Gujarat High Court
Dilip Sinh Madansinh Sisodiya vs Adjudicating Officer on 26 June, 2019
Author: A.Y. Kogje
Bench: A.Y. Kogje
C/SCA/10629/2019 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10629 of 2019
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 10629 of 2019
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DILIP SINH MADANSINH SISODIYA
Versus
ADJUDICATING OFFICER
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Appearance:
MR ZUBIN F BHARDA(159) for the Petitioner(s) No. 1
DS AFF.NOT FILED (N)(11) for the Respondent(s) No. 1
MR NAVIN PAHWA, SENIOR ADVOCATE for THAKKAR AND PAHWA
ADVOCATES(1357) for the Respondent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE A.Y. KOGJE
Date : 26/06/2019
ORAL ORDER
1. Civil Application No.1 of 2019 is filed for vacating of interim relief granted by this Court vide order dated 20.06.2019 in the main matter. 1.1 Considering the nature of urgency urged by learned Senior Advocate for the applicant in Civil Application and the nature of disputed involved and the direction that the Court proposes to give, it would be appropriate to take up the Civil Application as well as main matter for final disposal.
2. The petition is filed seeking direction to NCLT Page 1 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER to hear application of the petitioner on urgent basis or atleast before meeting of COC which is scheduled on 21.06.2019. The case in short of the petitioner is that the petitioner who is Time Sharing Member of the corporate debtor was initially treated as a class and financial creditor with total claim of Rs.82,28,68,000/- with voting share at 5.90% by the IPR in its first report to COC dated 29.05.2019. Thereafter, Time Sharing Members as a class were not considered as financial creditors but were categorized as corporate creditors, thereby losing their right to have voting share. This was done without bringing it to the notice of the petitioner and /or any Time Sharing Member.
3. With this background, this Court passed order on 20.06.2019 staying meeting of COC scheduled on 21.06.2019.
4. Learned Advocate for the petitioner submitted that the petitioner had moved an application for intervening in an application filed by IRP in connection with fixed deposit creditors who were also considered as financial creditors and were given voting share of 1.53% in the report of the IRP. This application is still pending and after which another application came to be filed by the petitioner under Sections 420(1) and 424(1) of the Companies Act read with Rule 11 of NCLT Rules, Page 2 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER 2016, which is also adjourned at the request of the Lawyer of the petitioner on 09.08.2019 and thereafter, on 17.06.2019, application under Section 60 of the IBC was filed, which, learned Advocate for the petitioner submitted that, was mentioned for urgent hearing, but was not granted and in that circumstances, the present petition is filed.
5. The respondent has opposed the petition mainly on the ground of maintainability of the petition as the jurisdiction to decide such application lies only with NCLT and NCALT. Learned Advocate relied upon decision of the Apex Court in the case of Arcelormittal India Private Limited Vs. Satish Kumar Gupta & Ors., reported in 2018 SCC Online, SC, 1733. It is submitted that the Court should not interfere in the ongoing process of resolution as the judgment of the Apex Court has held that the resolution process has to follow strict time line specified by the Apex Court and therefore, any interference by this Court would obviously cause delay in following this time line. During the course of submissions, learned Advocate for the respondent produced for perusal of this Court minutes of the first meeting of COC held on 29.05.2019.
5.1 It is submitted that the petitioner who is a Time Sharing Member cannot be equated with financial Page 3 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER creditors as he would not fall in the definition and therefore, the petition itself requires to be rejected on merits.
6. Having considered the rival submissions and having perused documents on record, including minutes of the meeting dated 29.05.2019 produced today, it appears that the matter is still at large before the NCLT. The IRP report to COC considers the petitioner as Time Sharing Member as a separate class and classified as financial creditors for amount claimed to the tune of Rs.82,28,68,000/- and provisionally admitted amount to be Rs.82,28,68,000/- with voting share of 5.90% as per Annexure-1 to the first report to COC. Relevant portion of para-2 of the minutes of meeting of COC reads as under:-
"All the members of committee of creditors gone through the Report submitted by Interim Resolution professional.
* Interim Resolution Professional explained to the members of committee of creditors that all the claims of these financial creditors are admitted purely on provisional basis and on the basis of one legal opinion obtained in each of four cases from advocate (Mr.Pravin Godiawala). Further, IRP informed that he still has apprehension in these cases whether they Page 4 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER should be included in CoC and voting rights should be given to them. For doing due diligence and taking second legal opinion, the time was not enough until now due to strict timeline to conduct 1st COC as per IBC regulations and this proper verification process needs some more time from second advocate and /or due diligence from IRP himself. Till such time they shall not be part of COC nor any voting right shall be given to these creditors.
