Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(Online)(NCLT) 2897

NATIONAL COMPANY LAW TRIBUNAL
SHRI JYOTI KUMAR TRIPATHI, SHRI RAVICHANDRAN RAMASAMY, JJ
Mallur Siddeswara Spinning Mills Private Limited – Appellant
Versus
Mr. Kashasai Elangkumaran – Respondent
IA (IBC) /1524 (CHE) /2024 in IA (IBC)/ 2253 (CHE)/2023 IN CP (IB) /316 (CHE) /2021

Advocates:
For the Appellants/Petitioners: Mr. Kishore M. Sethia, KSR & Co Company Secretaries LLP
For the Respondents:Ms. J. Madhumitha, Advocate, Mr. B. Dhanaraj, Advocate

Issues of missing assets in insolvency proceedings may require civil or criminal investigation, and liability cannot be assigned without proper judicial process.

Headnote:(A) Insolvency & Bankruptcy Code, 2016 - Section 60(5) - Application by Successful Resolution Applicant for direction to recover missing parts of Windmill from Respondents - Relief sought to either deliver missing parts or indemnify loss incurred - Allegations of collusion between Respondents and failure to disclose information regarding missing parts - Tribunal holds SRA has the rights under Resolution Plan but issues of theft and missing parts entail a civil court investigation - No liability can be imposed on R3 for alleged theft without criminal proceedings. (Paras 106-156)

Facts of the case:
Application filed for missing parts of a windmill owned by the corporate debtor, with allegations of non-cooperation from the former directors and maintenance contractor, which was allegedly withholding assets. (Paras 1-22)

Findings of Court:
Adjudicating authority affirms jurisdiction under Section 60(5) but finds lack of sustainability in claims regarding the theft part liability against R3. SRA is encouraged to seek legal action against actual possessors. (Paras 156-156)

Issues: Whether the interim application is maintainable and if the applicant can be granted the relief sought. (Paras 106-106)

Ratio Decidendi: The tribunal held that while the SRA has standing under the Resolution Plan, matters concerning theft require judicial investigation by a civil or criminal court; thus, imposing liability in this summary proceeding is unjustified. (Paras 150-153)

Result: Application is disposed of with directions encouraging further legal actions. (Paras 156-157)

Table of Content
1. application filed under ibc. (Para 1 , 2)
2. details regarding windmill operations and issues. (Para 3 , 4 , 5 , 6 , 7 , 8)
3. joint liability of respondents acknowledged. (Para 18 , 19 , 20 , 21 , 22)
4. respondent's objections and background. (Para 23 , 24 , 25 , 32 , 33 , 34)
5. discussion on the knowledge of respondents regarding windmill status. (Para 56 , 67 , 68 , 69 , 70)
6. jurisdiction and issues set for adjudication. (Para 105 , 106 , 108)
7. final conclusion on the matter. (Para 156)

ORDER

(Heard through Hybrid Mode)

Brief Facts

1. The present Application is preferred under Sec 60(5) of the IBC, 2016 seeking the following reliefs as follows,

“

1. To direct the Respondent No.3 to deliver the missing parts of the Windmill No. 1682 of the Corporate Debtor at its cost to the Applicant and ensure smooth functioning of the windmill provided the missing parts are found to be in serviceable condition and further direct the Respondent No.3 to pay a sum of Rs. 10 Lakhs for the purpose of installing them after requisite maintenance; (OR)

2. In the event the missing parts are not traceable or if they are not in good and serviceable condition or if Respondents No. 1 to 3 are not cooperating, the Hon’ble Adjudicating Authority may be pleased to pass an order directing the Respondents No. 1 to 3 jointly and severally to pay Rs.97,66,980/- to the Applicant indemnifying the loss occasioned to the Applicant on account of wilful acts committed by them;

3. To grant such other reliefs as this Hon’ble Tribunal may think that may deem fit in the interest of justice;”

2. The applicant herein is the SRA of the CD i.e, Mallur Siddeswara Spinning Private Limited. The Corporate Debtor was admitted into CIRP vide order dated 31.03.2023 in CP(IB)/316(CHE)/2021 which followed by approval of Resolution Plan submitted by the applicant for the CD vide order dated 22.12.2023 in IA(IBC)/2253/2023. The total value provided under the Resolution Plan was Rs.25.06 Crores. The SRA has completely fulfilled the payment obligations under the Resolution Plan and the CD has been completely handed over to the Applicant.

Applicant Submissions

3. It is stated that, Corporate Debtor, Mallur Siddeswara Spinning Private Limited held windmills with HTSC Service Connection Nos. 079204720474, 079204720475, 079204721079 and 079204721682. Out of which the HTSC connection ending 1682 was stopped during July 2022 due to component failure and failed part is given for repair to R3 by the CD.

4. It is alleged that, the R1 & R2 who were the suspended directors of the CD failed to disclose the information that the Wind Mill Turbine was given to R3 for repair works.

5. It is stated that, R4 has sent an email dated 01.08.2023, informing that the team from H M Textiles is visiting the Plant and R3 acknowledged the same immediately.

6. It is stated that, on 03.08.2023 R4 sent an email to R3 requested for detailed report on the missing machine parts and components of the Wind Mill and Turbine, reasoning that the team observed lot of machinery parts of the Wind Mill are missing.

7. It is stated that, Senior Manager – Operations of the R3, replied to 03.08.2023 email on the same day stating there has been no parts of components missing in the turbine.

8. It is stated that, as the CD failed to settle the long pending dues towards Operations & Maintenance charges to R3, replacement of failed components in the Wind Mill Turbine did not take place, which lead to continuous stoppage.

9. It is stated that, R3 communicated the status of the Wind Mill Turbine to R4 and informed about the Risk of Burglary. In consequent, the R3 removed few parts and kept it in its custody. Additionally reported that, components such as Yaw Motors and Couplings were given to service centres for repair and repair works are completed.

10. It is stated that, those parts which were under the repairs were repaired and was in the state of receivables which in turn enable the Wind Mill Turbine restart.

11. It is further sta