07.2022, the respondent

preferred its claim in Form B.

f) The respondent, however, did not receive any information on the claim

it had preferred, hence it moved the Adjudicating Authority with

I.A.2725 of 2022 seeking a direction that its claim be considered. On

29.09.2022, the Adjudicating Authority passed an interim order and

directed the appellant to consider the respondent's claim.

g) Subsequent thereto, on 20.10.2022, the appellant rejected the claim of

the appellant on two scores: (i) that the Order of the RERAA awarding

compensation to the respondent was passed during the moratorium;

and (b) that the claim was belated. (Regulation 13(1B) of the CIRP

Regulation, enabling filing of claims till 7 days prior to the CoC voting

on the resolution plan, came into effect only on 18.09.2023). 4

3. On 18.12.2023, the Adjudicating Authority has passed the final order in

I.A.2725 of 2022 admitting the Claim of the respondent. It held: (i) that the

respondent's claim was not belated; and (ii) that the CD was bound by the

judgement of the RERAA.

Arguments

4.1 The learned counsel for the appellant submitted:

a) The foundation of the claim of the respondent is an ex parte Order of

the RERAA, dated 30.06.2022. However, this Order was passed after

the moratorium was clamped under Sec.14 pursuant to the CD's

admission to CIRP vide the order of the Adjudicating Authority dated

04.10.2021. Law is settled vide the ratio in P. Mohanraj & Ors. v.

Shah Brothers Ispat Pvt. Ltd. [(2021) 6 SCC 258] and Real Estate

Regulatory Authority Vs M/s D.B. Corp Ltd. [CA (AT) (Ins) No. 1172-

1173 of 2022, dated 08.12.2023] where it has been held that any

proceedings held during the period of moratorium is void and are

incapable of creating enforceable rights.

b) If the Order passed initially by RERA is considered, it discloses that the

respondent's complaint has been the delay on the part of the CD in

handing over possession of the office premises purchased. However,

this complaint was dismissed by the RERA on 08.10.2020, on the

ground that the delay in delivery was due to the delay in obtaining the

Occupancy Certificate from the authorities. And, the agreement 5

between the respondent and the CD provided for such a contingency,

which binds the respondent herein, which the RERA had taken note of.

c) The next aspect is that on the admission of the CD to CIRP, the

appellant duly issued a public notice through paper publication dated

21.10.2021 and invited claims from the creditors to be submitted by

05.11.2021. It was submitted that publication in newspapers in terms

of Regulation 6 constituted a deemed notice to all creditors, including

the respondent, terms of the dictum in M/s RPS Infrastructure Ltd.

Vs Mukul Kumar & another [(2023) 10 SCC 718]. But the appellant

has filed its claim only on 19.07.2022 with a delay of about 198 days.

By that time, the Information Memorandum had already been finalized

and circulated to Prospective Resolution Applicants, and therefore

entertaining such belated claims would derail the CIRP process.

d) Another aspect that flows directly from the effect of the public notice is

that when the respondent has notice about the commencement of the

CIRP and the moratorium on continuing with its appeal. However, the

respondent not only suppressed the commencement of the CIRP but

also continued serving notices on the erstwhile management of the CD

instead of its Resolution Professional. Its effect is that the RP has been

kept in the dark about the proceedings before the RERAA. This aspect

has to be appreciated in the context of the fact that the erstwhile

management of the CD has been least helpful in sharing the 6

information and, the appellant was constrained to initiate a proceeding

against them under Sec.19 IBC.

e) The appellant had acted with utmost diligence, hence no adverse

inference can be drawn against him. Reliance was placed on M/s RPS

Infrastructure (supra).

4.2 Concluding the arguments, the learned counsel submitted that the

Adjudicating Authority, however, has erred in relying on the judgement in Power

Grid Corporation of India Ltd. Vs Jyoti Structures Ltd. [2017 SCC OnLine

Del 12189 : (2018) 246 DLT 485] and disregarding the later judgment of the

Hon'ble Supreme Court in P. Mohanraj case [(2021) 6 SCC 258]. In the process,

the Adjudicating Authority has also overlooked the overriding effect of Sec.238

of the Code.

