# Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr

- **Citation:** 2024 INSC 102
- **Court:** Supreme Court of India
- **Decided:** 2024-02-12
- **Case number:** Civil Appeal Nos. 7590-7591 of 2023
- **Bench:** Dr. Dhananjaya Y. Chandrachud, J. B. Pardiwala, Manoj Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/greater-noida-industrial-development-authority-v-prabhjit-singh-soni-anr-37523
- **Pages:** 30

## Headnote

Whether in exercise of powers under s.60(5), Insolvency and
Bankruptcy Code, 2016, the Adjudicating Authority-NCLT can recall
an order of approval passed under s.31(1) of the IBC; whether the
application for recall of the order was barred by time; whether the
resolution plan put forth by the resolution applicant did not meet
the requirements of s.30(2) of the IBC read with Regulations 37
and 38 of the CIRP Regulations, 2016 and; what relief, if any, the
appellant is entitled to.
Headnotes
Insolvency and Bankruptcy Code, 2016 - ss.30(2), 31(1), 60(5)
- The Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations,
2016 - National Company Law Tribunal Rules, 2016 - r.11 -
Inherent power of the Tribunal - Recall of the order of approval
passed u/s.31(1) - Maintainability of application for recall -
Resolution plan put forth by the resolution applicant, if met
the requirements of s.30(2) r/w Regulations 37 and 38 of the
CIRP Regulations, 2016:
Held: A Court or a Tribunal, in absence of any provision to the
contrary, has inherent power to recall an order to secure the ends
of justice and/or to prevent abuse of the process of the Court -
Neither the IBC nor the Regulations framed thereunder, in any
way, prohibit, exercise of such inherent power - Rather, s.60(5)
(c) which opens with a non-obstante clause, empowers the NCLT
(the Adjudicating Authority) to entertain or dispose of any question
of priorities or any question of law or facts, arising out of or in
relation to the insolvency resolution or liquidation proceedings of
the corporate debtor or corporate person under the IBC - Further,
[2024] 2 S.C.R.
259
Greater Noida Industrial Development Authority v.
Prabhjit Singh Soni & Anr.
r.11 of the NCLT Rules, 2016 preserves the inherent power of the
Tribunal - In the present case, the grounds taken in the recall
application qualified as valid grounds on which a recall of the
order of approval could be sought- Thus, the recall application
was maintainable notwithstanding that an appeal lay before the
NCLAT against the order of approval passed by the Adjudicating
Authority - Neither NCLT nor NCLAT while deciding the application/
appeal of the appellant took note of the fact that the appellant was
not served notice of the meeting of the Committee of Creditors
(COC); the entire proceedings up to the stage of approval of the
resolution plan were ex-parte to the appellant; the appellant had
submitted its claim, and was a secured creditor by operation of
law, yet the resolution plan projected the appellant as one who
did not submit its claim; and the resolution plan did not meet all
the parameters laid down in s.30(2) read with Regulations 37 and
38 of the CIRP Regulations, 2016 - Also, the Recall Application
was not barred by time - Impugned order set aside - Resolution
plan be sent back to the COC for re-submission after satisfying
the parameters set out by the Code. [Para 50, 52 and 55]
Insolvency and Bankruptcy Code, 2016 - The Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 - Claim submitted
with proof could not be overlooked merely because it is in
a different Form:
Held: Even if a claim submitted by a creditor against the Corporate
Debtor (CD) is in a Form not as specified in the CIRP Regulations,
2016, the same has to be given due consideration by the IRP or the
RP, as the case may be, if it is otherwise verifiable, either from the
proof submitted by the creditor or from the records maintained by
the CD - A fortiori, if a claim is submitted by an operational creditor
claiming itself as a financial creditor, the claim would have to be
accorded due consideration in the category to which it belongs
provided it is verifiable - The resolution plan disclosed that the
appellant did not submit its claim, when the unrebutted case of the
appellant was that it had submitted its claim with proof - Though,
the record indicates that t

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* Author
[2024] 2 S.C.R. 258 : 2024 INSC 102
Greater Noida Industrial Development Authority
v.
Prabhjit Singh Soni & Anr.
