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INSOLVENCY AND BANKRUPTCY NEWS

M/s. Brand Realty Services Ltd. Vs. M/s. Sir John Bakeries India Pvt. NCLAT concluded that there was neither any consideration of the Scheme
Ltd. [Company Appeal (AT) (Insolvency) No. 958 of 2020] nor there is any valid reason for rejecting the Scheme by the Liquidator.
The consequential action, after rejection of the Scheme, to proceed with
The issue for consideration was whether the CD is precluded to raise the
issue of pre-existing dispute before the AA, in case CD failed to submit the auction is unsustainable since the decision to proceed with auction was
reply within 10 days from the receipt of the notice under section 8 of the consequent to rejection of the Scheme which was contrary to the statutory
Code. NCLAT observed that the statutory scheme under section 8 and 9 scheme and statutory requirements
does not indicate that in an event reply to notice is not led within 10 days M/s. Adriatic Sea Foods Pvt. Ltd. Vs. Suresh Kumar Jain [Company
by CD or no reply under section 8(1) has been given, the CD is precluded Appeal (AT) (Insolvency) No. 1057 of 2021]
from raising the question of dispute. It also observed that section 9(5)(ii) NCLAT, on an appeal led by a purchaser of property against the order of
provides that the AA can reject the application if- “notice of dispute has been AA by which a sale transaction was reversed as the same was a preferential
received by the Operational Creditor or there is a record of dispute in the and undervalued one, observed that fact of pendency of application under
information utility”. The record of dispute in the IU can very well be pointed section 25 read with section 60(5) for declaration of sale deed as null and
out by the CD before the AA when notice is issued under section 9 as well void, will have no bearing on application led under section 43 and 45 of the
as in its reply to the application to indicate that there are pre-existing Code. NCLAT, dismissing the appeal, noted that the possession of the
disputes in existence prior to issuance of demand notice.
property was handed over to the appellant by the CD at meagre payment
Sikander Singh Jamuwal Vs. Vinay Talwar and Ors., [Company of ` 25 Lakh for which NOC was issued by the mortgagee bank for sale of
Appeal(AT) (Ins)No. 483 of 2019] an amount of not less than `17.86 crore, this indicates that it was a
preferential transaction as well as undervalued transaction. Further noted
The issues for consideration before NCLAT were whether the provident
fund dues (PF dues) are the assets of the CD and whether there is any that the AA itself has not directed for cancellation of the sale rather
conict between the provisions of the Employees Provident Funds and cancellation of sale deed was inferred on account of non-payment of
Miscellaneous Provident Fund Act, 1952 and the Code.The ex-employees balance consideration and entry made by the Bank in its books of accounts.
had challenged the order of AA approving the resolution plan of CD inter- It was directed that the possession of the property be handed over to the
RP. The contention of the purchaser that since an application led by RP for
alia on the ground that the resolution plan is discriminatory as it fails to
consider the payment of PF dues as computed by the Assistant Provident declaring the transaction void is pending, the AA could not have issued any
Fund Commissioner which was `1,35,06,391/-; whereas the provision of direction, was not conceded.
`78 lakh only was made in the approved resolution plan. NCLAT referred M/s. Radico Trading Ltd. Vs. Tarun Batra (Insolvency Professional)
to section 17-B of the Employees Provident Funds and Miscellaneous Act, & Ors. [Comp. App. (AT) (Insolvency) No. 139 of 2022]
1952, and directed that the resolution applicant is liable to pay the NCLAT on the issue whether there has to be a mandatory appointment of
contribution and other sums due from the employer under any provisions an expert by the AA in applications led under section 46(1) of the Code,
of the said Act for the period up to the date of such transfer. This aspect is held that it is not necessary to appoint expert for all applications led under
justiciable as a duty has been casted on the RP/AA/ NCLAT and it is not a section 46(1) of the Code. The appellant being purchaser of property
commercial wisdom as compliance of law is a must. It was further observed challenged the order stating that the appellant was a bona de purchaser for
that PF dues are not the assets of the CD as amply made clear by the value and transactions, which have been declared undervalued. The CD
provisions of section 36(4)(a)(iii) of the Code and that there is no conict had transferred its xed assets just before the initiation of CIRP by the way
between the provisions of both the Acts.
of book entries. It was revealed that the directors of the CD were aware of
Ramesh Kumar Chaudhary & Anr. Vs. Anju Agarwal & Ors. the fact that CIRP application is pending against CD. It was observed that
[Company Appeal (AT) (Insolvency) No. 957 of 2021] the book value of the machinery stood at ₹ 1.56 crore whereas the sale of
the plant and machinery was for ` 21 lakh and which is clearly undervalued
In this case, a scheme of compromise or arrangement (Scheme) under
section 230 of the Companies Act, 2013 was led, however, the transaction. While dismissing the appeal, NCLAT held that the appellant
Stakeholders Consultation Committee (SCC) had not accepted the was in fact the beneciary of the undervalued transaction.
Scheme. The Liquidator treating herself absolved from consideration of Mukul Agarwal Vs. Royale Resinex Pvt. Ltd. & Anr. [Company
the Scheme proceeded with the e-auction of the assets of the CD. The AA Appeal (AT) (Insolvency) No. 777 of 2020]
directed the Liquidator to consider the Scheme and that no further steps Suspended director of CD challenged the admission order passed by AA,
be taken with regard to the auction of the assets of the CD. On appeal, inter alia on the grounds that the CD is a going concern having a good
NCLAT made some important observations in the factual context of the turnover and that there is no operational debt due on the CD as the
case:
application is based on a decree passed by a civil court. NCLAT observed
• The action of the Liquidator in placing the Scheme before the SCC was that “the mere fact that when the Corporate Debtor did not pay the amount,
uncalled for and is not in accordance with the provisions of the Code suit for recovery was led in the year 2016 by the Operational Creditor, which
and the Regulations. was also Decreed, does not in any manner effect the transaction out of which
the amount fell due. The fact that amount was adjudicated and a Decree was
• The SCC was not a competent forum for obtaining any advice with
regard to scheme of compromise or arrangement submitted under passed, in no manner take away the nature of ‘operational debt”. It held that
section 230 of the Companies Act, 2013. OC is entitled to invoke section 9, and the application led by OC cannot
be said to be non-maintainable on the ground that CD is a going concern.
• When an advice of rejection of the Scheme is not by 66%, there was no
question of following the said advice of the SCC by the Liquidator and National Company Law Tribunal
act of Liquidator in relying on the said advice amounts to abdication of Anil Vora HUF Vs. Kavya Build-Con Private Limited [CP(IB)
her own duty to consider the Scheme and shield herself on No.2076/NCLT/MB-IV/2019]
misconception of law rejecting the Scheme.
In this case, an OC led an application under section 9 of the Code, seeking
• Under sub-regulation (9) of Regulation 31A, SCC shall advice the initiation of CIRP against the CD on the ground that the CD had failed to
Liquidator by a vote of not less than 66% of the representative of the make payment of ` 75,00,000/- to the applicant under the retirement deed
consultation committee, present and voting. Thus, percentage has to
be computed on the members of the SCC present and voting and not between the applicant and the partnership rm i.e., Kavya KCD
Developers. The CD was also a partner in the partnership rm. The
from value of claims of the FC.
question which arose before AA was whether the retirement amount
• Obligation to obtain the consent of 75% of the creditors is on the arising out of the agreement with the partnership rm constitutes the
person who proposes the Scheme. operational debt. AA held that “even the liability of the Corporate Debtor is

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