Yogesh Singh vs Mr. Supriyo Kumar Chaudhuri & Ors

1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT)(INSOLVENCY) NO.565 OF 2021 (Arising out of Order dated 26.07.2021 passed in IA No.19/2021, IVN.P02//ALD/2020 in CP No.(IB)223/ALD/2019 by National Company Law Tribunal, Allahabad Bench, Allahabad) In the matter of: Yogesh Singh, S/o Nand Kumar Singh, Aged about 41 years, R/o Koilari, Koilaro, Jaunpur UP 222148 Appellant

Vs

1. Mr Supriyo Kumar Chaudhuri, Liquidator of M/s JVL Agro Industries Ltd, (under going CIRP) and having his office At BDO, Restructuring Advisory LLP C/o BDO India LLP, Floor 4, Duckback House, 41 Shakespeare Sarani, Kolkata 700017.

2. Bank of Baroda, Baroda Bhavan, RC Dutta Road, Alkapuri, Baroda 390007

Also at Varuna Bridge Cantt, Varanasi 221002

3. State Bank of India, SARG,

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 2

Corporate Centre, Makers Tower, 21st Floor, Cuffe Parade, Mumbai 400005

4. Punjab National Bank, Plot No.4, 205 Delhi Road, Sector 10 Dwarka, New Delhi 110075

Also having its office at Mahmoorganj, Varanasi 221010

5. Allahabad Bank, 2 N.S. road, Kolkata 700001

6. Standard Chartered Bank, Special Assets Management, 2nd Floor, Building No.7A, DLF Cyber City, Sector 24/25/25A, Gurgaon 122002

7. Union Bank of India Overseas Branch 9 Indian Exchange Place, Kolkata 700001 Respondents

For Appellant: Mr Gautam Singh, Advocate. For Respondent: Ms Swati Dalmia, Mr Saurabh Bindal, Mr Palzer and Mr. Siddharth Baskar, Advocates for R1.

With Company Appeal (AT)(Insolvency) No. 594 of 2021.

In the matter of: Satya Naryan Jhunjhunwala,

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 3

Earstwhile Director, JVL Agro Industries Ltd K-67/85-2, Jhunjhunwala Bhavan Natimli, Varanasi 221001 Email: mrsnj101@gmail.com Mobile 8795831200 Appellant

Vs

1. Mr Supriyo Kumar Chaudhuri, Liquidator of M/s JVL Agro Industries Ltd, (under going CIRP) and having his office At BDO, Restructuring Advisory LLP C/o BDO India LLP, Floor 4, Duckback House, 41 Shakespeare Sarani, Kolkata 700017.

2. State Bank of India, SARG, Corporate Centre, Makers Tower, 21st Floor, Cuffe Parade, Mumbai 400005

3. Punjab National Bank, Having its office at Mahmoorganj, Varanasi 221010

4. Union Bank of India Overseas Branch 9 Indian Exchange Place, Kolkata 700001

5. Standard Chartered Bank, Special Assets Management, 2nd Floor, Building No.7A, DLF Cyber City, Sector 24/25/25A, Gurgaon 122002

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 4

6. P.K. Mukhopadhyay JVL Agro Industries Ltd 9th Floor, Diamond Prestige 41A, AJC Bose Road, Kolkata 700017

7. The Goods Shed Superintendent, Budge Budge, Eastern Railway, Sealdah Division, Kolkata

8. JSW Vallabh Tinplate Pvt Ltd, Village Beopror, GT Road, Shambhu, Teh. Rajpura, Ditt. Patiala Punjab 140417

9. Rathod Jitendra Kumar, Narsang Bhai 18, Prakruti Bunglow, Bopal, Ahmedabad, Gujarat 380058

10. Bank of Baroda, Baroda Bhavan, RC Dutta Road, Alkapuri, Baroda 390007

Also at Varuna Bridge Cantt, Varanasi 221002 Respondents

For Appellant: Mr Mohit Choudhury, Mr Prakhar Mithal and Ms Sanyuikta Gupta, Advocates. For Respondent: Ms Swati Dalmia, Mr Saurabh Bindal, Mr Palzer and Mr Siddharth Baskar, Advocates for R1. Mr. Bishwajit Dubey and Ms Aishwarya Gupta, Advocates for R2/SBI.

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 5

Mr Shivam Saini and Mr Arun Aggarwal, Advocates for R10/Bank of Baroda.

JUDGEMENT

(30th August, 2022)

JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL) Since in both the appeals order challenged was

common i.e. order dated 26.07.2021 passed by the

Adjudicating Authority, National Company Law

Tribunal, Allahabad Bench, Allahabad (hereinafter

referred to as 'Adjudicating Authority') in IA No.19/2021

filed in CP No.(IB) 223/ALD/2019, both the appeals

were tagged and heard together. Accordingly, by a

common judgement both the appeals are being disposed

of.

2. Mr. Mohit Chaudhury, learned counsel for the

appellant in Company Appeal (AT)(Insolvency)

No.594/2021 has argued as lead appeal and as such

the brief facts stated in Company Appeal

(AT)(Insolvency) No.594/2021 can be taken into account

for disposal of both the Appeals. In both the Appeals

the Appellants have prayed for setting aside an order

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 6

dated 26.07.2021 whereby the Adjudicating Authority

on an application filed by the Liquidator i.e. Respondent

No.1 under Section 35(1)(n) of IBC read with Section

60(5) IBC allowed the said application. By the said order

the Adjudicating Authority opined that as the amount

to be distributed is in excess of the liquidation cost as

estimated by the liquidator and is to be distributed to

them who are entitled to the benefit of the distribution

of liquidation proceedings, therefore, the Adjudicating

Authority allowed the applicant/liquidator to distribute

the amount of Rs.61 crore, less any applicable

withholding tax, out of the accumulated cash profits

lying the bank accounts of the corporate debtor, to the

stakeholders in accordance with the waterfall

mechanism as specified under Section 53 of the IBC and

the Adjudicating Authority allowed the IA No.19/2021.

