National Company Law Appellate Tribunal
West Bengal Financial Corporation vs Bijoy Murmuria & Ors on 7 January, 2022
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NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH,
NEW DELHI
Company Appeal (AT) (Ins) No. 1012 of 2021
IN THE MATTER OF:
WEST BENGAL FINANCIAL CORPORATION,
a body corporate formed and constituted
under the State Financial Corporation Act, 1951,
having its registered office at DD-22, Sector-I,
Salt Lake City, Kolkata-700 064 ... Appellant
VERSUS
BIJOY MURMURIA,
Resolution Professional of the Corporate debtor,
having IBBI registration No. IBBI/IPA-001/IP-N0007/2016-2017/10026
and inter alia, working for gain at Clo. Sumedha
Management Solution Private Limited, 8B,
Middleton Street, 6A, Gitanjali, Kolkata - 700 071 ... Respondent No. 1
C.P. ISPAT PRIVATE LIMITED,
a company incorporate under
the provision of the Companies Act, 1956
having its registered office at 37,
Shakespeare Sarani, S.B. Towers,
3rd Floor Kolkata 700 017 ... Respondent No. 2
STATE BANK OF INDIA,
a body corporate formed and
constituted under the State Bank
of India Act, 1955 and inter alia, carrying on
business from Stressed Assets Management
Branch, 1, Nagaland House, 8" Floor, 11 & 13
Shakespeare Sarani, Kolkata - 700 071 ... Respondent No. 3
PUNJAB NATIONAL BANK,
a banking company incorporated under provision
of the Companies Act, 1956 and carrying on banking
Company Appeal (AT) (Ins) No. 1012 of 2021
Page 2 of 14
business under the Banking Regulation Act, 1949
and inter alia, carrying on business from 109,
G.T. Road, Burdwan, 713 101 ... Respondent No. 4
KARNATAKA BANK LIMITED,
a banking company incorporated under the provision
of the Companies Act, 1956 and carrying on banking
business under the Banking Regulation Act, 1949
and inter alia, carrying on business from Overseas
Branch, Kolkata, 1, Sarojini Naidu Sarani, Subham
Building, I Floor, Park Street, Mallickbazar Crossing,
near SIMPARK PLAZA, Kolkata 700 017 ... Respondent No. 5
Present:
For Appellant: Ms. Madhumita Bhattacharjee, Ms. Sirja Choudhury,
Mr. Anant, Advocates
For Respondent: Mr. Anuj Singh, Mr. Gaurav H. Sethi, Advocates for R1
Mr. Joy Saha, Sr. Advocate, Mr. Kumar Anurag Singh,
Ms. Aishwarya Kumar Awasthi, Advocates for R2
JUDGMENT
Jarat Kumar Jain: J.
The Appeal is filed against the order dated 08.10.2021 passed by Ld. Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) whereby dismissed the Application I.A. (IB) No. 775/KB/2021 in CP (IB) No. 832/KB/2019, filed by West Bengal Financial Corporation (one of the member of the Committee of Creditors).
