By Pooja J. Punjabi
Chartered Accountant
7.
Transmission Corporation of Andhra Pradesh Ltd. vs. Equipment Conductors
& Cables Ltd.[2018] 98 taxmann.com 375 (SC) Date of Order: 23rd October, 2018
Section 9 of Insolvency and Bankruptcy
Code, 2016 – Existence of an undisputed debt is essential to initiate the
Corporate Insolvency Resolution Process – IBC is not intended to substitute
recovery forum – IBC proceedings cannot be initiated if there exists a dispute
with respect to the claim
FACTS
A Co is in the activities relating to
transmission of electricity. It had awarded certain contracts to E Co for
supply of goods and services. Some disputes arose and E Co initiated
arbitration proceedings. 82 claims were filed by E Co and Arbitral Council held
that 57 of those claims were barred by law of limitation and the rest were
awarded in favour of E Co.
E Co challenged
the said part of the award of the Arbitral Council, but was not successful. On
the basis of certain observations made by the High Court of Punjab and Haryana
in its appeal decision dated 29th January, 2016, E Co further
attempted to recover the amount by filing execution petition before the Civil
Court, Hyderabad. However, that attempt of E Co was also unsuccessful inasmuch
as the High Court of Judicature at Hyderabad categorically held that since that
particular amount was not payable under the award, execution was not
maintainable.
After failing
to recover the amount in the aforesaid manner, E Co issued notice to A Co u/s.
8 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) treating itself as the
operational creditor and A Co as the corporate debtor. Although A Co refuted
this claim, E Co proceeded to file an application u/s. 9 of the IBC which was
dismissed by the NCLT. An appeal was filed before the NCLAT and it passed an
interim order directing the parties to settle the “claim”. A Co filed an appeal
before the Supreme Court against the said order of NCLAT.
HELD
The Supreme Court examined the facts in case
and observed that the NCLAT perceived that A Co owes money to E Co and for this
reason a chance was given to A Co to settle the claim of E Co, failing which
order would be passed for initiation of Corporate Insolvency Resolution Process
(“CIRP”).
Supreme Court reading the provisions of
section 9 of the IBC observed that existence of an undisputed debt is sine qua
non of initiating CIRP. It also follows that the adjudicating authority shall
satisfy itself that there is a debt payable and there is operational debt and
the corporate debtor has not repaid the same.
The Court relying on its own judgment in the
case of Mobilox Innovations Private Limited vs. Kirusa Software Private
Limited [2018] 1 SCC 353 observed that IBC was not intended to be
substitute to a recovery forum. Whenever there was existence of real dispute,
the IBC provisions could not be invoked.
The Appeal was allowed by the Supreme Court
and the order of NCLAT was set aside. After examination of facts, Supreme Court
held that order of NCLT was justified and that no purpose would be served by
remanding the matter back to NCLAT. It accordingly quashed appeal filed by E Co
as also the miscellaneous applications filed by it before the NCLAT.
8. Radius Infratel Pvt. Ltd. vs. Union Bank of
India Company Appeal
(AT) (Insolvency) No. 535 of 2018 Date of Order: 13th
November, 2018
Section 7 of the insolvency and
bankruptcy code, 2016 – appeal filed by corporate debtor is not maintainable
after order of moratorium is passed and interim resolution professional has
been appointed facts
UBI filed an application for initiating corporate
insolvency resolution process (“CIRP”) u/s. 7 of the Insolvency and Bankruptcy
Code, 2016 (“IBC”) against R Co with National Company Law Tribunal (“NCLT”).
NCLT admitted the said petition; ordered moratorium and appointed the Interim
Resolution Professional.
R Co preferred an appeal against the order
of NCLT.
HELD
NCLAT relied on the decision of Supreme
Court in the case of Innoventive Industries Ltd. vs. ICICI Bank and Ors
(2018)1 SCC 407 and passed an order on 14.09.2018 to hold that an appeal at
the instance of corporate debtor was not maintainable in law. R Co prayed that
one of the shareholders of R Co be made the applicant and transpose R Co
through ‘Resolution Professional’ as the second respondent. NCLAT further
directed that R Co may file an affidavit to show that there was no ‘debt due’
or there was no ‘default’ as on the date of filing of the petition u/s. 7 of
the IBC.
As no affidavit was filed and neither was a
substitution application made, NCLAT on 09.10.2018 passed an order allowing for
extension of time which was prayed by R Co. However, as no one appeared from R
Co on the said date, the appeal filed was dismissed by NCLAT.
It was held that shareholder / director of R
Co could move an appeal in accordance with the law if the same was not barred
by limitation.