3. The Appellant in Company Appeal (AT)(Insolvency)

No.594/2021 has claimed to be ex-Director of JVL Agro

Industries Ltd (Corporate Debtor) whereas the Appellant

in Company Appeal (AT) (Insolvency) No.565/2021 has

claimed to be an employee of JVL Agro Industries Ltd

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 7

and representing all employees of the Corporate Debtor.

However, no such authorisation on behalf of other

employees has been brought on record. In the affidavit

filed alongwith the Memo of Appeal by the Appellant

depicts that he was employed as Electrical Engineer

(HOD) in JVL Agro Industries Ltd (Corporate Debtor).

4. The brief facts of the case is that on the ground of

corporate debt an application under Section 7 of IBC

was filed by Standard Chartered Bank seeking initiation

of Corporate Insolvency Resolution Process (CIRP)

against M/s JVL Agro Industries Ltd (Corporate Debtor).

The said application was filed before the Adjudicating

Authority which was admitted on 25.07.2018 and

subsequently on 10.09.2018 the Adjudicating Authority

appointed Mr Supriyo Kumar Chaudhuri, Respondent

No.1 herein as Resolution Professional of Corporate

Debtor. After commencement of CIRP on 05.10.2018

the Resolution Professional published the Request for

Expression of Interest (hereinafter referred to as EOI)

which was again issued on 05.12.2018. On 19.02.2018

upon receipt of 12 applications for Expression of

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 8

Interest the Resolution Professional issued Request of

Resolution Plan (RFRP). In terms of RFRP, the last date

for submission of the Resolution Plan was 02.02.2019.

Since no Resolution Plan was received on 02.02.2019

the notified date for submission of Resolution Plans was

extended at various occasions. Even after best efforts

made by the RP, Resolution Plan was not approved by

the CoC.

5. Finally on an application for liquidation under

Section 33(1) of IBC on 19.08.2020 the order was

passed by Adjudicating Authority regarding liquidation

of the Corporate Debtor. During the liquidation

proceeding, meeting of the Stakeholders Consultation

Committee was held on 21.10.2020 wherein the

members of the Stakeholders' Consultation Committee

comprising of the representatives of the State Bank of

India and other Banks considered that when the

amount was lying in the Bank account of the corporate

debtor approximately Rs.99.35 crores, those amount

may be distributed amongst the shareholders. In the

said Meeting it was intimated by the Liquidator that

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 9

such distribution would only commence after filing of

the assets memorandum with the Adjudicating

Authority and after expiry of period of 90 days stipulated

for receipt of the proposals for scheme of compromise

for arrangements. No scheme of compromise or

arrangement was receipt by the applicant from any

eligible person. Thereafter, second meeting of

Stakeholders Consultation Committee (hereinafter

referred to as SCC) of the Corporate Debtor was held on

10.12.2020 and in the said Meeting the representatives

of SBI insisted that the accumulated profit aggregating

to Rs.96.21 crore lying in the bank account of the

corporate debtor be distributed to the stakeholders in

accordance with waterfall mechanism as per Section 53

of IBC. The said stand was also supported by

representatives of Standard Chartered Bank. It is

reflected from the impugned order that Legal Advisor on

behalf of Liquidator present in the said Meeting

informed the Members of the SCC that such distribution

would not be possible without obtaining leave of the

Adjudicating Authority. The SBI sent an email on

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 10

15.12.2020 urging immediate distribution of funds lying

in the Bank account of the Corporate Debtor and also

SBI offered to indemnify the corporate debtor for any

amount that are distributed to them out of the

accumulated cash profits represented by the present

balance in the bank account of the corporate debtor.

The liquidator prepared liquidation cost which was

aggregating to Rs.21.95 crores. The estimated cost of

liquidation was less than the accumulated cash profit

amount of Rs.96.21 crores. Subsequently the liquidator

filed an application which was numbered as IA

No.19/2021 before the Adjudicating Authority seeking

clarification whether the accumulated cash profit

presently lying in the bank account of corporate debtor

which are in excess of liquidation cost, can be

distributed by the liquidator to the stakeholders subject

to deduction of withholding tax, as may be applicable

pending sale of assets forming part of liquidation estates

and realisation of proceeds thereof.

6. Before the Adjudicating Authority, Bank of Baroda

filed an intervention petition being financial creditor of

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 11

the corporate debtor and Member of the CoC. Bank of

Baroda claiming as secured financial creditor filed a

claim which was duly admitted and it was also part of

CoC holding 26.38% in the CoC of the corporate debtor.

The Bank of Baroda intimated its decision to relinquish

its security interest in respect of all the properties of the

corporate debtor charged to it on pari passu basis with

other consortium lenders of the Bank of Baroda.