5. Per contra, the learned counsel for the respondent contended:

a) The respondent had instituted its appeal to the RERAA as early as

December 2020, much prior to the commencement of CIRP against the

Corporate Debtor on 04.10.2021. The notice of the appeal was duly

served on the Corporate Debtor through multiple notices, e-mails, and

reminders regarding the hearing dates were also issued. Despite such

service, neither the corporate debtor nor the RP chose to appear before

RERAA, therefore the CD is bound by the judgment dated 30.06.2022

passed therein.

b) On the aspect that the Order of the RERAA, as it was passed during the

subsistence of moratorium, in ABG Shipyard Liquidator Vs Central

Board of Indirect Taxes & Customs [(2023) 1 SCC 472], the Hon'ble 7

Supreme Court has held that any adjudicatory proceedings may

continue during moratorium and that only recovery is prohibited.

Therefore, the order passed by the RERAA is valid and binding upon

the Corporate Debtor as well as the RP.

c) So far as the allegation that the claim was preferred belatedly is

concerned, the respondent could not have filed its claim prior to the

adjudication of the proceedings before the RERAA, since the claim

crystallised only upon the order dated 30.06.2022 directing payment of

interest to the Respondent. Immediately thereafter, the Respondent

informed the RP by email dated 01.07.2022 and sought guidance for

filing its claim under the Code, and subsequently filed its claim in Form

B on 19.07.2022 at the earliest possible opportunity. Hence, there was

no delay attributable to the Respondent in lodging its claim.

d) At any rate, Sections 18, 25 and 29 of the IBC read with Regulation 36

of the CIRP Regulations create a statutory obligation on the IRP or the

RP, as the case may be, to collect and collate all claims against the

corporate debtor and to keep itself apprised of all pending litigation

involving the CD. The Information Memorandum was also required to

disclose all material litigation and disputes concerning the CD.

Consequently, the RP cannot evade its statutory responsibility by

contending that it lacked information regarding the proceedings before

RERAA. Indeed, these provisions taken along with Regulation 14(2)

statutorily obligate an IRP or a RP to revise admitted claims whenever

additional information comes to light. It was submitted that the CIRP

framework itself contemplates revision and up-dation of claims during 8

the CIRP process, therefore rejection of the Respondent's claim solely

on the ground of delay is contrary to the scheme of the Code and

Regulations.

e) At any rate, the timeline fixed for collation of claims is only directory as

held in State Tax Officer Vs Rainbow Papers Limited [(2023) 9 SCC

545] and hence, claims cannot be rejected merely on account of delay

where the resolution plan has not attained finality. Indeed, where a

claim is discernible from the records of the corporate debtor, and the

resolution plan has not been approved, then a delay in submitting the

claim cannot be held against the creditor of the corporate debtor.

f) So far as the application of Sec.238 of the Code goes, in Pioneer Urban

Land and Infrastructure Ltd. Vs Union of India [AIR 2019 SC 4055],

it is held that the remedies under the RERAA and the IBC are

concurrent and complementary in nature, and hence there exists no

inconsistency warranting the invocation of Section 238 of the Code.

g) The appellant did not challenge the interim Order of the Adjudicating

Authority, dated 29.09.2022, and had considered the Claim. Having

considered the claim, which, according to the appellant, was preferred

belatedly, the argument that the claim was belatedly filed loses much

of its sheen. Indeed, the appellant is estopped from contending about

the delay in preferring the claim.

Discussion & Decision

6.1 The core issue, which is critical to the outcome of this appeal, is about the

maintainability of the Claim, which undisputably is founded on an Order of the 9

RERAA passed during the operation of the moratorium. It instantly relegates the

alleged failure of the respondent to notify the appellant about the pendency of

its appeal before the RERAA to insignificance. After all, even if the RP had been

notified about the appeal, given the fact that Sec.14(1)(a) of the code prohibits

'the continuation of pending suits or proceedings against the corporate debtor

including execution of the judgement, decree or order in any court of law, tribunal

or beneficial interest therein", the Order of the RERAA will necessarily come under

the scanner of the Code. The idea behind moratorium, as contemplated under

Sec.14, is to freeze the assets and liabilities of the CD during CIRP for optimizing

the value of the assets of CD to enable a successful resolution process and pay

off the liabilities of the CD out of the proceeds of the resolution process in the

manner contemplated under Sec.53 of the Code. In ABG shipyard case [(2023)

1 SCC 472], the Hon'ble Supreme Court has observed (paragraph 38), "Section

14 of the IBC prescribes a moratorium on the initiation of CIRP proceedings and its

effects. One of the purposes of the moratorium is to keep the assets of the

corporate debtor together during the insolvency resolution process and to facilitate

orderly completion of the processes envisaged under the statute."

