Rajkumar Brothers An... v. Harish Amilineni Sha..., Supreme Court Of India, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

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Case Number

Civil Appeal No. 4044 of 2020

Judges

Justice Indira Banerjee
Justice Sanjiv Khanna

Acts

Section 7 of the IBC (Insolvency and Bankruptcy Code)
Section 5, Subsection 2 of the 1983 Income Tax Act
Section 62 of the Insolvency and Bankruptcy Code, 2016

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Smart Summary

Factual and Procedural Background

The appellant, Rajkumar Brothers and Production Private Limited, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal (NCLT), Hyderabad. The NCLT issued notice on 21 November 2019 and, on 9 January 2020, admitted the petition on the ground that the operational debt was undisputed.

Aggrieved, the respondents—shareholder and erstwhile director of Amilionn Technologies Private Limited—appealed to the National Company Law Appellate Tribunal (NCLAT). On 10 August 2020, the NCLAT set aside the NCLT’s admission order, holding that pre-existing disputes barred the Section 9 initiation. In paragraph 8(C) of its order, the NCLAT further directed that the Interim Resolution Professional/Resolution Professional (IRP/RP) place particulars of Corporate Insolvency Resolution Process (CIRP) costs and fees before the Adjudicating Authority, which would then order the operational creditor (the present appellant) to pay them.

The appellant invoked Section 62 of the IBC and approached the Supreme Court, challenging only the cost direction in paragraph 8(C) of the NCLAT’s order.

Legal Issues Presented

Whether the NCLAT was correct in directing the operational creditor—whose Section 9 petition was ultimately dismissed—to bear the CIRP costs and fees of the IRP/RP.

Arguments of the Parties

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

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Supreme Court characterised paragraph 8(C) of the NCLAT’s order as an allocation of “costs of the proceedings.” It reasoned that:

The CIRP was initiated at the behest of the appellant but was later found to be unsustainable because of pre-existing disputes.
Since the respondents succeeded before the NCLAT, they should not be burdened with expenses incurred in a process that was wrongly triggered.
Requiring the appellant to pay CIRP costs and IRP/RP fees is a logical consequence of its unsuccessful attempt to invoke insolvency proceedings.

Finding “no grounds to interfere” with the NCLAT’s order on costs, the Court dismissed the appeal in its entirety.

Holding and Implications

Appeal Dismissed.

The NCLAT’s directive that the operational creditor bear the CIRP costs and IRP/RP fees remains intact. The ruling underscores that a party who unsuccessfully initiates insolvency proceedings may be held liable for the expenses incurred, but it sets no broader precedent beyond affirming cost-allocation principles within the IBC framework.

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Rajkumar Brothers And Production Private Limited (S) v. Harish Amilineni Shareholder And Erstwhile Director Of Amilionn Technologies Private Limited And Another (S).

1. This appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 is against an order dated 10 August, 2020 passed by the National Company Law Appellate Tribunal (NCLAT), New Delhi allowing Company Appeal (AT) (Insolvency) No. 212 of 2020 filed by the Respondent.

2. The Appellant had filed a petition under Section 9 of the IBC before the National Company Law Tribunal (NCLT) Hyderabad, being CP(IB) No. 737/9/HDB/2019. Notice on the said petition was issued by the NCLT on 21 November, 2019.

3. By an Order dated 9 January, 2020, the NCLT admitted the petition observing that the claim of the Appellant was undisputed. Aggrieved by the order dated 9 January, 2020, the Respondent filed above mentioned appeal before the NCLAT. By the order impugned in this appeal, the NCLAT has set aside the order of the NCLT, holding that there were pre-existing disputes between the Respondent and the Appellant. The aforesaid finding is based on various documents.

4. The NCLAT set aside the impugned order of the NCLT and dismissed the application of the appellant under Section 9 of the IBC. The Appellant has challenged the impugned order only to the extent of the direction in paragraph 8(C) thereof, which reads as follows:

“he IRP/RP will place particulars regarding CIRP costs and fees before the Adjudicating Authority and the Adjudicatiang Authority after examining the correctness of the same will direct the Operational Creditor to pay the same in time to be specified by the Adjudicating Authority.”

5. The direction is in the nature of costs of the proceedings under Section 7 of the IBC, which have been found to be unsustainable in law. The Respondent having succeeded, cannot be saddled with the costs of the Corporate Insolvency Resolution Process (CIRP) initiated at the behest of the Appellant or with the fees of the Interim Resolution Professional (IRP). The direction does not warrant interference in appeal.

6. We find no grounds to interfere with the order dated 10 August, 2020 passed by the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 212 of 2020.

7. The Civil Appeal is accordingly dismissed.

SUPREME COURT OF INDIA

RECORD OF PROCEEDINGS

Civil Appeal No(s).4044/2020

Rajkumar Brothers and Production Private Limited.….Appellant(s)

v.

Harish Amilineni Shareholder and Erstwhile Director of Amilionn Technologies Private Limited and Another.….Respondent(s)

(WITH IA No. 131619/2020-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No. 131618/2020-STAY APPLICATION)

Date : 22-01-2021 This appeal was called on for hearing today.

(Before Indira Banerjee and Sanjiv Khanna, JJ.)

For Appellant(s) Mr. Abhishek Kumar, Adv.

Ms. Garima Prashad, AOR

Ms. Ankita Pandey, Adv.

Mr. Imtiyaz, Adv.

For Respondent(s) Mr. Raavi Yogesh Venkata, AOR

UPON hearing the counsel the Court made the following

8. The appeal is dismissed in terms of the signed order.

9. Pending applications stand disposed of.

Rajkumar Brothers An... v. Harish Amilineni Sha...