7. After hearing learned counsel for the parties, the

Adjudicating Authority permitted the liquidator to

proceed with the distribution once the list of

stakeholders and asset memorandum have been filed

with the Tribunal. The Adjudicating Authority allowed

distribution of amount of Rs.61 crores less any

applicable withholding tax out of accumulated cash

profit lying with the Bank in the account of corporate

debtor to the stakeholders in accordance with waterfall

mechanism as specified under Section 53 of the IBC.

8. Before further proceeding, it is necessary to

indicate that after an application filed under Section 33

of IBC by the liquidator/Respondent No.1, the learned

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 12

Adjudicating Authority by its order dated 19.08.2020

allowed the same. The liquidation order dated

19.8.2020 was assailed by both the appellants herein

alongwith some other. The Appellant in Company

Appeal (AT)(Ins) No.594/2021 filed an appeal under

Section 61 of IBC vide Company Appeal (AT)(I) No.

832/2020 whereas appellant in Company Appeal (AT)(I)

No.565/2021 filed an another appeal i.e. Company

Appeal (AT)(Ins) No.846/2020. The Appellant i.e.

Yogesh Singh was Appellant No.2 in Company Appeal

(AT) (Ins) No.846/2020. The said appeals were finally

disposed off by judgement dated 18.01.2022 passed by

the Division Bench of this Tribunal. This Tribunal did

not interfere with the liquidation order rather approved

the same with certain observations.

9. While Company Appeal (AT)(Ins) No. 565/2021

was taken up for the first time before Division Bench of

this Tribunal, a prayer was made by the Appellant for

staying of operation of the impugned order. However,

considering the fact that the impugned order had

already been carried out, this Tribunal refused to pass

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 13

an order staying the impugned order. We feel

appropriate to reproduce the order dated 5.8.2021

passed in Company Appeal (AT) (Ins) No. 565/2021 as

follows:-

"05.08.2021: Heard Ld. Counsel for the Appellant,

he submits that ld. Adjudicating Authority by the

impugned order erroneously permitted to the

Liquidator to distribute the amount between the

Financial Creditors. The order is erroneous and

prejudicial to the Promoters of the Corporate Debtor

Company. Specially Ld. Adjudicating Authority

should not pass the order when the CA (AT) (Ins) No.

846 of 2020 is pending before this Appellate

Tribunal. He further submits that the operation of

the impugned order may be stayed.

Issue notice.

Ld. Counsel appearing for the Liquidator

(Respondent No. 1) accepts notice and submits that

in compliance of the impugned order the Liquidator

has already been distributed the amount as per

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 14

Section 53 of the IBC. Therefore, there is no question

for staying the impugned order.

We have considered the submissions of Ld.

Counsels for the parties. We admit the Appeal

however when the order has already been carried

out, therefore, there is no question of passing any

order for staying the impugned order.

Ld. Counsel for the Respondent No. 1

(Liquidator) may file Reply Affidavit within two

weeks. Rejoinder, if any, may be filed within one

week thereafter.

Issue notice to the other Respondents by

speed post. Requisites alongwith process fee be

filed if not filed within two days. If the Appellant

provides the email address to the Respondents. Let

notice be also issued through email. Let the matter

be fixed 'For Admission (After Notice)' on 03th

September, 2021."

10. At the very outset when both the appeals were

taken up for hearing before the Appellate Tribunal ,

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 15

considering the subsequent development this Tribunal

was of the view that nothing is remained to be

adjudicated in both the appeals. However, learned

counsel for the appellant in both the appeals insisted for

hearing in the appeals and prayed for deciding the issue.

11. Mr. Mohit Chaudhury, learned counsel for the

Appeal in Company Appeal (AT)(Ins) No.594/2021 has

emphatically argued that the impugned order is liable to

be set aside on the ground that the same is in conflict

with the Regulation 32 and 42 of the IBBI (Liquidation

Process) Regulations, 2016 (hereinafter referred to as

Regulation, 2016). He further submits that the

impugned order is itself against the provisions

contained in Section 53 of the IBC. He has argued that

without following procedure as prescribed in Chapter VI

and VII of the Regulation, 2016 neither the liquidator

was entitled to file an application for distribution of

surplus income lying in the bank account of corporate

debtor nor the Adjudicating Authority was competent to

permit the liquidator for distribution of the said funds

amongst the stakeholders.

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 16

12. Shri Chaudhury, learned counsel has further

made allegations against the liquidator for suppression

of fact. He submits that once appeal i.e. Company

Appeal (AT)(Ins) No.832/2020 and 846/2020 filed

against the liquidation order were pending before the

Appellate Tribunal it was duty on the part of the

liquidator to inform the Adjudicating Authority, but this

fact was suppressed. Same stand has been taken by

Mr. Gautam Singh, learned counsel who has appeared

on behalf of the Appellant in Company Appeal (AT)(Ins)

No.565/2021. Both the counsel besides raising

allegations against the liquidator have also argued that

this Tribunal may issue some guidelines to prevent re-

occurrence of such event by either liquidator or the

Adjudicating Authority. According to the learned

counsel for the appellant the liquidator in connivance

with State Bank of India persuaded the Tribunal to allow

him to distribute accumulated profit. Mr. Chaudhury

by way of referring to Section 53 of IBC highlighted that

only proceeds from the sale of liquidation assets can be

distributed on priority basis. According to him the profit

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 17

which has been permitted to be distributed may not be

termed as sale proceed of the liquidation assets. He by

way of referring to Regulation 42(2) further emphasised

that liquidator can distribute proceeds only on

realisation from the sale proceeds to the stakeholders.

According to him the accumulated profit cannot be

termed as proceeds from realisation and as such there

was no question of distribution of the said amount.

