Vijayalakshmi Enterprises vs Malabar Hotels Pvt Ltd

Vijayalakshmi Enterprises ....Appellant

Vs

Malabar Hotels Pvt. Ltd. ....Respondent

Present: For Appellant: Mr. Aravind Pandian, Sr. Advocate with Mr. Anandh K. and Mr. Pawan Jhabakh, Advocates. For Respondent: Mr. Sumant Batra, Advocate.

ORDER

(Through Virtual Mode)

15.12.2020: Appellant is aggrieved of dismissal of its application filed

under Section 7 of the I&B Code in terms of impugned order dated 5th May, 2020

by virtue whereof the Adjudicating Authority (National Company Law Tribunal),

Division Bench-I, Chennai, taking note of the fact that the Resolution Plan has

a saving clause for the Financial Creditor providing that the Financial Creditor

shall be paid on the basis of the outcome of the adjudication of the legal

proceedings and keeping in view that the claim of the Financial Creditor was

rejected by the Resolution Professional at the first instance in its entirety and

the Resolution Applicant having submitted the Resolution Plan to the Committee

of Creditors, which was approved by the Adjudicating Authority, held that the

amount payable to the Financial Creditor has not been crystalized. Resolution

Cont'd..../ -2-

Plan in respect of the Corporate Debtor-'Malabar Hotels Pvt. Ltd.' came to be

approved by the Adjudicating Authority in terms of order dated 17th September,

2018.

2. Mr. Sumant Batra, Advocate representing Respondent - Corporate Debtor

has invited our attention to page 170 of the appeal paper book (extract of the

Resolution Plan) wherein in respect of disputed creditors it is provided that the

amounts claimed by Mr. Bharat Kumar Dugar and M/s Vijayalakshmi

Enterprises (Appellant) shall be paid on the basis of the outcome of the

adjudication of the legal proceedings. Same has been reflected in Clause (9) of

the order dated 17th September, 2018 passed by the Adjudicating Authority in

regard to approval of the Resolution Plan. It is therefore clear that the claim of

the Appellant was to be paid on the basis of outcome of adjudication of legal

proceedings.

3. Admittedly, Appellant has sought initiation of Corporate Insolvency

Resolution Process against the Corporate Debtor by filing an application under

Section 7 of the I&B Code which cannot be held to be a legal proceeding dealing

with the adjudication of the disputed claims. From tone and tenor of Clause (9)

of the order approving the resolution plan, it can be easily gathered that outcome

of adjudication of legal proceedings postulates pendency of any proceedings on

Company Appeal (AT) (Insolvency) No. 1068 of 2020 -3-

the date of approval of the Resolution Plan or even a suit or arbitration

proceeding taken in respect of the claim thereafter. However, there is no

difficulty in holding that initiation of Corporate Insolvency Resolution Process

would not tantamount to adjudication of the claim in regard to right to recover

money which claimant in respect of a disputed claim, claims to be entitled to.

Adjudication has to be, in respect of the claim, by a Civil Court and other

adjudicatory mechanism like Arbitral Proceedings. Proceedings under

Insolvency and Bankruptcy Code, 2016 are only meant to resolve the insolvency

issues and not adjudge a claim. Therefore, the Appellant cannot bank on this

clause, while referring to filing application under Section 7 of the I&B Code. The

remedy available to him did not lie in triggering Corporate Insolvency Resolution

Process by taking resort to provisions of Section 7 of the I&B Code.

4. We find no merit in this appeal. It is accordingly dismissed. However,

disposal of this appeal will not preclude the Appellant from seeking remedy from

the competent forum, subject to all just legal exceptions.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Anant Bijay Singh] Member (Judicial) am/gc

Company Appeal (AT) (Insolvency) No. 1068 of 2020