Asha Chopra Vs Hind Motors India Limited

Harnam Singh Thakur, Member (Judicial); Umesh Kumar Shukla, Member (Technical)

IA NO. 336/2021

1. The present application is filed by Smt. Asha Chopra (hereinafter referred to as “Applicant”),  under section  60  (5)  read  with  Section  12A  of  the  Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as “Code”) with the following prayers:

(a) to direct the Respondent-Resolution Professional/ Liquidator of the Corporate Debtor/ Company in liquidation, to call for the meeting of the Committee of the Creditors, in terms of Regulation 30-A of the IBBI (Insolvency Resolution Process for Corporate persons) Regulations, 2016 and;

(b) to consider the application dated 24.05.2021, submitted by the applicant u/s 12A of the Code.

2. It is averred in the application that:

i. The Applicant is one amongst 274 depositors of the Corporate Debtor (M/s Hind Motors India Limited), who have collectively deposited the total amount outstanding of Rs.808.08 lacs (Rupees Eight Crores Eight Lacs and Eight Thousand only) with the Corporate Debtor as on 20.2.2017. The Applicant had deposited an amount of Rs.5,11,800 (Rupees Five Lakh Eleven Thousand Eight Hundred only) on various dates with the corporate debtor. A copy of the deposit receipts is attached with the application as Annexure A-1.

ii. In the year 2017, the Corporate Debtor/ Corporate applicant, filed an application U/s 10 of the Code, seeking initiation of the Corporate Insolvency Resolution process against the Company. The said application was admitted vide order dated 09.03.2017, whereby the management was suspended and an Interim Resolution Professional, was appointed. The copy of said order is attached with Application as Annexure A-3.

iii. In the last meeting of the Committee of Creditors (hereinafter referred to as “CoC”) held on 04.09.2017, it was resolved with 78.49% vote that the Company should be recommended for liquidation to the Adjudicating Authority. The resolution plan presented by Shri Naresh Aggarwal, representing Shri Ashish Mohan Gupta, the erstwhile Director of the Company, was rejected and consequently, vide order dated 12.09.2017, this Tribunal ordered liquidation of the Corporate Applicant. The copy of the said order is attached with Application as Annexure A-4.

iv. The former Director, Shri Ashish Mohan Gupta approached the Hon'ble NCLAT, with a Company Appeal No.239 of 2017, challenging the liquidation order, which was dismissed vide order dated 26.04.2018. The copy of the said order is attached with the Application as Annexure A-5.

v. The Respondent/ Liquidator floated e-auction, proposed to be held on 16.08.2019. The aforesaid former Director filed an application, seeking stay of the said sale on the ground that the Scheme u/s 230 of the Act, 2013, submitted by the aforesaid former Director was required to be considered, rather than proceeding for sale, which was rejected by this Tribunal vide order dated 23.08.2019. Against the said order, Company appeal No.875 of 2019, was filed, which was dismissed by the Hon'ble Appellate Tribunal vide order dated 13.04.2021 (Annexure A-6) in view of the judgment dated 15.03.2021, passed by the Hon'ble Supreme Court in the case of Arun Kumar Jagatramka vs. Jindal Steel & Power Limited, Writ Petition (Civil) No.269 of 2020 reported as 2021- SCC-Online-SC220, wherein it was held that a former Director, would not be eligible to float a Settlement Scheme u/s 230 of the Companies Act, 2013, keeping in view the ineligibility attracted u/s 29A of the Code.

vi. On 11.11.2019, Union Bank of India settled the loan account under One Time Settlement with all the three Companies, i.e., M/s Hind Motors Limited, M/s Hind Motors India Limited and M/s Hind Motors Mohali Private Limited for Rs.19.55 crore. The payment of the said amount was to be made within 330 days of the sanction, however after the deposit of Rs.1 crore upfront money, further amount was not deposited, and the OTS was cancelled on 15.12.2020. The copy of the settlement letter and Cancellation letter is attached with the Application as Annexure A-7 and Annexure A-8 respectively.

vii. Further the former Director informed the Applicant that a request letter for extending the time period for making the balance settlement amount was submitted on 23.05.2021 (Annexure A-9), in view of the Judgment of Hon'ble High Court in the case of Annu Bhalla and others Versus District Magistrate, Pathankot, 2021-AIR-Punjab-1 and has prayed that the balance settlement amount shall be paid within 6 months.