13. Mr. Gautam Singh, learned counsel for the

Appellant in Company Appeal (AT)(Ins) No.565/2021 by

way of referring to paragraph 19 of the impugned order

which is at running page 36 and also order dated

20.11.2020 passed in Company Appeal (AT)(Ins)

No.832/2020 and 846/2020 at running page 45, has

tried to highlight that on one side this Appellate

Tribunal was directing to ensure that corporate debtor

shall continue to operate as going concern, whereas the

Adjudicating Authority has observed that the Corporate

Debtor in liquidation was not a going concern. At this

juncture it would be appropriate to reproduce para 19

at page 36 of the impugned order dated 26.07.2021 and

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 18

order dated 20.11.2020 passed by this Tribunal in

Company Appeal (AT)(Ins) No.832/2020:-

"Para-19 of the order dated 26.07.2021 passed

in IA 19/2021 filed in CP

No.(IB)223/ALD/2019"

"Para 19.Further since the corporate debtor in

liquidation is not a going concern and assets

which are to be distributed are in the form of

liquid assets and are non saleable, thus this

Adjudicating Authority is of the opinion that

the Code does not bar such distribution as

such distribution will not hamper the

liquidation process of the corporate debtor."

"Order dated 20.11.2020 passed in

Comp.App(AT) No.832 and 846 of 2020.

"20.11.2020: Let a formal notice be issued to

Respondents. Notice on behalf of Respondent No.1

is accepted by Mr. Ramji Srinivasan, Senior

Advocate along with Ms. Swati Dalmia, Advocate.

Notice on behalf of Respondent No.2 (Committee of

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 19

Creditors/ Members of the Committee of Creditors)

is accepted by Mr. Ritin Rai, Senior Advocate along

with Mr. Madhav Kanoria. No further notice need be

issued to them. Reply affidavit may be filed by the

Respondents within two weeks. Rejoinder, if any,

be filed within two weeks thereof. Short written

submissions, not exceeding three pages, may also

be filed along with the pleadings. List the appeals

on 13th January, 2021 at 2.00 P.M. Meanwhile, the

Liquidator shall ensure that if the Corporate Debtor

(Company) is a going concern, it shall continue to

operate as a going concern."

14. According to Mr. Gautam Singh, learned Counsel

for the appellant in Company Appeal (AT)(Ins)

No.565/2021, the Adjudicating Authority has not taken

any steps to ensure the corporate debtor to continue as

going concern. He also reiterates that

liquidator/Respondent No.1 has suppressed the facts

before the Adjudicating Authority regarding pendency of

two appeals i.e Company Appeal (AT)(Ins) No.832 and

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 20

846 of 2020 and he levelled serious allegations against

the liquidator for suppression of facts.

15. Ms Swati Dalmia, learned counsel has appeared on

behalf of Liquidator/Respondent No.1. She has taken

the allegations made by both the appellants very

seriously and refuting the same she has argued that

without pleading such allegation has been levelled

which is highly deplorable.

16. On the point of allegation regarding non-disclosure

of fact of pendency of appeals before the Appellate

Tribunal she has drawn attention of this Tribunal to IA

No.19/2021 which was filed in

CPNo.(IB)223/ALD/2019 under Section 60(5) of the IBC

before the Adjudicating Authority. She submits that in

the IA, Respondent No.6, P.K. Mukhopadhyay was

representatives of the employees whereas Respondent

No.9 Mr. Rathod Jitender Kumar was arrayed as

representative of the shareholders. She submits that it

is not case of the liquidator that only with the support

of State Bank of India and other Banks petition was filed

rather the representative of employee as well as

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 21

representative of shareholders were arrayed as parties.

She has further drawn our attention to rejoinder filed by

the liquidator to reply of State Bank of India which was

filed on 24.03.2021. She submits that much before

passing of the impugned order in the rejoinder dated

24.03.2021 filed by Respondent No.1/liquidator at page

161 to 179 of Volume 2 to the reply, the Respondent

No.1 had intimated the Adjudicating Authority

regarding pendency of Appeals i.e. Company Appeal

(AT)(Ins) No. 832 and 846/2020. She has drawn our

attention to running page 178 of Volume 1 of Reply of

Respondent No.1. It is appropriate to reproduce the

same:-

"The Liquidator has sought clarification for

distribution of funds to the Stakeholders prior to

sale of assets of the Corporate Debtor in the instant

application and any allegation to the contrary is

denied and disputed. The applicant reiterates the

statements made in paragraphs 4,5 and 6 and the

prayers of the instant application in this regard.

The Applicant also states and submits that two

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 22

appeals bearing Comp.app.(AT)(Ins) no.832/2020

and (AT)(Ins) 846/2020 have been filed on behalf of

the Promoters of the Corporate Debtor and Ramesh

Chandra Garg, ex-CFRO of the corporate debtor and

others (Employees) respectively against the order of

liquidation passed by this Hon'ble Tribunal dated

19th August, 2020. The Hon'ble NCLAT has

observed in course of hearings that any sale of

assets an/or distribution of proceeds would render

the appeals infructuous. The appeals are in the

final stage of hearing and next fixed in April, 2021

for hearing. The Applicant craves leave to submit

copies of the said appeals and orders passed

thereon at the time of hearing of this application, if

any."