(Civil Appeal Nos. 7590-7591 of 2023)
12 February 2024
[Dr. Dhananjaya Y. Chandrachud, CJI, J. B. Pardiwala and
Manoj Misra,* JJ.]
Issue for Consideration
Whether in exercise of powers under s.60(5), Insolvency and
Bankruptcy Code, 2016, the Adjudicating Authority-NCLT can recall
an order of approval passed under s.31(1) of the IBC; whether the
application for recall of the order was barred by time; whether the
resolution plan put forth by the resolution applicant did not meet
the requirements of s.30(2) of the IBC read with Regulations 37
and 38 of the CIRP Regulations, 2016 and; what relief, if any, the
appellant is entitled to.
Headnotes
Insolvency and Bankruptcy Code, 2016 - ss.30(2), 31(1), 60(5)
- The Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations,
2016 - National Company Law Tribunal Rules, 2016 - r.11 -
Inherent power of the Tribunal - Recall of the order of approval
passed u/s.31(1) - Maintainability of application for recall -
Resolution plan put forth by the resolution applicant, if met
the requirements of s.30(2) r/w Regulations 37 and 38 of the
CIRP Regulations, 2016:
Held: A Court or a Tribunal, in absence of any provision to the
contrary, has inherent power to recall an order to secure the ends
of justice and/or to prevent abuse of the process of the Court -
Neither the IBC nor the Regulations framed thereunder, in any
way, prohibit, exercise of such inherent power - Rather, s.60(5)
(c) which opens with a non-obstante clause, empowers the NCLT
(the Adjudicating Authority) to entertain or dispose of any question
of priorities or any question of law or facts, arising out of or in
relation to the insolvency resolution or liquidation proceedings of
the corporate debtor or corporate person under the IBC - Further,
[2024] 2 S.C.R.
259
Greater Noida Industrial Development Authority v.
Prabhjit Singh Soni & Anr.
r.11 of the NCLT Rules, 2016 preserves the inherent power of the
Tribunal - In the present case, the grounds taken in the recall
application qualified as valid grounds on which a recall of the
order of approval could be sought- Thus, the recall application
was maintainable notwithstanding that an appeal lay before the
NCLAT against the order of approval passed by the Adjudicating
Authority - Neither NCLT nor NCLAT while deciding the application/
appeal of the appellant took note of the fact that the appellant was
not served notice of the meeting of the Committee of Creditors
(COC); the entire proceedings up to the stage of approval of the
resolution plan were ex-parte to the appellant; the appellant had
submitted its claim, and was a secured creditor by operation of
law, yet the resolution plan projected the appellant as one who
did not submit its claim; and the resolution plan did not meet all
the parameters laid down in s.30(2) read with Regulations 37 and
38 of the CIRP Regulations, 2016 - Also, the Recall Application
was not barred by time - Impugned order set aside - Resolution
plan be sent back to the COC for re-submission after satisfying
the parameters set out by the Code. [Para 50, 52 and 55]
Insolvency and Bankruptcy Code, 2016 - The Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 - Claim submitted
with proof could not be overlooked merely because it is in
a different Form:
Held: Even if a claim submitted by a creditor against the Corporate
Debtor (CD) is in a Form not as specified in the CIRP Regulations,
2016, the same has to be given due consideration by the IRP or the
RP, as the case may be, if it is otherwise verifiable, either from the
proof submitted by the creditor or from the records maintained by
the CD - A fortiori, if a claim is submitted by an operational creditor
claiming itself as a financial creditor, the claim would have to be
accorded due consideration in the category to which it belongs
provided it is verifiable - The resolution plan disclosed that the
appellant did not submit its claim, when the unrebutted case of the
appellant was that it had submitted its claim with proof - Though,
the record indicates that the appellant was advised to submit its
claim in Form B (meant for operational creditor) in place of Form
C (meant of financial creditor) - But, assuming the appellant did
not heed the advice, once the claim was submitted with proof,
it could not have been overlooked merely because it was in a
different Form - The Form in which a claim is to be submitted
is directory and not mandatory - What is necessary is that the
260
[2024] 2 S.C.R.
