Prasad Gempex v. Star Agro Marine Exports Pvt. Ltd. And Another, National Company Law Appellate Tribunal, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

Company Appeal (AT) (Insolvency) No. 469 of 2019

Attorney(S)

Mr. V. Prakash, Senior Advocate with Mr. Ajay Garg and Ms. Shubha Ananth, Advocates ;
Ms. C. Rubavathi and Ms. Sabita Mahadevan for R.P., Advocates for the 1st Respondent;
Mr. Nakul Sachdeva, Advocate for the 2nd Respondent.

Judges

Sudhansu Jyoti Mukhopadhaya
Chairperson
A.I.S. Cheema, Member (Judicial)
Kanthi Narahari, Member (Technical)

Acts

sub-section (6) of Section 60 of the I&B Code,
sub-section (6) of Section 60
Section 40 of the I&B Code.
Section 31 of the I&B Code.
LIMITATION ACT 1963

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Smart Summary

Factual and Procedural Background

The Appellant's total claim was not entertained by the Resolution Professional, whereupon the Appellant approached the Adjudicating Authority and then this Appellate Tribunal. By order dated 1 February 2019 in Company Appeal (AT) (Insolvency) No. 291 of 2018, this Tribunal directed the Adjudicating Authority to pass an appropriate order under Section 31 of the I&B Code in respect of a resolution plan approved by the Committee of Creditors. The Tribunal granted the Appellant liberty to file a claim under sub‑section (6) of Section 60 of the I&B Code before a court of competent jurisdiction or to file an application against the corporate debtor M/s. Star Agro Marine Exports Pvt. Ltd.

The Tribunal noted precedent holdings that the Resolution Professional has no jurisdiction to adjudicate individual claims and that, under sub‑section (6) of Section 60, the period of moratorium is excluded in computing limitation and that suits or applications can be filed after the moratorium. A resolution plan for the corporate insolvency resolution process against M/s. Star Agro Marine Exports Pvt. Ltd. had been approved by the Committee of Creditors and placed before the Adjudicating Authority on 4 October 2018; however no order under Section 31 had been passed at that time (270 days had passed). The Tribunal directed the Adjudicating Authority (NCLT), Chennai to pass an appropriate order under Section 31 by 22 February 2019, and allowed the Appellant liberty to invoke sub‑section (6) of Section 60 or, if liquidation followed, to file claims before the Liquidator who would decide them under Section 40.

The Adjudicating Authority eventually passed an order under Section 31 approving the resolution plan by an impugned order dated 11 March 2019. That order included a paragraph (paragraph 13) stating that from the plan approval date all inquiries, investigations and proceedings, whether civil or criminal, pending or threatened, present or future in relation to any period prior to the plan approval date, or arising on account of implementation of the resolution plan, shall stand withdrawn and dismissed.

Legal Issues Presented

Whether the Resolution Professional has jurisdiction to decide individual claims of creditors (financial, operational, secured or unsecured).
Whether, after the moratorium period and in light of sub‑section (6) of Section 60 of the I&B Code, a person may file a suit or application against a corporate debtor despite an approved resolution plan or order under Section 31.
Whether the Adjudicating Authority (NCLT), when approving a resolution plan under Section 31, can include directions that all inquiries, investigations and proceedings (civil or criminal) pending or threatened in relation to the corporate debtor shall stand withdrawn and dismissed (i.e., whether the Adjudicating Authority has jurisdiction to bar or extinguish such proceedings).

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
M/s. Dynepro Private Limited Company Appeal (AT) (Insolvency) No. 469 of 2019 vs. Mr. V. Nagarajan Company Appeal (AT) (Insolvency) No. 229 of 2018 (judgment dated 30th January, 2019)	Held that the Resolution Professional has no jurisdiction to decide the claim of any creditor; after completion of the moratorium period a suit or application can be filed against the corporate debtor (referring to sub‑section (6) of Section 60).	The Tribunal relied on this holding to reinforce that the Resolution Professional cannot adjudicate claims and to support the view that persons may file suits/applications after the moratorium period under s.60(6).
Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors., Writ Petition (Civil) No. 99 of 2018 (judgment dated 25th January, 2019)	Held that the Resolution Professional has no adjudicatory power; the Resolution Professional vets, verifies and determines the amount of each claim, whereas the Liquidator in liquidation proceedings consolidates and verifies claims and admits or rejects them under Sections 38 to 40.	The Tribunal cited this Supreme Court authority to support the proposition that the Resolution Professional lacks adjudicatory power over claims and to distinguish functions in resolution vs. liquidation.

Court's Reasoning and Analysis

The Tribunal proceeded from established principles and its earlier order giving the Appellant liberty to file claims under sub‑section (6) of Section 60. It compared the content of the Adjudicating Authority's approval order dated 11 March 2019 (in particular paragraph 13) with those principles and earlier decisions.

