- Bookmark
- Share
- CaseIQ
Dipco Private Limited v. Jayesh Sanghrajka, R...
Factual and Procedural Background
The case arises from the Corporate Insolvency Resolution Process (CIRP) of M/s Ariisto Developers Private Limited (Corporate Debtor). Financial Creditors filed Miscellaneous Applications under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (I&B Code). HDFC Bank Ltd. challenged the voting shares allotted to some Financial Creditors, claiming that a proper grant of voting shares would increase its voting share from 21.26% to approximately 51% in the Committee of Creditors (CoC).
Another Financial Creditor, Dipco Private Limited (the Appellant), filed an application under Section 60(5) against the Resolution Professional’s decision to accept claims of Vistra ITCL (India) Limited and M/s Aasan Corporate Solutions Private Limited, alleging no debtor-creditor relationship existed between these entities and the Corporate Debtor. The Appellant contended that acceptance of these claims reduced its voting share in the CoC. It also alleged that Vistra ITCL, IIFL Trustee Ltd., and another Financial Creditor claimed to be Financial Creditors without documentary evidence.
The Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) rejected these Miscellaneous Applications by an order dated 13th November 2019, directing the Resolution Professional to proceed with the decisions of the CoC regarding approval of the Resolution Plan.
Legal Issues Presented
- Whether the Resolution Professional’s acceptance of claims of certain Financial Creditors, including Vistra ITCL and M/s Aasan Corporate Solutions Private Limited, was valid in the absence of a debtor-creditor relationship and documentary evidence.
- Whether the NCLT has jurisdiction under Section 60(5) of the I&B Code to re-determine or collate claims after the CoC has approved the Resolution Plan.
- Whether claims made by certain Financial Creditors constitute “Financial Debt” under Section 5 of the I&B Code.
- The applicability and effect of Section 60(5) jurisdiction in the context of a Resolution Plan approved by the Committee of Creditors and pending before the Adjudicating Authority.
Arguments of the Parties
Appellant's Arguments
- The debt claimed by Vistra ITCL and IIFL Trustee Ltd. did not constitute Financial Debt under Section 5 of the I&B Code, as no amount was disbursed to the Corporate Debtor for the time value of money.
- The Corporate Debtor was not a guarantor since no guarantee existed.
- The Resolution Professional wrongly accepted claims of certain Financial Creditors, which reduced the Appellant’s voting share in the Committee of Creditors.
- The Resolution Professional failed to initiate action against alleged preferential transactions within the prescribed 135 days under Regulation 40A, prompting the Appellant to file an application under Section 60(5) within 126 days.
Respondents' Arguments
- More than 330 days had passed since commencement of CIRP, and the Committee of Creditors had already approved the Resolution Plan.
- The application by HDFC Bank under Section 60(5) was filed just before the Resolution Plan was placed before the Adjudicating Authority.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Arcelormittal India Private Limited vs. Satish Kumar Gupta & Ors, (2019) 2 SCC 1 (2018 SCC OnLine 1733) | Jurisdictional scope of NCLT under Section 60(5) of the I&B Code; limitation on NCLT’s power to interfere post-approval of Resolution Plan by CoC and Adjudicating Authority; availability of challenge only before Appellate Authority (NCLAT) under Section 61 and Supreme Court under Section 62. | The Court relied on this precedent to hold that once the Resolution Plan is approved by the CoC and adjudicated by the Adjudicating Authority, the NCLT cannot entertain applications under Section 60(5) to re-determine claims. Challenges lie before appellate forums within prescribed timelines. |
Court's Reasoning and Analysis
The Court analyzed the jurisdictional ambit of Section 60(5) of the I&B Code, emphasizing that although the NCLT may entertain applications by or against the Corporate Debtor, it does not have jurisdiction to re-determine or collate claims once the Resolution Plan has been approved by the Committee of Creditors and passed muster before the Adjudicating Authority. The adjudication by the Resolution Professional in collating claims is quasi-judicial, and the NCLT cannot act as an appellate forum on this issue.
The Court noted that the applications under Section 60(5) were filed after the Committee of Creditors had approved the Resolution Plan and during the period when the CIRP was concluding or had concluded. It relied on the Supreme Court’s decision in Arcelormittal India Private Limited vs. Satish Kumar Gupta & Ors to underscore that challenges to the Resolution Plan or decisions related to claims must be pursued under the appellate provisions (Sections 61 and 62) within the stipulated timelines.
Further, for the sake of transparency, the Court observed that the documents submitted in support of the Financial Creditors’ claims demonstrated that the Corporate Debtor had liability towards them, and therefore the Resolution Professional’s acceptance of claims was justified.