2. Brief facts of this case are that Carbon Resources Pvt. Ltd. (Operational Creditor) filed an Application under Section 9 of IBC against the Dimension Steel & Alloys Pvt. Ltd. (Corporate Debtor) before Adjudicating Authority Kolkata for initiation of Corporate Insolvency Company Appeal (AT) (Ins) No. 1012 of 2021 Page 3 of 14 Resolution Process (CIRP). The same was allowed vide order dated 18.10.2019 and Ms. Meena Sureka was appointed as Interim Resolution Professional (IRP). Subsequently, Mr. Bijoy Murmuria was appointed as Resolution Professional (RP). The RP has published Form-G on 30.12.2019 and revised Form-G on 21.01.2020. The last date to submit the Resolution Plan was 10.12.2020 which was extended to 22.12.2020. Despite such extension no Resolution Plan was received. In the 10th meeting held on 04.01.2021 Committee of Creditor (CoC) had decided to go for liquidation. The RP had moved an application IA No. 274/KB/2021 for liquidation. The time for submission of resolution plan was over, therefore C.P. Ispat Private Limited (R2) filed an application IA No.197/KB/2021 before the Adjudicating Authority for direction to RP (R1) to place the resolution plan submitted by R2 for consideration by the COC. The applications where disposed of with the following directions:-
"1. I.A. No. 197/KB/2021 Considering also that maximization of the Corporate Debtor is one of the twin objectives of the IBC and liquidation should only be ordered as a last resort, we deem it fit to condone the delay of 43 days in submitting the Resolution Plan by the applicant in IA No. 197 of 2021. The Resolution Plan submitted by the applicant on 05/02/2021 shall be placed before the CoC for its consideration on or before 22.03.2021. The CoC shall deliberate on the Resolution Plan and its feasibility and viability and take a decision in the matter on or before 25th of March, 2021"
X XX
5. I.A. No. 274/10/2021:
This is an application filed by the RP for liquidation of the Corporate Debtor. Since in I.A. No. 197/KB/2021 we have directed the CoC to consider the Resolution Plan submitted by the Applicant, I.A No. 274/KB/2021 is pre-matured at this Company Appeal (AT) (Ins) No. 1012 of 2021 Page 4 of 14 stage. RP therefore seeks permission to withdraw the present application.
I.A. No. 274/KB/2021 stands disposed of accordingly."
3. The Adjudicating Authority directed the COC to consider the Resolution Plan and take a decision on or before 25th March, 2021. When Resolution Plan was placed before the COC, the COC gave further time to R2 for modification of the plan in its meeting held on 25th March, 2021. At that time, the Appellant who was also a member of COC had objected but still the COC decided to give time to R2 for modification.
4. Being aggrieved on 05.04.2021 the appellant had filed an application IA(IB)No.426/KB/2021prayed for the following reliefs: -
"(a) Injunction restraining the respondents from giving any effect or further effect or acting in terms of or in furtherance to the resolution adopted in the meeting of Committee of Creditors on March 25, 2021, to the extent that time to take a decision in the matter, as specified in the order dated March 16, 2021, regarding the resolution plan of the Respondent No.2, was unilaterally extended;
(b) Injunction restraining the respondents from considering and/or deliberating the amended and/or altered and/or modified resolution plan, if any, submitted by the Respondent No.2, in terms of the directions of the Respondent No.1 given in the meeting convened on March 25, 2021.
(c) Injunction restraining the respondents from approving the amended and/or altered and/or modified resolution plan, if any, submitted and/or circulated by the Respondent No.2 in any manner whatsoever.
(d) An order of liquidation be passed in terms of section 33 of the Code."
5. The Application was dismissed by the Adjudicating Authority vide order dated 30.04.2021. Operative portion of the Order is as under:-
Company Appeal (AT) (Ins) No. 1012 of 2021 Page 5 of 14 "15. Given the circumstances and the fact that voting has already been taken place in resolution plan, we do not at this stage pass any orders with respect to liquidation of the corporate debtor.
16. In the circumstances, the prayers sought for in the present IA 426/KB/ 2021 cannot be granted at this stage. However, we direct that the entire process be concluded expeditiously.
17. I.A No. 426/KB/2021 shall stand disposed of accordingly."
6. The Appellant has challenged the order before this Appellate Tribunal, in CA (AT) (INS) 536 of 2021, however, vide order dated 02.08.2021 the Appeal was dismissed. The operative portion of the Order is as under:-
"7. Having heard the Learned Counsel for the Appellant and keeping in view the main objective of Insolvency and Bankruptcy Code that all efforts should be made for resolution of the Corporate Debtor in the present matter when we have a Resolution Plan approved by the CoC, we do not think that orders of liquidation should be passed without considering the Resolution Plan already approved by the CoC. We do not find any reason to admit the Appeal in the facts of the matter. Although the CoC did not strictly follow the time frame given by the Adjudicating Authority and displeasure was expressed, when Adjudicating Authority exercised discretion not to pass order of liquidation and wait, we will not interfere in the discretion. When the Resolution Plan is on the verge of being accepted or rejected by the CoC it would not make much difference if little time is extended."