17. Learned counsel for the Respondent No.1 has

further drawn our attention to IA filed in Company

Application No.19/2021 which was filed on behalf of the

liquidator to urgency application, filed by the applicant

under Section 60(5)(c) of IBC read with Rule 111 of

NCLT Rules. She has drawn our attention to para 8 of

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 23

the petition which is at running page 267 to 268 in

Volume 2 of reply affidavit filed on behalf of Respondent

No.1. The same is quoted herein below:-

"8. Paragraph 5(vi) and (vii)-With reference to

paragraphs 5(vi) and (vii), save what are matter of

records, all allegations made therein are denied and

disputed. It is denied and disputed that the

Liquidator has stalled the liquidation process and

the only sale notice dated 19th January, 2021

issued for sale of Block/(s) of assets of the

Corporate Debtor has been withdrawn on 3rd March,

2021 without specifying any reason and without

discussion with the Stakeholders. The Liquidator

states that two appeals bearing Company Appeal

(AT)(Insolvency) No.832 of 2020 and Company

Appeal (AT)(Insolvency) No.846 of 2020 have been

filed before the Hon'ble NCLAT by the suspended

Promoter Director and employees of the corporate

debtor respectively from the order of liquidation of

the corporate debtor passed by this Hon'ble

Tribunal dated 19th August, 2020 which were

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 24

initially listed before the Hon'ble Chairperson's

Court (Bench-1) at NCLAT and pleadings were

completed by parties including the Applicant herein.

By an order dated 24th February, 2021, the Hon'ble

Bench-I of the Hon'ble NCLAT was pleased to place

the appeals for hearing before the Hon'ble Bench-

IV, NCLAT since the appeals were ready for hearing

which commenced immediately thereafter on 2nd

March, 2021 before the Hon'ble Bench-IV of the

NCLAT. During the course of arguments, before the

Hon'ble Bench IV, NCLAT the appellants put forth

submissions to the effect that, the Liquidator

intends to sell the assets of the Corporate Debtor

through e-auction scheduled to be held on 4th March,

2021 and 5th March, 2021 and on this ground

sought ad interim stay from the Hon'ble NCLAT.

The aforesaid submission was vehemently opposed

by the learned senior counsel appearing on behalf

of the Liquidator. The applicant herein is also

appearing in the hearing of the appeals and is

representate3d by a Senior Counsel. Upon hearing

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 25

all the Counsel appearing on behalf of the parties, it

fell from the Hon'ble Tribunal that in case the assets

of the corporate debtor was sold during the

pendency of the appeals, then the appeals would be

rendered infructuous. Senior Counsel appearing on

behalf of the Liquidator, realizing that he was in the

appeals appearing on behalf of an officer of the

Hon'ble Tribunal informed the Hon'ble Bench-IV ,

NCLAT that he would advise his client, the

Liquidator to defer the e-auction till the appeals

were disposed of. The Liquidator was likewise

advised by his senior counsel to defer the e-auction

scheduled on 4th March, 2021 and 5th March, 2021.

