Page 9 - IBBI-JUNE-SEPTEMBER 2022

under section 60(1) of the Code makes it clear that the residence of PG is ` 40,60,147/- towards the MGRs payable by the CD under the licensing
not taken into consideration when proceedings against the PG are initiated. agreement and in lieu of which the CD made the payment of ` 17,69,835/-.
:KHQ DQ DSSOLFDWLRQ LV ÀOHG DJDLQVW 3* ZKHWKHU UHVLGLQJ LQ ,QGLD RU UHVLGLQJ 2Q &'·V IDLOXUH WR SD\ WKH UHPDLQLQJ EDODQFH 2& ÀOHG D VHFWLRQ DSSOLFDWLRQ
outside India, the jurisdiction shall be before the AA in whose territorial which was admitted by the AA. The NCLAT observed that section 7 of the
MXULVGLFWLRQ WKH UHJLVWHUHG RIÀFH RI WKH FRUSRUDWH SHUVRQ LV ORFDWHG $V Central Goods and Services Tax Act, 2017 permits the use or enjoyment of
regards applicability of section 234, it was observed that applicability of any Intellectual Property Right as a ‘supply of service’. The NCLAT noted
section 234 arises only in a case where assets or property of PG are situated that the CD was permitted to use the trademark in relation to its licensed
at any place in a country outside India. products, so, there was temporary transfer/permission to use, constituting
‘provision of service’ rendered by the OC and, therefore, it falls within the
CA Rita Gupta Vs. M/s. Shilpi Cable Technologies Ltd. & Ors. GHÀQLWLRQ RI VHUYLFH DQG DQ\ DPRXQWV ¶GXH DQG SD\DEOH· DULVLQJ RXW RI VXFK
[Company Appeal (AT) (Insolvency) No. 10 of 2020] service is an ‘operational debt’ within the ambit of section 5(21) of the Code.
The question that arose for consideration was, whether the liquidator
has the jurisdiction to decide the fee of the RP as the CoC is no longer in Adjoin Built & Developers Vs. Aditya Kumar & Ors. [Company
existence? The NCLAT observed that by virtue of section 5(13)(e) of the Appeal (AT) (Insolvency) No. 769-770 of 2021]
Code, the fees and expenses incurred by the RP comes under the ambit 7KH DSSHDO LQ WKH FDVH ZDV ÀOHG E\ WKH ,%%, DJDLQVW $$·V RUGHU GLUHFWLQJ WKH
of insolvency resolution process cost and therefore the liquidator cannot IBBI not to initiate any enquiry against an IP till further orders, and if any
adjudicate upon the insolvency resolution process cost. Regulation 34 of the enquiry is initiated, the same be halted till further directions of the AA. The
IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, NCLAT placed reliance on the SC’s decision in K. Sashidhar v. Indian Overseas
&,53 5HJXODWLRQV VSHFLÀHV WKDW WKH &R& VKDOO À[ WKH H[SHQVHV ZKLFK Bank & Ors., and its previous orders in the matters of Mohan Gems & Jewels
are incurred by the RP. The liquidator can only verify and adjudicate the Pvt. Ltd. v. Vijay Verma & Ors. and Insolvency and Bankruptcy Board of India v.
FODLPV DV GHÀQHG XQGHU WKH &RGH 7KH IHHV RI DQ 53 FDQQRW EH D ¶FODLP· DV Shri Rishi Prakash Vats & Ors. and set aside the order of the AA. It held that
GHÀQHG XQGHU VHFWLRQ RI WKH &RGH 6LQFH WKH DPRXQW RI IHHV SD\DEOH neither the Code, nor the rules framed thereunder confer any power to the
WR DQ 53 LV QRW D ¶FODLP· WKH VDPH FDQQRW EH GHWHUPLQHG RU YHULÀHG E\ WKH AA to interfere with the process of inspection and investigation initiated by
liquidator. It is the AA which has to decide fees in the absence of a CoC and the Board, nor does it have the power to direct the Board to take or not to
the RP cannot be directed to prefer a ‘claim’ before the liquidator. take actions.
Rakesh Kumar Jain Vs. Jagdish Singh Nain & Ors. [Company Appeal Sumat Kumar Gupta Vs. Committee of Creditors of M/s Vallabh
(AT) (Ins.) No. 425 of 2022] Textiles Company Ltd. [Company Appeal (AT)(Insolvency) No.1037
The NCLAT considered the issue, whether AA is competent to pass order of 2022]
under section 66 of the Code during the currency of moratorium under The NCLAT considered the issue whether RP should be given opportunity
section 14. It held that section 14(1)(a) of the Code interdicts institution of being heard in case of his replacement? The NCLAT held that the scheme
of suits and continuation of pending suits and proceedings against the CD of section 27 of the Code does not indicate that RP is to be made party
including execution of any judgment decree or order of any court of law, and is to be issued notice before taking decision to appoint another RP. The