6.2 Turning to the effect of the moratorium in P. Mohanraj case [(2021) 6 SCC

258], the Supreme Court has held that the moratorium operates absolutely on

all pending suits or proceedings (though the Court drew a distinction between

suit and proceedings) and they will come to a standstill. This view was later

followed in Anjali Rathi & Others Vs Today Homes & Infrastructure Pvt.,

Ltd., & others [(2021 SCC OnLine SC 729]. However, the respondent has

contended that the Order of the RERAA is not invalidated in terms of the dictum 10

in ABG Shipyard case [(2023)1 SCC 472]. In that case, the Supreme Court has

held that while the Customs Officials may assess or determine the quantum of

customs duty payable by the CD during the period of moratorium, it may not

still be permissible for it to take steps to recover the same during moratorium,

and that issuance of any demand notices during the subsistence of moratorium

is hit by Sec.14 of the Code. The judgement in ABG Shipyard case is set to

the facts of that case, but what is significant is that Sec.14 does not permit or

enable creation of any new liability against the corporate debtor from the date of

commencement of CIRP, except those which are enabled by the Code to be

treated as CIRP costs.

6.3 If the case of the respondent is tested on the plane of this legislative

philosophy on which Sec.14 of the Code is set, it would render ineffective the

Order of the RERAA passed during the moratorium, creating a new liability on

the CD. Necessarily, no claim based on the Order of the RERAA can be

maintained.

7. If the claim is not maintainable, then it does not matter whether it is filed

within time or belated. Therefore, we do not propose to deal with that issue.

8. Having stated thus, there is another angle to the issue of the respondent's

entitlement to a claim. Admittedly, the respondent invested in a built-up

commercial space and claims to have paid the entire sale consideration of

₹12,93,60,000/-. If the RP has replaced the Board of the CD, and if he is aware of

the projects that the CD had undertaken, then it will not be difficult for the

resolution professional to ascertain and identify the allottees and the amounts

they had paid. It may be that when, on 21.10.2021, the RP issued a public notice 11

in terms of Sec.15, Regulation 6A of the IBBI(CIRP) Regulations was not there,

but when the RP is required to prepare a list of assets and liabilities of the CD

in discharge of his duty under Sec.18(1), will it not be appropriate for him to

include investments innocently and bona fide made even though they may not

have preferred a claim? On going through the reply of the RP to the application

of the respondent herein before the Adjudicating authority, he has not disputed

the claim of allotment made to the respondent. Indeed, the fact that RERA and

RERAA have considered the complaint of the respondent establishes that an

allotment indeed has been made by the corporate debtor. In our opinion, RP

should have realized that IBC is neither designed as a statute for the divestiture

of individual rights, nor is it fashioned as an expropriatory statute. On the other

hand, IBC is keen to recognize every right to claim a debt, which it defines as

debt, even though it holds no promise to any creditor that the debt due to him

will be paid. Here we are at the point of recognizing the right of the respondent

at least to the money it has invested for the purchase of a commercial unit from

the Corporate Debtor. In that sense, a claim is but a notice to the resolution

professional that the corporate debtor is liable to repay a debt to a certain

creditor. But if that debt could be ascertained without a formal claim, would it

not be appropriate and fair for the RP to ascertain the same and seek the one to

whom the debt is due from the corporate debtor? We consider that ideally, the

appellant, as a resolution professional, even as he rejected the claim made by

the respondent, still could have investigated and accepted the claim based on 12

the original investment made by the respondent for the purchase of the

commercial unit in lieu of the claim the respondent had made.

9. In conclusion, we dispose of the appeal with a direction to the resolution

professional to verify if the respondent had made any payment of consideration

to the corporate debtor as claimed by it and to include its claim.

[Justice N. Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical) rs/beena