7. On 28.4.2021, RP has filed an Application I.A. No.479 of 2021 seeking approval of the resolution plan filed by R2,
8. On 16.8.2021, the Appellant has filed an Application I.A. No.775 of 2021 under Section 60(5) of IBC r/w Rule 11 of NCLT, Rules, 2016 for the following reliefs:
(a)the Application filed by the Respondent No. 1 being I.A. (IB) No. 479/KB/2021 be dismissed.
(b) The plan sought for approval by the respondent should be rejected.
Company Appeal (AT) (Ins) No. 1012 of 2021 Page 6 of 14
(c) An order of liquidation be passed in terms of IBC 2016.
9. The Ld. Adjudicating Authority has dismissed the Application vide impugned order dated 8.10.2021 holding that "the subject matter of this Application is similar to the prayers in I.A (IB) No. 426/KB/2021 and hence this issue was settled on 30.04.2021 and we had expressed our disapproval towards the conduct of RP and CoC. The appeal filed against the order dated 30.04.2021 was dismissed by the Hon'ble NCLAT and hence the order dated 30.04.2021 has attained its finality".
10. Being aggrieved with the Order dated 8.10.2021 the present Appeal is filed.
11. Ld. Counsel for the Appellant submitted that the RP has committed grave illegality by allowing the R-2 to file the Resolution Plan beyond stipulated date fixed by the Adjudicating Authority in its order dated 16.03.2021. The ld. Adjudicating Authority allowed the extension and fixed 25.03.2021 as the deadline for taking a decision on the Resolution Plan. The RP and CoC disregarded the deadline and unilaterally granted extension for submission of modified Resolution Plan. The proviso to Section 12(3) IBC provides that any extension of the period of CIRP under Section 12 cannot be granted more than ones. Even the 3rd proviso to Section 30 states that nothing in the 2nd proviso shall be construed as extension of a period for the purposes of the proviso to sub-Section 3 of Section 12 and the CIRP shall be completed within the period specified in that sub-section. Even the literal language of Section 12(1) makes it clear that proviso must be read as Company Appeal (AT) (Ins) No. 1012 of 2021 Page 7 of 14 mandatory. For this purpose, cited the Judgment of Hon'ble Supreme Court in the case of Arcellormittal India Pvt. Ltd. Vs. Satish Kr. Gupta 2018 SCC Online 1733.
12. Learned Counsel for the Appellant further submitted that learned Adjudicating Authority erroneously held that the subject matter of the IA No.479/KB/2021 is similar to the prayers in IA No.426/KB/2021 and hence, this issue was settled on 30.4.2021. It is incorrect to say that the Order dated 30.4.2021 upheld by this Hon'ble Tribunal and hence attained finality. This Hon'ble Tribunal never dismissed the C A (AT) (Ins) No. 536 of 2021 rather it was disposed of with a direction to the authority to consider the resolution plan as has been placed before it in terms of the provisions of law on its own merits which the authority has miserably failed to comply with and thus the issue was never decided and consequently it did not attain finality.
13. Per contra Ld. Sr. Counsel for the Respondent No. 2 submitted that the Ld. Adjudicating Authority vide order dated 16.03.2021 condoned the delay of 43 days in submitting the Resolution Plan by the CP Ispat Pvt. Ltd. (R2) and RP was directed that the Resolution Plan be placed before the CoC for consideration on or before 22.03.2021 and the CoC shall deliberate on the Resolution and its feasibility and viability and take a decision on or before 25.03.2021. This order was not challenged by the Appellant. Thus, this order attained finality. It is further submitted that the Appellant has filed an Application I.A. No. 426/KB/2021 seeking the reliefs that the CoC Company Appeal (AT) (Ins) No. 1012 of 2021 Page 8 of 14 and RP have not strictly adhered to the timeline fixed in the order dated 16.03.2021 and they have unilaterally extended the period. Therefore, the CoC may be restrained from considering the Resolution Plan. This Application has been dismissed by the Adjudicating Authority vide order dated 30.04.2020 and the same has affirmed by this Appellate Tribunal vide order dated 02.08.2021 in CA (AT) (Ins) No. 536 of 2021. Thus, the order attained finality, however, the Appellant has filed the Application I.A. (IB) No. 775/KB/2021 seeking the same relief which is barred by principle of res judicata as the earlier orders have attained finality.