The Liquidator being an officer of the Tribunal

considered that the appeals had reached an

advanced stage of hearing and pursuant to

concerns raised by the Hon'ble Bench-IV, NCLAT

and the advice of his learned senior counsel

cancelled the e-auction process scheduled on 4th

March, 2021 and 5th March, 2021. The said

appeals were thereafter heard by the Hon'ble

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 26

Bench -IV, NCLAT on 4th March, 2021 when counsel

appearing on behalf of the appellants concluded

their arguments. On the said date the Counsel on

behalf of the Liquidator informed the Hon'ble

Bench-IV, NCLAT were informed about the

cancellation of the e-auction. The Applicant and its

officers despite appearing as Respondent No.2 in

the said appeals and being represented by its

Senior counsel who have had no objection

whatsoever to the deferment/cancellation of e-

auction in course of hearing of the appeals on the

assurance of the Senior Counsel of the Liquidator is

now taking advantage of the situation and

instigating and misrepresenting to other

stakeholders/lenders that the Liquidator has

unilaterally cancelled the e-auction without any

direction being passed of stay of liquidation

process/e-auction by the Hon'ble NCLAT. The

Applicant herein has in fact in a meeting of the 4 th

Stakeholders' Consultation Committee held on 24th

May, 2021 repeatedly raised alleged and insisted

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 27

that the Liquidator has brought in a "self inflicted

stay" on the e-auction/liquidation process while

deliberately suppressing to other stakeholders that

the Applicant has not also raised any objection to

the submissions made by Senior Counsel of the

Liquidator before the Hon'ble Bench-IV, NCLAT

regarding deferment/cancellation of e-auction till

the appeals are disposed of. The stakeholders

attending the said meeting categorically advised

the liquidator that he should immediately proceed

with e-auction of assets since there is no stay order

in existence passed by the Hon'ble NCLAT and not

pay any heed to observations and directions made

by any court and tribunal in the event they are not

mentioned in the written orders passed by the

Courts/Tribunals. One of the stake holders also

gave opinion that the Liquidator ought to have sold

the assets since there was no stay order and made

the appeals infructuous. A copy of the minute of the

4th Stakeholders Committee Meeting held on 24th

May, 2021 is annexed hereto and marked as

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 28

annexure "B". Pursuant to the said meeting of the

Stakeholders' Consultation Committee held on 24th

May, 2021 the liquidator was compelled to file two

applications bearing IA No.050 of 2021 and IA

No.960 of 2021 before the Hon'ble Bench IV NCLAT

seeking directions for e-auction of assets including

perishable inventory of oil and also recording the

apprehensions of the stakeholders therein. A letter

by way of an email dated 28th May, 2021 was also

filed with the Registrar, NCLAT for early listing and

hearing of the pending appeals. The appeals

thereafter appeared in the list before the Hon'ble

Bench IV, NCLAT on 2nd June, 2021 when the

learned counsel on behalf of the Liquidator made

submissions on his applications for permission

regarding e-auction. The Hon'ble Bench IV, NCLAT

has been pleased to pass directions for filing

affidavits on the applications and appeal paper

books with written submissions on the appeals by

an order dated 2nd June, 2021. The matters were

directed to be listed on 8th June, 2021. The

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 29

applications filed on behalf of the Liquidator inter

alia seeking directions for holding e-auction of

assets and inventory of expired stock of Olein and

Palm Oil was heard by the Hon'ble NCLAT on 8th

June, 2021 when counsel on behalf of the

appellants therein, Liquidator and the Applicant

herein were present and made submissions. The

Hon'ble NCLAT concluded hearing of the

applications of the said date and disposed of the

same by an order dated 10th June, 2021 wherein

the Liquidator was allowed to sell the inventory of

600 tonnes (approx.) of expired Olein and 100

tonnes (approx.) of expired stock of refined palm oil

by way of e-auction in a transparent manner to the

highest bidder. The sale proceeds have been

directed to be kept in a interest baering bank

account. The senior counsel appearing on behalf of

the Applicant herein in the said appeals was

present during hearing and did not have any

submissions and/or objections. It is, therefore,

clear that the NCLAT has not permitted the

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 30

Liquidator to sell the assets of the Corporate Debtor

pending adjudication of the appeals filed by the

Promoter Director and Employees of the Corporate

Debtor. The NCLAT has also not passed any

direction for distribution of funds to the

stakeholders from proceeds realized from sale of

inventor. The Liquidator humbly states and

submits that there is no scope for passing any order

of distribution of funds to the stakeholders at this

stage in view of the order passed by the Hon'ble

NCLAT as aforesaid. Copies of the order dated 2nd

June, 2021 and order dated 10th June, 2021 are

annexed hereto and marked as Annexure D. It is

denied and disputed that the Liquidator has not

been convening the meetings of stakeholders even

when request for such meeting is made by more

than 60% of the stakeholders. It is further denied

and disputed that the Liquidator had previously, by

intentionally misinterpreting the provisions of law

as to stakeholders rejected the request of all

financial creditors who constitute 90% of the

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 31

stakeholders (in terms of value) on many occasions

for conducting such meeting. The Liquidator states

and submits that a meeting of Stakeholders'

Consultation Committee can be convened at the

request of stakeholders only when a request is

received from at least fifty-one percent of the

representatives in the consultation committee under

Regulation 31A(6) of the IBBI (Liquidation Process)

Regulations, 2016. The Liquidator states and

submits that there has been no valid request from

adequate number of the members of the

Stakeholders' Consultation Committee under

Regulation 31A(6) of the IBBI (Liquidation Process)

Regulations, 2016 and the Applicant is making

baseless and unfounded allegations."

18. Ms Swati Dalmia, Learned Counsel for Respondent

No.1 by way of referring to contents of petition quoted

hereinabove submits that appellants before this

Tribunal have made completely false and frivolous

allegations against the liquidator regarding the

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 32

suppression of fact in respect of pendency of appeals

before this Appellate Tribunal.

19. Learned Counsel for Respondent No.1 has further

questioned the locus of appellants before this Tribunal.

Raising question of locus of Yogesh Singh, appellant in

Company Appeal (AT)(Ins) No.565/2021 she submits

that once in respect of corporate debtor an liquidation

order was passed long back on 19.08.2020, in terms of

Regulation 33(7) all the employees were deemed under

notice of discharge and as such the appellant claiming

to be Electrical Engineer of the corporate debtor was not

having any locus to file the present appeal. Moreover

the representatives of employees i.e. Respondent No.6

P.K> Mukhoupdhyay was already on record before the

Adjudicating Authority. Similarly it has been argued

that once representative of all shareholders i.e.

Respondent No.9 Rathod Jitender Kumar was already

arrayed in the application filed before the Adjudicating

Authority under Section 60(5) of the IBC, Satya Narayan

Jhunjhunwala, the appellant in Company Appeal

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 33

(AT)(Ins) No.594/2021 was having no locus to file the

present appeal.

20. Ms Swati Dalmia, learned counsel for Respondent

No.1 has argued that it is true that mechanism has been

provided under Section 53 of the IBC as well as Chapter

VI and Chapter VII of the Regulation, 2016 regarding

sale of assets etc and its liabilities but fact remain that

once accumulated profits of the corporate debtor was

already lying in the bank account, distribution of such

accumulated profit may not invite any question since it

was not the proceed of the sale of assets. The

accumulated profit was already lying in the bank and

there was huge corporate debt against the corporate

debtor. In any event such amount would not have been

withheld for long period by the liquidator and as such it

was necessary to distribute the accumulated profit

amounts in terms of Section 53 of the Code. She has

also drawn our attention to distribution of accumulated

profit by way of referring to chart showing distribution

of accumulated cash profit available with the corporate

debtor as in the month of December, 2020. She has

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 34

taken this Tribunal to running page No.355 of Volume

2 of reply affidavit filed by Respondent No.1. We feel it

necessary to reproduce the same as follows:-

Particulars Amount Remarks distributed 1 Insolvency 62,93,488 Provisioning for Resolution payment of entire process outstanding costs CIRP costg had (Section been made which 53(1)(a) is over and above the 61 crores distributed to the secured creditors. Entire outstand CIRP cost paid in full. 2 Liquidation 16,02,15,728 The amount costs represents (Section liquidation costs 53(1)(a) of paid tup to 31st the code) July, 2021. Requisite provisioning towards payment of entire liquidation cost for a period up to one year has been made. Funds have been earmarked and kept aside separately for meeting the liquidation expense

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 35

estimated at Rs.21.95 crore(for 1 Year) 3 Workmen's - All workmen dues dues for the representing period of 24 wages, leave months encashment preceding the and bonus liquidation (53(1)(b)(i) of commencement the Code) date including leave encashment and bonus aggregating to Rs.40,75,731/-

have been paid before filing the application with the Adjudicating Authority.