viii. As regards the second unsecured Creditor, i.e., India SME Asset Reconstruction Company Limited is concerned, One Time Settlement took place for Rs.1 crore on 04.11.2019 (Annexure A-10), and after making payment of the upfront amount of Rs.5 lakhs, no further amount was paid, which led to the expiry of OTS with the said Creditor vide letter dated 12.11.2020 (Annexure A-11). The former Director informed that a similar request for extension of OTS was submitted to the said Creditor vide letter dated 23.05.2021 (Annexure A-12), offering to pay the remaining amount by granting extension by another 6 months. Similarly, the depositors have also been approached by the former Director, offering to settle their accounts as well.

ix. It is further submitted that if the Company goes in liquidation, the Creditors will not be benefitted, as compared to the proposal of settlement, floated by the former Director as shown in the following Table:

x.  The applicant has placed reliance upon V. Navaneetha Krishnan Versus Central Bank of India, Coimbatore and another Company Appeal (AT) Insolvency No.288 and 289 of 2018, wherein the Hon'ble NCLAT held that in view of Section 12A, even during liquidation period, if any person not barred U/s 29A of the Code, satisfies the demand of the Committee of Creditors, then such person may move to the Adjudicating Authority by giving an offer which may be considered by the COC.

xi. Since the applicant is not barred/ disqualified under Section 29A, consequently, on 24.05.2021, an application U/s 12A, was submitted to the Respondent/ Liquidator attached to the Corporate Debtor requesting for calling of meeting of CoC u/s 12A of the Code, to examine whether the proposal for settlement floated by the former Director, passes through the Muster of 90% vote, as required under the provisions. The corrected Form-FA dated 10.06.2021 submitted for withdrawal of Section 7 Application has also been annexed at Annexure-A-17 with the application.

xii. It is alleged that as per Section 12A of the Code, read with regulation 30A of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, an application filled under Section 12A has to be considered within 7 days by the CoC, but in the present case, the respondent has not even responded to the application of the applicant. Under the Code, the respondent is responsible for convening the CoC. The applicant has placed further reliance upon Kridhan Infrastructure Private Limited V/s Venkatesan Sankanarayanan decided on 09.10.2020, wherein it was held that “Liquidation of the Corporate Debtor should be a matter of last resort. The IBC recognizes a wider public interest in resolving corporate insolvencies and its object is not the mere recovery of monies due and outstanding.”

3. The Respondent No. 1 submitted its reply vide Diary No. 00764/1 dated 13.12.2021, stating that: -

i. Section 12A is not applicable during liquidation and the judgment passed by the Hon'ble NCLAT in V. Krishnan vs. Central Bank of India, (supra), relied upon by the applicant, is not applicable in the present case. During liquidation, the relevant provision is Section 230 of the Act read with Regulation 2B of the Liquidation Process Regulations and the present application having been filed under Section 12A of the Code during liquidation is clearly misconceived.

ii. For filing an application under Section 12A of the Code, the existence of CoC is a must, but in the present case, the CoC ceased to exist after the passing of the liquidation order by this Tribunal on 12.09.2017.

iii. Contrary to what has been stated by the applicant that there are total of 274 claimants’/ FD holders of the Corporate Debtor, the liquidator of the Corporate Debtor has received claims of only 38 claimant’s/ FD holders and all such claims have been duly accepted and as per un-amended Regulation 16 of the Liquidation Process Regulations, the claims of the said persons only have to be honoured by the answering respondent. Furthermore, Respondent No. 2 is required to pay the amounts to the FD holders as had been undertaken by him before the Hon'ble Punjab & Haryana High Court, Chandigarh in Ashish Gupta Vs. State of UT, Chandigarh, CRM-M-31034 of 2017.

iv. The present application is, in fact, a proxy litigation by the ex-director of the Corporate Debtor namely, Sh. Ashish Mohan Gupta. (Respondent No.2), who has been held to be ineligible under Section 29A of the Code to file an application under Section 230 of the Companies Act, 2013 and Form FA submitted by him cannot be taken into consideration, wherein it is stated in para 1 that the initial application was filed by the Corporate Debtor itself under Section 10 of the IBC for initiation of CIRP and in para 2, it is mentioned that the applicant despite being not competent to withdraw the aforesaid application under Section 10 of IBC, withdrew the same. Further, as para 3 of the said form, the guarantee to be submitted as per Regulation 30A of CIRP Regulations (though not applicable in the present case) is being offered by Mr. Ashish M. Gupta, Ex- Director of the Corporate Debtor

v. The application under Section 12A can be filed by the original applicant under Section 7, 9 or 10 of the Code for initiation of CIRP in respect of the Corporate Debtor, with the pre-condition that the said person is not barred under Section 29A of IBC and admittedly, the present applicant was not the original applicant of the application filed under Section 10 of IBC as the said application was filed by the Corporate Debtor itself. Further, the present application having been filed under the guarantee of Sh. Ashish M. Gupta Ex-Director of the Corporate Debtor (Respondent No.2), who is admittedly barred under Section 29A of IBC, is not maintainable and as such liable to be dismissed.