14. Ld. Sr. Counsel for the Respondent No. 2 further submitted that pursuant to the approval of the Resolution Plan a sum of Rs. 2,02,27,619/- has already been paid in terms of the Resolution Plan to the RP and as per information the RP has disbursed the amount. In addition, thereto CP Ispat (R-2) has also paid to the RP a sum of Rs. 1 Crores on account of performance guarantee. A sum of Rs. 7,45,608/- has been paid to the DVC requesting reconnection of electricity. On 2.11.2021 R2 has taken possession of Corporate Debtor and opened a new bank account with the permission of RP. Thus, the Resolution Plan has already been partially implemented by the R-2.
15. Ld. Sr. Counsel for the Respondent No. 2 submitted that Hon'ble Supreme Court in the case of Essar Steel India Limited, Committee of Creditors Vs. Satish Kumar Gupta reported in (2020) 8 SCC 531, at paragraph 127 has categorically struck down the term mandatory in section Company Appeal (AT) (Ins) No. 1012 of 2021 Page 9 of 14 12(3) and has specifically directed that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation. It may be open in such exceptional cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Thus, Ld. Adjudicating Authority keeping in view of the main objective of the IBC exercised his discretion rightly even though RP and CoC has not strictly adhered to the timeline fixed in the Code, in the interest of all stakeholders of the Corporate Debtor. Thus, there is no substance in the Appeal and the Appeal may be dismissed.
16. Ld. Counsel appearing on behalf of the Respondent No. 1 adopts the argument advanced by the Ld. Sr. Counsel for the Respondent No. 2.
17. After hearing, learned Counsels for the parties, we have gone through the record.
18. Following issues arose for our consideration: -
(i) Whether the subject matter of present Application IA No.479/KB/2021 is different to the prayer in IA No.426/KB/2021?
(ii) Whether the time limit of 330 days provided in Section 12 of IBC is mandatory?
Issue No. (i) Whether the subject matter of present Application IA No.479/KB/2021 is different to the prayer in IA No.426/KB/2021?
Company Appeal (AT) (Ins) No. 1012 of 2021 Page 10 of 14
19. In the present case, the Adjudicating Authority vide Order dated 16.03.2021 condoned the delay of 43 days in submitting the Resolution Plan by the CP Ispat Pvt. Ltd. (R2) and RP was directed that the Resolution Plan be placed before the COC for consideration on or before 22.03.2021 and the COC shall be deliberate on the Resolution Plan in its feasibility and viability and take a decision on or before 25th March, 2021. This Order was not challenged by the Appellant. It is true that the COC has not strictly adhered to the timeline fixed by the Adjudicating Authority and on 08.04.2021, the COC approved the Resolution Plan of R2. The Appellant has challenged this action and filed an Application I.A. No.426 of 2021 praying an injunction restraining the COC from considering the Resolution Plan.