Workmen's 1,27,58,850 An amount of Rs.

dues 3 crores had representing been set aside gratuity (which is over (53(1)(b)(i) of and above the the Code sum of Rs.61 crores distributed to the secured creditors) towards payment of gratuity to the eligible workmen and employees of the corporate debtor. Amount payable as per actuarial valuation of LIC has been deposited with

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 36

LIC under LIC's group gratuity policy in pursuance to an order dated 10.12.2020 passed by the Adjudicating Authority.

Indian 1,81,29,542.89 Bank(e- Allahabad Bank State Bank 15,41,10,517.98 of India Union Bank 5,88,61,229.85 of India and Union Bank of India (E- Corporation Bank) Punjab 16,30,77,790.86 National Bank (e- OBC) and Punjab National Bank Indian 2,32,58,563.86 Overseas Bank Bank of 15,79,62,209.62 Baroda (incl Vijay Bank Standard 1,44,79,249.19 Chartered Bank (UK) Standard 2,01,20,895.75 Chartered Bank (India)

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 37

Total amount distributed to the secured financial creditors is Rs.61,00,000,00.

On aforesaid fact and circumstances the learned

counsel for Respondent No.1 has further argued that

filing of the present appeal and that too pressing the

same even after liquidation order was already approved

by this Appellate Tribunal amounts to abuse of process

of Court and wasting precious time of the Tribunal.

21. Mr. Biswajit Dubey, learned Counsel appearing on

behalf of State Bank of India in both the appeals has

raised question of maintainability of the present appeal

by way of referring to Section 61 of the IBC. He submits

that only an aggrieved person can file an appeal under

Section 61 of the IBC whereas appellants in both the

appeals are strangers. One of the appellant has claimed

to be ex director of the corporate debtor i.e. Company

Appeal (AT)(Ins) No.594/2021 whereas in Company

Appeal (AT)(Ins) No.565/2021 the appellant claims to be

an employee/engineer of the corporate debtor. He

further submits that though learned counsel for the

appellant in both the appeals have highlighted the Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 38

provisions regarding distribution of sale proceeds they

have not shown any provision which restrict

distribution of accumulated profit lying in the account

of corporate debtor during liquidation proceedings.

22. Mr. Shivam Saini, learned counsel for the Bank of

Baroda in Company Appeal (AT)(Ins) No.594/2021

adopts the arguments of learned counsel Ms Swati

Dalmia and Mr. Biswajit Dubey and submits that there

is no infirmity in the impugned order.

23. Besides hearing learned counsel for the parties we

have minutely examined the material available on

record. At the very outset we are of the considered

opinion that on perusal of impugned order which had

already been carried out and after approval of

liquidation order by this Tribunal which was passed on

19.08.2020, there was no reason available to the

appellants to further press the present appeal. Even at

the time of admission of Company Appeal (At)(Ins)

No.565/2020 this Tribunal had noticed that order

impugned have already been carried out and this was

the reason for refusal for passing any order staying the

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 39

impugned order. At this juncture we feel necessary to

reproduce order dated 05.08.2021 whereby Appeal

No.565/2021 was admitted by the Tribunal. It is quoted

hereinbelow:-

"05.08.2021: Heard Ld. Counsel for the Appellant,

he submits that ld. Adjudicating Authority by the

impugned order erroneously permitted to the

Liquidator to distribute the amount between the

Financial Creditors. The order is erroneous and

prejudicial to the Promoters of the Corporate Debtor

Company. Specially Ld. Adjudicating Authority

should not pass the order when the CA (AT) (Ins) No.

846 of 2020 is pending before this Appellate

Tribunal. He further submits that the operation of

the impugned order may be stayed.

Issue notice.

Ld. Counsel appearing for the Liquidator

(Respondent No. 1) accepts notice and submits that

in compliance of the impugned order the Liquidator

has already been distributed the amount as per

Section 53 of the IBC. Therefore, there is no question Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 40

for staying the impugned order. We have

considered the submissions of Ld. Counsels for the

parties. We admit the Appeal however when the

order has already been carried out, therefore, there

is no question of passing any order for staying the

impugned order.

Ld. Counsel for the Respondent No. 1 (Liquidator)

may file Reply Affidavit within two weeks.

Rejoinder, if any, may be filed within one week

thereafter.

Issue notice to the other Respondents by speed

post. Requisites alongwith process fee be filed if not

filed within two days. If the Appellant provides the

email address to the Respondents. Let notice be

also issued through email.

Let the matter be fixed 'For Admission (After Notice)'

on 03th September, 2021."

Once the order impugned had already taken its finality

there was no reason to advance further arguments.