4. The reply submitted by respondent no.2 states that as per the V. Navaneetha Krishnan Vs Central Bank of India, Coimbatore(supra), Section 12A application can be filed even at the stage of liquidation by a person, who is not ineligible in terms of Section 29A of the Code. The Applicant (Asha Chopra) being one of the deposit holders of the Corporate Debtor, highlighted that in terms of the proposal floated by the former Director (Answering Respondent), the Secured Creditors would get much more i.e. Rs.19.55 crore pursuant to the earlier OTS against the liquidation share of Rs.13.25 crore. Similarly, Unsecured Creditor/s i.e. India SME ARC, had an outstanding of Rs.203 Iakhs, which was settled for Rs.1 crore, which is not likely to get any amount in the liquidation share. Similarly, the depositor/s, which has outstanding of Rs.8.08 crore, under the settlement, is likely to get the said amount in full, whereas in the liquidation, no amount would be available to the depositor/s. Thus collectively the creditors, Secured & Unsecured would get Rs.28.63 crores under 12A as compared to Rs.13.25 crores under Liquidation.

5. The Respondent No.3/Union bank submitted its reply vide Diary No. 00764/7 dated 23.03.2023 in which it, reiterating the reply of Respondent No.1, submitted that the present application is liable to be dismissed on the ground that the requirement of Section 12A of the IBC is that members of the CoC having 90% voting share must vote in favour of the withdrawal of proceedings under IBC against the Corporate Debtor. The Respondent bank was/ is having 80.43% voting share in the CoC of the Corporate Debtor and thus the meeting, if any, of the stakeholders of the Corporate Debtor, even if ordered, would be an exercise in futility, as the Respondent bank having 80.43% voting share is not inclined to enter into any kind of settlement with Respondent No.2, as he is ineligible under Section 29A of the IBC to enter into any such settlement.

6. The Applicant filed its rejoinder to the reply of the Respondent No.1 vide Diary No. 00764/2 dated 04.01.2022 reiterating the facts stated in the application.

7. The relevant provision for considering this application i.e. Section 12A of the Code read with Regulation 30A of the IBBI (Insolvency and Bankruptcy Resolution Process for Corporate Persons) Regulations, 2016 is extracted here as under: -

“Section 12A: Withdrawal of application admitted under Section 7, 9 or 10.

12A. The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be prescribed.]

30A. Withdrawal of application.

(1) An application for withdrawal under section 12A may be made to the Adjudicating Authority:

(a) before the constitution of the committee, by the applicant through the interim resolution professional;

(b) after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be:

Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

(2) The application under sub-regulation (1) shall be made in Form FA of the Schedule accompanied by a bank guarantee-

(a) towards estimated expenses incurred on or by the interim resolution professional for purposes of regulation 33, till the date of filing of the application under clause (a) of sub-regulation (1); or

(b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and (d) of regulation 31, till the date of filing of the application under clause (b) of sub-regulation (1).

(3) Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of its receipt.

(4) Where an application for withdrawal is under clause (b) of sub-regulation (1), the committee shall consider the application, within seven days of its receipt.

(5) Where the application referred to in sub-regulation (4) is approved by the committee with ninety percent voting share, the resolution professional shall submit such application along with the approval of the committee, to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

(6) The Adjudicating Authority may, by order, approve the application submitted under sub-regulation (3) or (5).

(7) Where the application is approved under sub-regulation (6), the applicant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code.”

8. We have gone through the arguments put forward by the Ld. Counsels for the parties along with their submissions and have perused the records carefully.