20. In the earlier Application (I.A. No. 426/KB/2021), it was prayed that the COC be restrained from considering the Resolution Plan because at that time the Resolution Plan was pending before the COC for consideration. However, the Adjudicating Authority vide Order dated 30.04.2021 has dismissed the Application holding that voting has already been taken place on resolution plan and against that order when the Appeal came for hearing before this Appellate Tribunal at that time the resolution plan has already been approved by the CoC and the Application was pending before the Adjudicating Authority for approval of Resolution Plan. Therefore, this Appellate Tribunal declined to interfere in the order passed by the Adjudicating Authority. The subsequent Application I.A. No. 775 of 2021 filed by the Appellant praying that the Application filed by the RP for approval of plan of R-2 be dismissed and liquidation order be passed. When Company Appeal (AT) (Ins) No. 1012 of 2021 Page 11 of 14 this Appellate Tribunal has already overruled all the objections of the Appellant and directed the Adjudicating Authority to consider the Application for approval of Resolution Plan then there is no occasion for the Appellant to file the Application praying that the Application filed by the RP for approval of plan be dismissed and liquidation order be passed. We are in agreement with the finding of Ld. Adjudicating Authority that the subject matter of this Application is similar to the prayer in earlier Application I.A. No. 426/KB/2021 and the issue was settled on 30.04.2021 which is upheld by this Appellate Tribunal on 02.08.2021.
Issue No. (ii) Whether the time limit of 330 days provided in Section 12 of IBC is mandatory?
21. The object of the IBC is the resolution of the insolvency of a Corporate Debtor. Efforts of all stakeholders has to be towards resolution of insolvency. There can be no dispute that the law mandates that CIRP proceedings have to be concluded within 330 days. Hon'ble Supreme Court, after noticing the above requirement of 330 days in Section 12, laid down in (2020) 8 SCC 531 - Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors. that normally as per law, insolvency resolution process has to be completed within 330 days maximum, but in exceptional cases, the period can be extended by Adjudicating Authority/ Appellate Tribunal. In paragraph 127 of the judgment, following has been laid down:
Company Appeal (AT) (Ins) No. 1012 of 2021 Page 12 of 14 "127. Both these judgments in Atma Ram Mittal [Atma Ram Mittal v. Ishwar Singh Punia, (1988) 4 SCC 284] and Sarah Mathew [Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC (Cri) 721] have been followed in Neeraj Kumar Sainy v. State of U.P. [Neeraj Kumar Sainy v. State of U.P., (2017) 14 SCC 136 : 8 SCEC 454] , SCC paras 29 and 32. Given the fact that the time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant's case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date
-- without any exception thereto -- may well be an excessive interference with a litigant's fundamental right to non-
arbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant's fundamental right to carry on business under Article 19(1)(g) of the Constitution of India. This being the case, we would ordinarily have struck down the provision in its entirety. However, that would then throw the baby out with the bath water, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem [Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1 : (2016) 2 SCC (Civ) 478] . Thus, while leaving the provision otherwise intact, we strike down the word "mandatorily" as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for Company Appeal (AT) (Ins) No. 1012 of 2021 Page 13 of 14 the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation."
22. The Hon'ble Supreme Court in the above case has held that it would be in the interest of all stakeholders that the Corporate Debtor will be back on its foot instead of being sent into liquidation. It was further held that time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal.
23. The Hon'ble Supreme Court has held that in exceptional cases, time can be extended. The general rule being that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation and also held that in 2nd proviso to sub-section (3) of Section 12 the word mandatorily as being manifestly arbitrary under Article 14 of Constitutional of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19 (1)(g) of the Constitution. Therefore, strike down the word "mandatorily"
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24. With the aforesaid now it is settled law that the time limit for completion of Insolvency Resolution Process provided in Section 12 of IBC is not mandatory. Therefore, we are unable to be convinced with the argument of learned Counsel for the Appellant that in time limit of 330 days provided in Section 12(3) if the resolution is not completed, the Adjudicating Authority is bound to order for liquidation.
With the aforesaid, we find no ground to interfere in this Appeal. Thus, the Appeal is dismissed. No orders as to costs.
[Justice Ashok Bhushan] Chairperson [Justice Jarat Kumar Jain] Member (Judicial) [Dr. Alok Srivastava] Member (Technical) New Delhi 07th January, 2022.
SC Company Appeal (AT) (Ins) No. 1012 of 2021