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SUPREME COURT OF INDIA
(From the National Company Law Apellate Tribunal)
Dhananjaya Y Chandrachud, A S Bopanna, JJ.
E S Krishnamurthy & Ors. - Appellants
Versus
M/s Bharath Hi Tech Builders Pvt. Ltd. – Respondent
Civil Appeal No 3325 of 2020
Decided On : 14-12-2021
Insolvency and Bankruptcy Code 2016 – Section 62, 7, 12A, 5(8)(12), 7(5)(b) – Appeal – Tool for withdrawal – Either by itself or jointly – Appeal under Section 62 of the Insolvency and Bankruptcy Code 20161 has arisen from a judgment of the National Company Law Appellate Tribunal2, which upheld an order National Company Law Tribunal3at its Bench – On a petition4 which was instituted by appellants under Section 7 of IBC for initiating Corporate Insolvency Resolution Process5 in respect of respondent, NCLT declined to admit petition and instead directed respondent to settle claims within three months – NCLAT found no merit in appeal6 against NCLT’s order –Held, While acknowledging that consent terms were “filed by some of stake holders though may not be all encompassing”, Appellate Authority nonetheless proceeded to dismiss appeal as not maintainable – Observation that appeal was not maintainable is erroneous – Plainly, Adjudicating Authority failed to exercise jurisdiction which was entrusted to it – A clear case for exercise of jurisdiction in appeal was thus made out, which Appellate Authority then failed to exercise – Court may note at this stage that provisions of Section 7 of IBC have been amended with retrospective effect – These provisions have been construed in judgment of this Court in Manish Kumar (supra) – Since court are inclined to restore proceedings back to Adjudicating Authority for a fresh consideration, it is not necessary for this Court to dwell on any other aspect, save and except for what weighed with Adjudicating Authority in disposing of petition without adjudicating on other issues of maintainability or merits – Court leave open all rights and contentions of parties to be urged before and decided by Adjudicating Authority – Court accordingly allow appeal and set aside impugned judgment and order NCLAT in Company Appeal (AT) (Insolvency) No 649 of 2020 and of NCLT in CP (IB) No.188/BB/2019 – Petition under Section 7 of IBC (i.e., CP (IB) No.188/BB/2019) is accordingly restored to NCLT for disposal afresh – Application disposed of.
JUDGMENT :
Dhananjaya Y Chandrachud, J.
1. Admit.
2. The present appeal under Section 62 of the Insolvency and Bankruptcy Code 20161[“IBC”] has arisen from a judgment of the National Company Law Appellate Tribunal2[“NCLAT”/“Appellate Authority”] dated 30 July 2020, which upheld an order dated 28 February 2020 of the National Company Law Tribunal3[“NCLT”/“Adjudicating Authority”] at its Bengaluru Bench.
3. On a petition4[C.P(IB)No. 188/BB/2019] which was instituted by the appellants (and others) under Section 7 of the IBC for initiating the Corporate Insolvency Resolution Process5[“CIRP”] in respect of the respondent, the NCLT declined to admit the petition and instead directed the respondent to settle the claims within three months. The NCLAT found no merit in the appeal6[Company Appeal (AT) (Insolvency) No 649 of 2020] against the NCLT’s order.
4. The issue which arises for adjudication before this Court is whether, in terms of the provisions of the IBC, the Adjudicating Authority can without applying its mind to the merits of the petition under Section 7, simply dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors.
5. The genesis of the case arises from a Master Agreement to Sell7[“Master Agreement”] which was entered into between the respondent, IDBI Trusteeship Limited and Karvy Realty (India) Limited8[“Facility Agent”] on 22 June 2014, in order to raise an amount of Rs 50 crores for the development of 100 acres of agricultural land. Under the terms of the Master Agreement, the Facility Agent was to sell the plots to prospective purchasers against the payment of a lumpsum amount. The respondent was then required to pay interest at the rate of 25 per cent per annum compounded annually to the purchaser, under the Master Agreement. It has been stated that in furtherance of the Master Agreement, the ninth appellant was allotted a plot in the project being developed by the respondent on the payment of a sum of Rs 12,50,000. Thus, the respondent was obligated to convey and register the plots to the ninth appellant within 21 months from the date of execution of the Master Agreement (i.e., by 21 March 2016).
6. Since the requisite funds could not be generated through the Master Agreement, a Syndicate Loan Agreement9[“Loan Agreement”] was entered into between the respondent, IDBI Trusteeship Limited and the Facility Agent on 22 November 2014 for availing a term loan of Rs 18 crores from prospective lenders. Such prospective lenders were to lend moneys by executing a Deed of Adherence. In accordance with the terms of the Loan Agreement, the respondent had to utilise the funds raised for developing the proposed residential layout in its project and it was to pay an assured return at the rate of 20 per cent annum on the principal amount. Further, the tenure of the loan was to be 24 months from the execution of the Loan Agreement, and in the event of default, the respondent was liable to pay an additional interest of one per cent for every month.
7. The case of the appellants is that during the year 2015-2016, the Facility Agent acting through its sister concern (Karvy Private Wealth) advised its clients to extend loans to the respondent. The appellants claim that they (with the exception of the ninth appellant), along with several others, extended term loans to the respondent acting on the advice of the Facility Agent and its sister concern. Thus, requisite Deeds of Adherence were signed. It is alleged by the appellants that through the Loan Agreement, the respondent raised over Rs 15 crores from nearly 300 investors in the first tranche of loans.
8. By a letter dated 29 February 2016, addressed to one of the original petitioners in the petition before the NCLT who was allotted a plot under the Master Agreement, the respondent sought an extension of time till 31
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