Even though learned counsel for the appellants were

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 41

conveyed regarding the present situation, learned

counsel for the appellants insisted to pursue the Court.

We have noticed that without any plausible reason

during arguments false allegations were made against

Respondent No.1/liquidator on the point of facts

relating to pendency of two appeals before this Appellate

Tribunal. We have already hereinabove that the fact

regarding pendency of the appeal before this Appellate

Tribunal was brought on record by the liquidator by way

of filing rejoinder/reply affidavit before the Adjudicating

Authority as it is apparent from Volume I and Volume

II. The reply filed by the Respondent No.1 was already

served on the appellants even then learned counsel for

the appellants have ventured to make allegations

against Respondent No.1 regarding suppression of fact

of pendency of appeal before this Appellate Tribunal.

24. So far as locus of both the appellants is concerned

it also appears to be doubtful. Section 61 of IBC in a

specific term contemplates filing of appeal by an

aggrieved person. It was not a stage of corporate

insolvency proceeding. After CIRP since it failed,

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 42

liquidation order was passed by the Adjudicating

Authority on an application filed by the Liquidator

under Section 33(1) of the IBC. Once corporate debtor

went into liquidation and the petition for distribution of

accumulated profit was filed wherein representatives of

employees as well as representatives of shareholders

were arrayed as party there was no reason for third

person to file the present appeal. So far as question of

law which has been raised by the learned counsel for

the appellant regarding distribution of sale proceeds as

contemplated under Section 53 IBC as well as

Regulation 32 and 42 of Regulation 2016 is concerned,

we are of the opinion that by the impugned order no sale

proceed was directed to be distributed. In the present

case there was accumulation of profit in the account of

corporate debtor regarding which account as per

Regulation 41 in the account of corporate debtor the

word "liquidation is to be added" being custodian of the

said account. Being custodian of the said account it

was duty on the part of the Liquidator to immediately

distribute accumulated profit lying in the said account.

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 43

Had it been not done by the liquidator after noticing

accumulation of huge accumulated profit amounting to

the tune of Rs.96 crores, question would have raised as

to why the said amount was lying in the bank account.

In such situation in all fairness it would be the duty on

the part of the liquidator to take immediate steps to

distribute the accumulated profit in terms of Section 53

of the Act under the waterfall mechanism. Accordingly

we find no error or default in liquidator for approaching

the Adjudicating Authority regarding distribution of

accumulated profit. We have noticed the chart of

distribution which has been referred hereinabove, that

the distribution was made in accordance with law. Even

huge cash i.e. Rs.1,27,58,850/- was distributed under

the head of workmen dues representing gratuity. We do

not find any justification to interfere with the impugned

order.

25. Before parting with the judgment it is also required

to notice that the same appellants i.e. Appellant Satya

Narayan Jhunjhunwala in Company Appeal (AT)(Ins)

No.594/2021 and Mr. Yogesh Singh appellant in

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 44

Company Appeal (AT)(Ins) No.565/2021 had earlier

approached this Tribunal assailing the order of

liquidation passed by the Adjudicating Authority. The

liquidation order was approved by this Tribunal. It is

also noticed that the corporate debtor was not going

concern. Even though learned counsel for the appellant

by way of referring to an order dated 20.10.2020 passed

by this Tribunal, which has been quoted hereinabove,

has argued that the Tribunal had observed that it was a

going concern. On bare perusal of the said order it is

clear that it was observed in order dated 20.11.2020

that liquidator shall ensure that if the corporate debtor

was (company) going concern, it shall continue to

operate as going concern. Accordingly the allegation of

Learned Counsel for the Appellant that the Adjudicating

Authority has incorrectly referred in its order that the

corporate debtor was not going concern appears to be

baseless.

26. In view of the facts and circumstances as

discussed hereinabove we are of the opinion that both

the appeals are devoid of merits and require to be

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 45

rejected with imposition of heavy cost. It is observed

that even though the order impugned had taken its

finality and there was no error in the impugned order,

both the appellants by filing and pursuing the present

appeal have abused the process of this court. It appears

that the appellants are in habit of filing such petitions

which is reflected from disposal of two appeals by this

Tribunal in which both the appellants by filing separate

appeal had assailed the liquidation order passed by the

Adjudication Authority in respect of the corporate

debtor of the present appeal.

27. In view of the fact and circumstances as discussed

above we are of the opinion that it is a glaring case of

abuse of process of court. Accordingly, while dismissing

both the appeals, it is desirable to impose exemplary

cost. Accordingly the appellant in Company Appeal

(AT)(Ins) No.565/2021 who has claimed to be

representative of employees, is imposed a cost of Rs.2

lakhs. The Appellant Satya Narayan Jhunjhunwala, in

Company Appeal (AT)(Ins) No.594 of 2021 who is ex-

director of Corporate Debtor is liable to be imposed

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021 46

heavier cost than the appellant Yogesh Singh and as

such the Appellant Satya Narayanan Jhunjhunwala is

imposed a cost of Rs.5 lakhs. Both the Appellants are

directed to deposit the aforesaid cost in the account of

Prime Minister's National Relief Fund, which must be

deposited within one month from the date of this order

and this Tribunal may be intimated by appellant

regarding depositing the cost within one week

thereafter.

28. Accordingly both the appeals are dismissed with

cost as indicated above.

(Justice Rakesh Kumar) Member (Judicial)

(Mr. Kanthi Narahari) Member (Technical) Bm

Company Appeal (AT)(Insolvency) No.565 and 594 of 2021