9. It may be noted that the application in hand is not maintainable to consider the same under Section 12A of the code. Here reliance can be placed upon, M/s Shri Veerganapathi Steels(P) Limited (I.A.(IBC)/193(CHE)/2023 in CP/229/(IB)/2018), wherein it has been held by the Hon’ble NCLAT as under:-

“11. Section 12A of the IBC, 2016 finds place under Chapter - II of IBC, 2016 which deals with "Corporate Insolvency Resolution Process" of the Corporate Debtor. The Liquidation process of the Corporate Debtor is contained under Chapter - III of the IBC, 2016. It is to be noted here that IBC, 2016 treats CIRP and Liquidation as two different parts. All the provisions under Chapter -

II of IBC, 2016 which deals with CIRP cannot be made applicable under Chapter III of IBC, 2016 which deals with Liquidation of the Corporate Debtor. For instance, the moratorium under Section 14 of IBC, 2016 is lifted when an order of Liquidation is passed and a fresh moratorium under Section 33(5) is ordered.

Further, it is significant to note here that the Regulator viz. IBBI has inserted Regulation 30A under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 with effect from 04.07.2018, which deals with withdrawal of Application under Section 12A of IBC, 2016.

The said Regulation 30A deals only with the withdrawal of Application during the CIRP and not during Liquidation.

Further, there is no such amendment made in the Liquidation Process Regulation by the Regulator viz. IBBI. In the absence of any express provisions either under the provisions of IBC, 2016 for withdrawal of Applications during Liquidation process or under the Regulations framed by IBBI, an Application for withdrawal cannot be filed during the Liquidation process.

10. Further the applicant in the present interlocutory application seeks directions that the Liquidator may be directed to call for the meeting of the CoC to consider the application dated 24.05.2021 submitted by the applicant u/s 12A of the Code. In the present case, the CoC ceased to exist after the passing of the liquidation order by this Tribunal on 12.09.2017. Further for consideration and approval of an application u/s 12A of the Code, an approval of members having at least 90% of the voting share of the CoC is required, for the filing such application, however the Respondent no. 3 Union Bank of India stated in its reply to the present application that it holds the majority voting share i.e. 80.43% and it does not approve the filing of the present application and is not inclined to enter into any kind of settlement with Respondent No.2, as he is ineligible under Section 29A of the Code to enter into any such settlement.

11. In view of the abovementioned reasons and the authority (supra), the present application filed by the applicant is misconceived and not maintainable, hence, stands dismissed.

IA No.375/2023, 376/2023, 1875/2022 & 1876/2022

12. All these four applications are taken together for discussion being interrelated and interconnected having common facts and law points involved. These applications have been filed seeking relief under section 60 (5) of the Code with common prayer that Liquidator be directed to comply with the provisions of the IBBI (Liquidation process) Regulations, 2016 more particularly regulation 31 to 35 and to set aside sale notice dated 02.12.2022 issued by Respondent No.1 (Liquidator) pertaining to the properties of Company in liquidation and being illegal, contemptuous and in violation of the Notification dated 16.09.2022 as well as the orders dated, 25.11.2021, 16.12.2021, 06.01.2022 passed by this Tribunal.

13. The brief facts, as stated in these applications, are that the IBBI issued the Notification dated 16.09.2022, notifying IBBI (Liquidation Process) (Second Amendment) Regulations, 2022 to amend the IBBI (Liquidation Process) Regulations, 2016. In view of the Notification dated 16.09.2022, it is incumbent upon the Liquidator to follow the amended regulations. It is further stated that the Liquidator has also not complied with the Regulation 31 to 35 of the amended regulations.

14. It is further submitted that since the application bearing no. IA 336/2021, is still pending, there should not have been any ground for the Respondent No 1 to seek the liquidation of the Corporate Debtor/ Respondent No 1, as the Applicant has prayed for calling of meeting of the CoC, in terms of Regulation 30A of the IBBI (Insolvency Resolution Process for Corporate persons) Regulations, 2016, to consider the application for withdrawal dated 24.05.2021, submitted by the applicant u/s 12A of the Code, 2016. The applicant has placed reliance upon the judgment of the Hon'ble National Company Law Appellate Tribunal in V. Navaneetha Krishnan Versus Central Bank of India, Coimbatore and another (supra).

15. It is further submitted in the applications that since the said sale being completely illegal and was stayed and then closed as observed vide orders dated 25.11.2021, 16.12.2021 & 06.01.2022 of this Tribunal, the Respondent No 1 has again issued the sale notice dated 02.12.2022, thereby fixing the assets for sale under the liquidation process, with the date of sale as 26.12.2022.

