Jaldhara Properties and Trading Pvt. Ltd. …Appellant Versus Sudal Industries Ltd. & Anr. Company Appeal (AT) (Ins) No. 707 of 2023
Facts:
1) Appeal is filed against the order dated 20.04.2023 passed in CP (IBPP) No. 01/MB-IV/2022 initiating Pre-Packaged Insolvency Resolution Process ( in short ‘PPIRP’), on an application filed under Section 54(C) of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) by the Corporate Debtor, namely, Sudal Industries Limited (hereinafter referred to as ‘the first appeal’) and CA (AT) (Ins) No. 1420 of 2023, filed against the order dated 10.08.2023 by which an application bearing I.A. No. 3021 of 2023 in CP (IBPP) No. 01/MB-IV/2022 filed by the Resolution Professional on 13.07.2023 under Section 54K(15) of the Code r/w Regulation 49(1) of the IBBI (Pre-packaged Insolvency resolution process) Regulation, 2021 (in short ‘Regulations’) for the approval of the base resolution plan, has been allowed (herein after referred to as ‘the second appeal’).
Issue: Whether the application filed under Section 54(C) of the Code shall have the precedence/priority of consideration and decision over and above the application filed under Section 7 of the Code, against the same Corporate Debtor, if the application under Section 7 is filed much prior of enforcement of the amendment of the Act, 2021 i.e. w.e.f. 04.04.2021 and is hit by Section 11A(4) of the Code?
Argument:
Appellant:
1) Counsel for the appellant submitted that the Tribunal has committed a patent error in giving precedence to the application filed under Section 54(C) of the Code over and above the application filed under Section 7 of the Code, violating the provisions of Section 11A(4) of the Code. He has submitted that Section 11A, inserted by the amendment, has four parts which are all independent of each other in which Section 11A(4) says that ‘the provision of this section shall not apply where an application under Section 7 or 9 or 10 is filed and pending as on the date of the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2021.
It was submitted that Tribunal giving precedence and priority to the application filed under Section 54(C) of the Code on 04.09.2022 over and above the application filed under Section 7 of the Code on 09.12.2020, much before the coming into force of amendment of the Act, 2021 on 04.04.2021, has committed a patent error, therefore, the order challenged in the first appeal deserves to be set aside.
Respondent:
1) It was submitted that submitted that there is no error in the impugned order because the Tribunal has discussed Section 11A(4) and then the merits of the case to hold that the application under Section 54(C) has to be given precedence over and above the application filed under Section 7 of the Code.
Decision: NCLAT allowed the appeal.
Rationale:
1) It noted that Section 11A(1) which is not the question involved here, it provides that where an application filed under Section 54C is pending, the AA shall pass an order to admit or reject such application, before considering any application filed under Section 7 or 9 or 10 during the pendency of such application under Section 54C, in respect of the same corporate debtor.
2) It held that Section 11A(2) says that precedence is to be given to an application if the application under Section 54C already pending and application under Section 7, 9 or 10 is filed or if the application under Section 7, 9 or 10 is pending and the application under Section 54C is filed within 14 days of the filing of the said application then the precedence has to be given to the said application but Section 11A(3) cast an exception as it provides that where an application under Section 54C is filed after fourteen days of the filing of the application under Section 7, 9 or 10 then it has not to be given precedence rather the precedence has to be given to the application filed under Section 7, 9 or 10 of the Code.
3) It held that what precisely has happened is that the application under Section 7 was filed on 09.12.2020, the Act of 2021 came into being on 04.04.2021 and the application under Section 54C was filed on 04.09.2022 that is much after the expiry of year, therefore, in our considered opinion, the rigours of Section 11A(4) is squarely applied to the controversy at hand and hence the Tribunal has committed a patent error in taking up the application under Section 54C of the Code over and above the application filed much earlier under Section 7 of the Code and decided the same.
Order:
