By Pooja Punjabi Oberai | Pramod S. Prabhudesai
Chartered Accountants
8. Foseco India Limited vs. Om Boseco Rail Products Limited C.P. (IB) No. 1735/KB/ 2019 Date of order: 20th May, 2020
Section 9 read with Notification dated 24th
March, 2020 – The Notification raises the pecuniary limit of the Tribunal for
initiating CIRP from Rs. 1 lakh to Rs. 1 crore – The said Notification is
prospective in nature and does not apply to applications which have been filed
but are yet to be admitted
FACTS
F Co (the ‘Operational Creditor’) was a
company engaged in the business of manufacturing and supply of chemical and
allied products related to foundry and steel industries. OB Co (the ‘Corporate
Debtor’) regularly purchased foundry and other chemicals from F Co on credit
basis wherein the credit period was 30 days and which was relaxed for a further
15 days beyond the usual credit period mentioned in the invoices.
The corporate debtor failed to make payments
of several invoices raised by the operational creditor from 3rd December, 2018 to 11th July, 2019 for supply of
materials. The total outstanding debt receivable from the corporate debtor was
Rs. 90,00,919.10 (principal amount of Rs. 78,52,663 + interest Rs.
11,48,256.10) on the basis of which a demand notice was issued on 1st
August, 2019. But the corporate debtor did not reply to the said notice. The
operational creditor therefore filed an application for initiating Corporate
Insolvency Resolution Process (CIRP) against the corporate debtor.
On two consecutive events (17th
January, 2020 and 3rd February, 2020), the corporate debtor chose
not to file a reply without assigning any valid reason. The matter was then
posted for hearing on 13th March, 2020. The corporate debtor then
requested for a period of seven days for settlement of the matter with the
operating creditor. The time was granted and the order was reserved. But owing
to the onset of the coronavirus pandemic, there was a delay in pronouncement of
an order.
The corporate debtor, citing the
Notification dated 24th March, 2020 which introduced the proviso
to section 4 of the Insolvency and Bankruptcy Code, 2016, filed a submission
before the NCLT on 13th May, 2020. The proviso enhanced the
minimum amount of default from Rs. 1 lakh to Rs. 1 crore for initiating CIRP
against corporate debtors from small and medium-scale industries. The issue
before the National Company Law Tribunal (NCLT) was whether the Notification
u/s 4 of the Code would apply to applications pending for admission.
HELD
NCLT heard both the parties. It observed
that the corporate debtor had always accepted and agreed to make payment of
outstanding debt without raising any dispute. The Tribunal observed that it was
a well-settled law that a statute is presumed to be prospective unless it is
held to be retrospective either expressly or by necessary implication. Further,
the Notification did not mention that its application would be retrospective.
The amendment was, therefore, held to be prospective.
It was submitted that the invoices did not
mention any terms stipulating the payment of interest. Accordingly, NCLT held
that since there was no objection raised by the corporate debtor, a sum for
supply of materials less any interest was due. The claim of the operational
creditor was found due and sustainable in law. The Tribunal passed an order
admitting the application and laid down necessary directions, including
declaration of moratorium and appointment of a resolution professional.
9. DLF Ltd. vs. Satya Bhushan Kaura [2020] 113 taxmann.com 363 (NCLAT) Date of order: 13th January, 2020
It was found that company in their
correspondence with legal heirs had accepted to issue shares to them as per
their entitlement on production of court orders, affidavit and indemnity bond
and on payment of Rs. 1.20 lakhs being consideration amount of 60,000 shares –
Where Letter of Administration for succession was submitted by legal heirs,
insisting on affidavit and indemnity bond again and again was harassing poor
investors and therefore, penalty was imposed on company and they were directed
to register transfer of 60,000 shares to legal heirs which were due to them on
rights basis by appellant company
FACTS
The Late DNK, a deceased shareholder of ‘D
Ltd’, held 150 equity shares of Rs. 10 each of the company. The said 150 equity
shares of Rs. 10 each were subsequently converted into 6,000 equity shares of
Rs. 2 each after giving effect to split and bonus issues. DNK had expired on 27th
August, 1987.
On 29th December, 2005, D Ltd
came out with a Rights issue which remained open till 18th January,
2006. The offer was available to all the existing shareholders as on 18th
November, 2005.
The legal heirs of DNK did not approach D
Ltd for transmission / transfer of the original 150 shares (being 6,000 shares
of Rs. 2 each) held by DNK in their favour; neither did they claim to be his
legal heirs nor did they inform D Ltd about his demise for about 20 years. On
25th May, 2007, for the first time the legal heirs informed that DNK
had expired on 27th August, 1987. Thereafter, by their letter dated
1st June, 2007, the legal heirs requested for transfer of 66,000
equity shares. In response to the said letter, D Ltd requested the legal heirs
to submit the requisite documents, including the succession certificate and
demand draft of Rs. 1.20 lakhs on or before 26th September, 2007 in
order to be eligible for allotment of shares on Rights basis.
The legal heirs after the cut-off date (26th
September, 2007) for the first time vide their letter dated 16th
October, 2007 applied for Letter of Administration in respect of the will of
DNK and after the lapse of five years, vide their letter dated 1st
June, 2012, enclosed the Letter of Administration granted by the District Court
(North) in respect of the Will of DNK.
On appeal, the NCLT vide its order
directed D Ltd to register the transfer and the legal heirs were directed to make payment for 60,000 shares at Rs. 2 per share to the promoters.
The legal heirs were also directed that on transfer of 60,000 shares in their name, they will execute the
transfer deed to the extent of entitlement of the legal heirs in accordance
with the terms of the Letter of Administration issued by the District judge.
The matter went in appeal before the
Appellate Tribunal.
HELD
D Ltd in its
correspondence with the legal heirs has already accepted to issue shares to the
legal heirs as per their entitlement on production of court orders, affidavit
and indemnity bond and on payment of Rs. 1.20 lakhs being the consideration
amount of 60,000 shares. During the course of arguments, D Ltd was asked why,
when the Letter of Administration had been submitted by the legal heirs, did it
insist on affidavit and indemnity bond? When the Letter of Administration has
been issued, it means that the legal heirs are discharged from their liability.
On this, D Ltd offered its apologies.
It is to be
noted that D Ltd is a listed company in real estate and is well aware of legal
formalities. By insisting on affidavit and indemnity bond again and again in
spite of the Letter of Administration, it was clear that D Ltd is harassing the
poor investors. The act of D Ltd deserves some penal action. It is also noted
that the legal heirs are entitled to 60,000 shares as per entitlement on
payment of consideration.
In view of the
foregoing discussions and observations, the following directions were issued:
The legal
heirs will make payment of consideration to D Ltd within 15 days from the date
of receipt of the order and they will be entitled to the benefit of the
membership from the date of payment.
D Ltd will
transfer / arrange for transfer of 60,000 shares to the legal heirs within 30
days from the date of receipt of payment.
A sum of Rs.
5 lakhs as costs is imposed on D Ltd to be deposited with the National Defence
Fund within 15 days from the date of the order. Proof of depositing the same
will be submitted to the Registrar of the Appellate Tribunal within a week
thereafter.