16. The Respondent No.1 filed its reply vide Diary No. 00347/01 and 00348/01 dated 02.03.23 and vide Diary No. 03271/01 and 03268/01 dated 03.01.2023 respectively, wherein it has been submitted that the IBBI had issued a Circular, bearing No.IBBI/LIQ/024/2019 dated 26th August, 2019 issued by Insolvency & Bankruptcy Board of India, whereby IBBI has reiterated that the provisions of the Amendment Regulations are applicable only to liquidation processes, which commenced on or after 25th July, 2019. Since the liquidation of Hind Motors India Limited commenced on 12.09.2017, the provisions of the Amended Regulations, with respect to constitution of SCC are not applicable to the liquidation process of Hind Motors India Limited.

17. It is further submitted that the sale was ordered to be kept at abeyance, however, the order dated 25.11.2021 was being extended again and again, the respondent had no option but to withdraw the sale notice dated 30.11.2021, as the bidders, who had deposited the amount of earnest money for participating in the auction were pressurizing the respondent either to conduct the sale or to refund their respective amounts. After the sale notice dated 30.11.2021 was withdrawn by the respondent, the stay orders automatically got vacated. It is further submitted that the change of circumstances at this stage are that pleadings in IA No.336 of 2021 are complete and there is no embargo, as to why the sale cannot be conducted by the answering respondent.

18. The applicants have filed short synopsis vide Diary No. 00347/4 and 00348/3 dated 25.04.2023.

19. We have gone through the arguments along with their submissions filed by all the parties and have perused the records carefully.

20. The liquidation of Hind Motors India Limited commenced on 12.09.2017 and the provisions of the Amended Regulations, with respect to constitution of SCC are not applicable to the present case, as they are applicable only to liquidation processes, which commenced on or after 25th July, 2019. Further this tribunal in Allahabad Bank Vs. Supreme Tex Mart Limited, CP (IB) No.67/CHD/Pb/2017, has also held that the Liquidation Amendment Regulations do not have retrospective effect and as such, the present application deserves dismissal.

21. The order dated 23.12.2022, passed in the IA 1875/2022 & 1876/2022, is reproduced below:

“These applications have been filed under Rule 60(5) of the Code seeking relief to stay and set aside the sale notice dated 02.12.2022 issued by Respondent No. 1 in relation to the sale of the properties of company under liquidation on 28.12.2022 being illegal and in violation of the orders dated 25.11.2021 and 06.01.2022. Both of these applications are opposed by Mr. Kamal Satija, learned counsel for the liquidator on the ground that these applications are not maintainable and earlier orders were passed in IA No. 594/2021, which have also been rendered infructuous on the ground that notice dated 30.10.2020 was withdrawn by the liquidator. It is further stated by the learned counsel for the liquidator that the said notice was to be withdrawn by the bidder on which IA Nos. 336/2021 and 136/20202 are fixed for hearing.

Keeping in view the facts and circumstances, let the same be conducted on 28.12.2022 as per schedule however, the same won't be confirmed till the next date of hearing i.e. 09.01.2023. In the meantime, liquidator is directed to file reply to both of these applications at least one week before the next date of hearing with a copy in advance to the counsel opposite. List on 09.01.2023.”

22. Later on IA no. 136/2022 was allowed by this Tribunal and disposed of vide Order dated 01.02.2023, having been filed for impleading the applicant Bank-Union Bank of India as respondent no. 3 in IA No. 336/2021.

23. It is pertinent to mention that vide order dated 25.11.2021 in IA no. 594/2021, this Tribunal had directed that the sale notice dated 30.10.2021 and sale fixed on 26.11.2021 be kept in abeyance. However, vide order dated 06.01.2022, the following observations were made:

“It is submitted by learned counsel for liquidator that the auction notice dated 30.10.2021 has been withdrawn by the liquidator. Therefore, IA No. 594/2021 has been rendered infructuous and disposed of accordingly.”

24. Upon perusal of the order dated 23.12.2022, it is noted that this Tribunal had allowed to conduct the sale, however, it had ordered the same would not be confirmed till the next date of hearing. Thereafter, the IA 594/2021 had been disposed of as it was rendered infructuous, due to the Sale Notice dated 30.10.2020 being withdrawn by the liquidator. It is pertinent to note that vide order of even date, IA 336/2021 has been dismissed. Therefore, the plea taken that there should not have been any ground to seek the liquidation of the corporate debtor during the pendency of IA 336/2021 is not sustainable.

25. In view of the abovementioned reasons, all these IA Nos. 375/2023, 376/2023, 1875/2022 & 1876/2022 filed by the respective applicants stand dismissed, however without any order as to costs.