Holding and Implications
The Court upheld the impugned order dismissing the Miscellaneous Applications filed under Section 60(5) of the I&B Code. It held that the NCLT lacked jurisdiction to entertain applications challenging the Resolution Professional’s collation of claims after the Committee of Creditors had approved the Resolution Plan and it was before the Adjudicating Authority.
The direct effect of this decision is that the Resolution Professional’s acceptance of claims and the voting shares assigned to Financial Creditors stand affirmed, and the Resolution Plan approved by the Committee of Creditors may proceed without interference at this stage. The Court did not establish any new precedent but clarified the limits of NCLT’s jurisdiction under Section 60(5) post-approval of a Resolution Plan.
SUDHANSU JYOTI MUKHOPADHAYA, J. In the Corporate Insolvency Resolution Process of M/s Ariisto Developers Private Limited (Corporate Debtor), Miscellaneous Applications under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the I&B Code) were filed by Financial Creditors. The HDFC Bank Ltd. filed M.A. No.999/2019 raising question of voting shares of some of the Financial Creditors on the ground that if the voting shares were granted properly, HDFC voting share in the Committee of Creditors would increase from 21.26% to approximately 51%.
2. The Appellant -Dipco Private Limited also filed an application under Section 60(5) against the decision of the Resolution Professional of Vistra ITCL (India) Limitedand M/s Aasan Corporate Solutions Private Limited alleging that there is no debtor-creditor relationship between the Corporate Debtor and the aforesaid Vistra ITCL (India) Limited and M/s Aasan Corporate Solutions Private Limited. It was alleged that the Resolution Professional wrongly accepted their claims, resulting in reduction of voting shares of Appellant Dipco Private Limited in the Committee of Creditors. It was also alleged by the Appellant - Dipco Private Limited that Vistra ITCL (India) Limited, IIFL Trustee Ltd. and another Financial Creditor are attempting to defend their inclusion in Committee of Creditors, claiming themselves to be Financial Creditors without any documentary evidence.
3. The aforesaid Miscellaneous Applications were rejected by impugned order dated 13th November, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai with a direction to the Resolution Professional to proceed with the decisions taken in the meeting of the Committee of Creditors as regards the approval of the Resolution Plan. Company Appeal (AT) (Insolvency) No. 37 of 2020 Page 3 of 5
4. The Appellant has alleged that the debt claimed by Vistra& IIFL from the Corporate Debtor did not constitute Financial Debt as defined under Section 5 of the I&B Code and they had not disbursed any amount to the Corporate Debtor for time value of money. The Corporate Debtor is also not a Guarantor in absence of any Guarantee.
5. Reliance has been placed on Regulation 40A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 to suggest that Resolution Professional can file an application to the Adjudicating Authority for appropriate relief for the preferential transactions within 135 days of the commencement of CIRP. In the present case, despite repeated communication, the Resolution Professional did not take any steps against the concerned Financial Creditors alleging preferential transactions, hence, the Appellant filed an application under Section 60(5) of the Code within 126 days.
6. The Respondents brought to the notice of the Adjudicating Authority that more than 330 days had passed in the present case and the Committee of Creditors has already approved the Plan, which was to be placed before the Adjudicating Authority. It was just before the same, the Applicant HDFC Bank moved an application under Section 60(5) of the I&B Code.
7. In Arecelormittal India Private Limited vs. Satish Kumar Gupta &Ors. (2019) 2 Supreme Court Cases 1: 2018 SCC OnLine1733the Honble Supreme Court had held as follows:-
84. 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, Company Appeal (AT) (Insolvency) No. 37 of 2020 Page 4 of 5 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 NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT 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 applicants behest at a stage before the quasi-judicial determination made by the Adjudicating Authority. The non-obstante clause in Section 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.
8. As per Section 60(5), though the NCLT is empowered to entertain or dispose of any application or proceeding by or against the Corporate Debtor or Corporate Person, it does not invest the NCLT with the jurisdiction to re-determine and collate the claim. The decision for collating the claim, if any, taken by the Resolution Professional, the same being judicial or quasi-judicial, the NCLT cannot sit in Appeal.
9. In the present case, though the Adjudicating Authority has no jurisdiction, but for the purpose of transparency, considered the documents relied upon by the Respondents in support of their claim and observed that the basic principle is that Documents speak for themselves, a simple verification of the above documents in fact are sufficient enough to Company Appeal (AT) (Insolvency) No. 37 of 2020 Page 5 of 5 conclude that the Corporate Debtor has a liability to pay the amounts as claimed in the documents.
10. It is not in dispute that the Committee of Creditors had approved the Plan and only thereafter at that stage, the Appellant and another moved applications under Section 60(5) against collation of claim by the Resolution Professional, by the time, the period of Corporate Insolvency Resolution Process was to conclude and had completed during the pendency. The Adjudicating Authority has rightly dismissed the application.
Alert