The Tribunal reasoned that:

Earlier decisions of this Tribunal and the Supreme Court (cited) show that the Resolution Professional does not have adjudicatory power to decide individual claims.
Sub‑section (6) of Section 60 makes clear that limitation periods exclude the moratorium and that suits or applications can be filed against a corporate debtor after the moratorium; accordingly, affected persons must have the ability to approach courts of competent jurisdiction.
The Adjudicating Authority (NCLT) does not have jurisdiction to pass orders affecting matters pending before criminal courts; more broadly, having afforded parties the opportunity to proceed under s.60(6), the Adjudicating Authority cannot prohibit aggrieved persons from filing claims or applications before appropriate fora.
Because the impugned paragraph 13 purports to withdraw and dismiss all inquiries, investigations and proceedings (civil or criminal) and thereby bars persons from pursuing claims before competent courts, it was contrary to the earlier Appellate Tribunal direction and precedent and therefore required setting aside to the extent indicated.

Applying these principles to the facts, the Tribunal set aside paragraph 13 of the Adjudicating Authority's order dated 11 March 2019 insofar as it related to inquiries, investigations and proceedings (civil or criminal, suits etc.). The Tribunal left the remainder of the Section 31 order (approving the resolution plan) undisturbed because no case to interfere with that part was made out. The Tribunal reiterated that it had not decided the merits of the Appellant's claim.

Holding and Implications

Holding: Paragraph 13 of the Adjudicating Authority's order dated 11 March 2019 is set aside insofar as it relates to inquiries, investigations and proceedings (whether civil or criminal, suits, claims or disputes).

Implications:

The rest of the Adjudicating Authority's order approving the resolution plan under Section 31 is not interfered with by this Tribunal.
The Appellant (M/s. Prasad Gempex) was permitted to file a claim in terms of sub‑section (6) of Section 60 before the appropriate court of law, or to file an appropriate application against the corporate debtor (M/s. Star Agro Marine Exports Pvt. Ltd.).
If the resolution plan is not approved and liquidation follows, the Appellant may file a claim before the Liquidator, who will decide the claim under Section 40 of the I&B Code.
The Tribunal expressly did not decide the merits of the Appellant's claim and did not express any opinion regarding pending suits or proceedings which may have reached finality in terms of Section 31.
The appeal was allowed in part; no costs were awarded.

No broader precedent beyond the application of cited authorities was purportively created by this order; the decision's direct effect is limited to setting aside the specific paragraph of the impugned order and preserving the rights of aggrieved persons to approach competent fora under s.60(6).

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Prasad Gempex v. Star Agro Marine Exports Pvt. Ltd. And Another

02.05.2019 The total claim of the Appellant was not entertained by the Resolution Professional and being aggrieved the Appellant moved before the Adjudicating Authority and thereafter before this Appellate Tribunal. The Appellate Tribunal by order dated 1st February, 2019 passed in Company Appeal (AT) (Insolvency) No. 291 of 2018 while directed the Adjudicating Authority to pass appropriate order under Section 31 of the I&B Code with regard to resolution plan as approved by the Committee of Creditors. The Appellant was allowed to file claim under sub-section (6) of Section 60 of the I&B Code before the Court of Law of appropriate jurisdiction or an application against the Corporate Debtor namely M/s. Star Agro Marine Exports Pvt. Ltd. with the following observations :

7. Similar issue fell for consideration before this Appellate Tribunal in M/s. Dynepro Private Limited Company Appeal (AT) (Insolvency) No. 469 of 2019 vs. Mr. V. Nagarajan Company Appeal (AT) (Insolvency) No. 229 of 2018 etc. The Appellate Tribunal by its judgment dated 30th January, 2019 held that Resolution Professional has no jurisdiction to decide the claim of one or other creditor, including Financial Creditor, Operational Creditor, Secured Creditor or unsecured Creditor. Referring to sub- section (6) of Section 60 of the I&B Code, this Appellate Tribunal further observed that after completion of the period of moratorium, a suit or application can be filed against the Corporate Debtor. Relevant portion of Section 60 is quoted below:-

60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located. xxx xxx xxx Company Appeal (AT) (Insolvency) No. 469 of 2019 (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. (6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been Company Appeal (AT) (Insolvency) No. 469 of 2019 made under this Part, the period during which such moratorium is in place shall be excluded. From the aforesaid provision, it is clear notwithstanding the order passed under Section 31 of the I&B Code (any existing law), it is open to a person to file a suit or an application against the corporate debtor after completion of the period of moratorium.

8. The power of Resolution Professional also fell for consideration before the Honble Supreme Court in Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. Writ Petition (Civil) No. 99 of 2018. In the said judgment dated 25th January, 2019, the Honble Supreme Court held that Resolution Professional has no adjudicatory power. The Resolution Professional has to vet and verify the claims made and ultimately determine the amount of each claim. As opposed to this, the Liquidator in the Liquidation proceedings under the I&B Code has to consolidate and verify the claims and either admit or reject such claims under Sections 38 to 40 of the Code.