* The Interim Resolution professional
offered the file of claims of these
financial creditors and the legal opinions obtained from first advocate (Mr.Pravin Godiawala) for perusal of members of committee of creditors. COC members discussed upon each such creditor and some of them differed from each other and also opinion given by first advocate."
7. When the IRP has considered petitioner as financial creditor, it was obligatory for the IRP to invite representation of the Time Sharing Members to the first meeting of COC, which from the minutes does not appear to have been done and with one opinion of the Advocate to consider Time Sharing Members as financial creditors, nothing is coming on record as to what necessitated the IRP to call for second opinion of the Advocate. The Court at this stage would not like to go elaborately into the issue when the application of the Page 5 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER petitioner under Section 60 is filed. The prayers in such application inter alia are as under:-
"B. Give opportunity of hearing to the applicant, in the interest of justice and fairness;
C. Declare that the 'Interim Resolution Professional /Resolution Professional, Mr.Ramchandar D.Choudhary is estopped from removing the applicant and other similarly placed creditors from the class of financial creditors and /or to change their class to that of operational creditor by his own volition, after his own act of having already classified them as the financial creditor of the corporate debtor;
D. Declare that the 'Interim Resolution Professional /Resolution Professional', Mr.Ramchandar D.Choudhary is not empowered to, suo moto and without concurrence of the committee of creditors and without information to and consent from the applicant and /or other similarly placed creditors, remove applicant's or other similarly placed creditors' names from the committee of creditors;
E. xxxxx
F. Declare that the 'Interim Resolution
Professional /Resolution Professional',
Mr.Ramchandar D.Choudhary is not empowered Page 6 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER to ask the applicant and other similarly placed creditors to re-file their claim as operational creditors;"
8. The judgment of the Apex Court, to which attention is drawn by the respondent to contend non- maintainability of the petition on the ground that powers lie with NCLT or NCALT, para-86 of that judgment reads as under:-
"86. If, on the other hand, a resolution plan has been approved by the Committee of Creditors, and has passed muster before the Adjudicating Authority, this determination can be challenged before the Appellate Authority under Section 61, and may further be challenged before the Supreme Court under Section 62, if there is a question of law arising out of such order, within the time specified in Section 62. Section 64 also makes it clear that the timelines that are to be adhered to by the NCLT and NCALT are of great importance, and that reasons must be recorded by either the NCLT or NCALT if the matter is not disposed of within the time limit specified. Section 60(5), when it speaks of the NCLT having jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person, does not invest the NCLT with the jurisdiction to interfere at an applicant's behest at a stage before the quasi- judicial determination made by the Adjudicating Authority. The non-obstante clause in Section Page 7 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER 60(5) is designed for a different purpose; to ensure that the NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings."
9. What is held by the Apex Court is the jurisdiction to decide application under Section 60 of the Code, but does not bar jurisdiction under Article 226, where no decision is taken on an application under Section 60 by the NCLT. In the instant case, on one hand, application is filed and pending whereas on the other hand, if the COC is permitted to proceed further, it may amount to frustrating the legitimate right of a creditor, more so in the instant case where the IRP has itself in its report has treated Time Sharing Members as financial creditors and gave voting share. Thereafter, without giving opportunity of hearing to the petitioner, cannot suo motu treat them as corporate creditors to take away whatever right is available to them in their capacity as financial creditors. This issue which precisely is to be decided by the NCLT in the application filed by the petitioner. This Court is therefore of the opinion that the COC meeting cannot be permitted to be proceeded unless petitioner is given a fair chance to get his grievance adjudicated by the NCLT. Page 8 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019 C/SCA/10629/2019 ORDER
10. With a view to meet with time line as prescribed by the Apex Court and at the same time, balance rights of the petitioner, it is appropriate to direct the petitioner to complete formalities in connection with application under Section 60 of the Code being CP No.(IB) 127/NCLT/AHM/2017 on or before 29.06.2019. The NCLT thereafter to consider and finally decide the application of the petitioner under Section 60 of the Code on or before 09.07.2019.
11. With the aforesaid directions, the petition stands disposed of.
12. In view of the order passed in the main matter, Civil application does nor survive. Disposed of accordingly.
Direct service permitted forthwith.
Sd/-
(A.Y. KOGJE, J) SHITOLE Page 9 of 9 Downloaded on : Fri Jun 28 01:09:52 IST 2019