Tribunal, Arbitration Panel or other authority. Thus, it prohibits institution NCLAT relied on the judgement of Punjab National Bank v. Kiran Shah, IRP
and prosecution of any proceedings against the CD but does not prohibit of ORG Informatics and held that the replacement of RP is complete when
passing any order by the AA during CIRP or liquidation process against required decision is taken by the CoC in its meeting with requisite majority
CD and its suspended directors or related parties. No doubt prohibition is and held that the erstwhile RP is not entitled for hearing.
only against the proceedings in any other Courts or Tribunals etc. but not a
prohibition against passing of any order in the pending CIRP or liquidation Shri Alok Kaushik, RP of Cheema Spintex Ltd Vs. Cheema Spintex
process against the CD. On the other hand, section 66 permits the AA to Ltd & Ors. [Company Appeal (AT) (Insolvency) No.896 of 2022]
pass appropriate orders on application of any person when any transaction 7KH LVVXH IRU FRQVLGHUDWLRQ ZDV ZKHWKHU 53 ZDV MXVWLÀHG LQ FDUU\LQJ RQ &,53
was entered into fraudulently. Further, the provisions of sections 14 and and adding to CIRP costs during the pendency of the withdrawal application
66 are independent, incorporated for different purposes. Section 14 is under section 12A of the Code. The NCLAT held that since the section 12A
LQWHQGHG WR SUHYHQW ÀFWLWLRXV FODLPV E\ WKLUG SDUWLHV WR UHDOLVH WKH DPRXQW DSSOLFDWLRQ ZDV ÀOHG E\ WKH ,53 EHIRUH WKH $$ ZHOO EHIRUH WKH FRQVWLWXWLRQ
by execution of the orders, decrees etc. whereas section 66 is intended to of the CoC, the IRP’s continuance with the CIRP without making adequate
prevent fraudulent trading or business by CD through its RP or suspended HIIRUWV WR VHHN SRLQWHG FODULÀFDWLRQ IURP WKH $$ RQ ZKHWKHU WR SURFHHG ZLWK
directors, during CIRP or liquidation process. These two provisions have to WKH &,53 RU QRW GRHV QRW UHÁHFW ZHOO RQ KLV FRQGXFW ,W REVHUYHG WKDW WKH
be read independently to achieve the object of the Code. IRP cannot afford to be unmindful of the fact that he is the driving force and
the nerve-center in the resolution process and is expected to assist in the
Vikas Dahiya Vs. Arrow Engineering Limited & Anr. [Company CIRP in a fair and objective manner in the best interest of all stakeholders.
Appeal (AT) (Insolvency) No. 699 of 2022] Simply by registering presence on each date of hearing before the AA
The NCLAT held that principle of res judicata, though a part of Civil without seeking clear guidance on CIRP modalities cannot in itself become a
Procedure Code, would be applicable to a proceeding under the Code. This VXIÀFLHQW JURXQG IRU WKH ,53 WR SURFHHG ZLWK WKH &,53 LQ IXOO WKURWWOH
LV WR SUHYHQW WKH DEXVH RI SURFHVV RI ODZ DQG JLYH D ÀQDOLW\ WR DQ\ SURFHHGLQJ
or orders, and to avoid an endless litigation to frustrate the very object of White Stock Limited Vs. Prajay Holdings Private Limited [Company
enacting the Code. It was further observed that a judgment obtained by Appeal (AT)(CH) (Ins) No. 271 of 2022 & I.A. Nos. 581 & 582 of
playing fraud on the AA or judgment or order passed without inherent 2022]
jurisdiction is non est in the eyes of law and the same can be challenged in a The question involved in this case was, whether the AA can refer section 7
collateral or incidental proceeding. application for mediation under section 442 of the Companies Act, 2013?
Relying upon its judgment in Sodexo India Services Pvt. Ltd. v. Chemizol Additives
Somesh Choudhary Vs. Knight Riders Sports Private Limited & Anr. Pvt. Ltd. in which it had held that under section 442 of the Companies Act,
[Company Appeal (AT) (Insolvency) No. 501 of 2021] 2013, the AA cannot refer the parties to arbitration or mediation for the
The CD entered into a licensing agreement with the OC, whereby the OC proceedings pending under the Code, NCLAT set aside the order of AA. It
granted the license and right to use its trademark on the licensed products held that once the default is established, the AA does not have the power
manufactured and sold by the CD, in lieu of Minimum Guaranteed Royalties to refer the parties to an arbitration, since it becomes an in-rem insolvency
(MGRs) as compensation. OC raised the invoices for an aggregate sum of proceedings and held that the proceedings under section 442 of the

9

11/15/2022 12:24:48 PM
IBBI newsletter.indd 9 11/15/2022 12:24:48 PM
IBBI newsletter.indd 9