9. In the present case, it is informed that the resolution plan has already been approved by the Committee Company Appeal (AT) (Insolvency) No. 469 of 2019 of Creditors and the Resolution Professional had placed the same before the Adjudicating Authority on 4th October, 2018 in M/s. Prasad Gempex with regard to the corporate insolvency resolution process initiated against M/s. Star Agro Marine Exports Pvt. Ltd. (subject matter of Company Appeal (AT) (Insolvency) No. 291/18) . A resolution plan has already been approved and placed before the Adjudicating Authority (Chennai) on 4th October, 2018. However, till date no order under Section 31 has been passed. We find that 270 days have passed.

10. Insofar as corporate insolvency resolution process initiated against Assam Company India Ltd. is concerned it is informed that a separate resolution plan has already been approved by the Committee of Creditors and same has been approved by the Adjudicating Authority under Section 31 of the I&B Code on 20th September, 2018.

11. In the facts and circumstances, we direct the Adjudicating Authority (National Company Law Tribunal), Chennai to pass appropriate order under Section 31 of the I&B Code on the resolution plan as approved by the Committee of creditors, if not yet passed, by 22nd February, 2019. Company Appeal (AT) (Insolvency) No. 469 of 2019

12. We allow the appellant - M/s. Prasad Gempex to file claim in terms of sub-section (6) of Section 60 before the appropriate court of law or may file appropriate application against the corporate debtor namely M/s. Star Agro Marine Exports Pvt. Ltd., if the resolution plan is approved and do not take proper care of the applicant. In case the resolution plan is not approved and order of liquidation is passed in respect of M/s. Star Agro Marine Exports Pvt. Ltd., in such case, it will be open to the appellant M/s. Prasad Gempex to file claim before the Liquidator in accordance with the provisions as referred to above and the Liquidator will decide the claim under Section 40 of the I&B Code.

13. We may observe that we have not expressed any opinion with regard to the claim as made by M/s. Prasad Gempex. So far as the SREI Infrastructure Finance Ltd. who is aggrieved by the decision of the Resolution Professional, it may also take steps under sub-section (6) of Section 60 against the corporate debtor or any other party. In this case, we make it clear that we have not expressed any opinion with regard to the claim made by the SREI Company Appeal (AT) (Insolvency) No. 469 of 2019 Infrastructure Finance Ltd. or the decision as taken by the Resolution Professional.

2. The Adjudicating Authority (National Company Law Tribunal), Single Bench, Chennai thereafter passed an order u/s 31 of the I&B Code approving the Resolution Plan by the impugned order dated 11th March, 2019. However, while passing such order, the Adjudicating Authority held and observed :

13. From the plan approval date, all inquiries, investigation and proceedings, whether civil or criminal, suits, claims, disputes, proceedings in connection with the Corporate Debtor or affairs of the Corporate Debtor, pending or threatened, present or future in relation to any period prior to the plan approval date, or arising on account of implementation of this resolution plan shall stand withdrawn and dismissed.

3. After hearing the learned counsel for the Appellant, learned counsel for the Successful Resolution Applicant who is now Corporate Debtor and the learned counsel for the Resolution Professional, we are of the view that the Adjudicating Authority has no jurisdiction to pass any order with regard to any matter pending before the Court of criminal jurisdiction. Further, the parties having given opportunity to move against the Corporate Debtor under sub-section (6) of Section 60 of the I&B Code, the Adjudicating Authority cannot prohibit the aggrieved person to file a claim before the Court of competent jurisdiction or an application before the appropriate Forum. Company Appeal (AT) (Insolvency) No. 469 of 2019

4. This Appellate Tribunal by order dated 1st February, 2019 in Company Appeal (At)(Insolvency) No. 291 of 2018 having given liberty to the Appellant to file a claim in terms of sub-section (6) of Section 60 and the impugned order aforesaid to the extent as mentioned in paragraph 13 and quoted above being contrary to the decision of this Appellate Tribunal, is fit to be set aside.

5. For the reasons aforesaid, we set aside the observation and direction as given by the Adjudicating Authority at paragraph 13 of the impugned order dated 11th March, 2019 passed in CP/668/IB/2017 so far it relates to inquiry, investigation, proceedings whether civil or criminal, suits etc. The rest part of the order, approving the plan, is not interfered with as no case is made out to interfere with the same.

6. However, we make it clear that we have not decided the claim of the Appellant on merit nor express any opinion with regard to the pending suits or proceedings which may have reached finality in terms of Section 31 of the I&B Code.

7. The appeal is allowed in part. No costs. [Justice S.J. Mukhopadhaya] Chairperson [ Justice A.I.S. Cheema ] Member (Judicial) [ Kanthi Narahari ] Member (Technical) /ns/gc

Prasad Gempex v. Star Agro Marine Exports Pvt. Ltd. And Another

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Prasad Gempex v. Star Agro Marine Exports Pvt. Ltd. And Another

Comments