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claim must have support from proof - The resolution plan failed
not only in acknowledging the claim made but also in mentioning
the correct figure of the amount due and payable. [Paras 30, 54]
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 - Regulation 7,
8, 8-A, 9, 9-A, 12-14, 12A - Corporate insolvency resolution
process under - Discussed.
National Company Law Tribunal Rules, 2016 - r.11 - Inherent
power of the Tribunal - Exercise of - Application for recall,
maintainable on limited grounds:
Held: r.11 of the NCLT Rules, 2016 preserves the inherent power
of the Tribunal - Therefore, even in absence of a specific provision
empowering the Tribunal to recall its order, the Tribunal has power
to recall its order - However, such power is to be exercised
sparingly, and not as a tool to re-hear the matter - A Tribunal or a
Court is invested with such ancillary or incidental powers as may
be necessary to discharge its functions effectively for the purpose
of doing justice between the parties and, in absence of a statutory
prohibition, in an appropriate case, it can recall its order in exercise
of such ancillary or incidental powers - Ordinarily, an application
for recall of an order is maintainable on limited grounds, inter alia,
where the order is without jurisdiction; the party aggrieved with
the order is not served with notice of the proceedings in which
the order under recall has been passed; and the order has been
obtained by misrepresentation of facts or by playing fraud upon the
Court /Tribunal resulting in gross failure of justice. [Paras 48, 50]
Insolvency and Bankruptcy Code, 2016 - s.30(2) - The
Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations,
2016 - Regulations 37 and 38 - Resolution plan put forth
by the resolution applicant did not meet the requirements
of s.30(2) of the IBC read with Regulations 37 and 38 of the
CIRP Regulations, 2016 - Reasons stated. [Para 54]
Insolvency and Bankruptcy Code, 2016 - s.60 - Companies
Act, 2013 - ss.408, 409 - National Company Law Tribunal
Rules, 2016 - r.11 - Code of Civil Procedure, 1908 - s.151:
Held: s.60 specifies that the Adjudicating Authority in relation
to insolvency resolution and liquidation for corporate persons
including corporate debtors and personal guarantors thereof shall
[2024] 2 S.C.R.
261
Greater Noida Industrial Development Authority v.
Prabhjit Singh Soni & Anr.
be the NCLT having territorial jurisdiction over the place where
the registered office of the corporate person is located - s.60(5)
provides that notwithstanding anything to the contrary contained
in any other law for the time being in force, the NCLT shall have
jurisdiction to entertain or dispose of any application or proceeding
by or against the corporate debtor or corporate person; any claim
made by or against the corporate debtor or corporate person,
including claims by or against any of its subsidiaries situated in
India; and any question of priorities or any question of law or
facts, arising out of or in relation to the insolvency resolution or
liquidation proceedings of the corporate debtor or corporate person
under the IBC - r.11 of the 2016 Rules, framed u/s.469 of the
Companies Act 2013, which is in pari materia with s.151 of CPC,
1908, preserves the inherent powers of the Tribunal. [Paras 40-42]
Insolvency and Bankruptcy Code, 2016 - Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 - Duties performed
by Resolution Professional - Discussed.
Words and Phrases - Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 - "a person claiming to be an operational
creditor" in Regulation 7; "a person claiming to be a financial
creditor" in Regulation 8:
Held: Indicate that the category in which the claim is submitted is
based on the own understanding of the claimant - There could be
a situation where the claimant, in good faith, may place itself in a
category to which it does not belong - However, what is important
is, the claim so submitted must be with proof - As to what could
form proof of the debt/ claim is delineated in sub-regulation (2)
of Regulations 7 and 8 of the CIRP Regulations, 2016. [Para 20].
Case Law Cited
Ghanashyam Mishra & Sons (P) Ltd. vs. Edelweiss Asset
Reconstruction Co. Ltd., [2021] 13 S.C.R. 737: (2021)
9 SCC 657; Jaypee Kensington Boulevard Apartments
Welfare Association vs. NBCC (India) Ltd., [2021] 12
SCR 603 : (2022) 1 SCC 401; Manohar Lal Chopra
vs. Rai Bahadur Rao Raja Seth Hiralal, [1962] Suppl.
SCR 450 : AIR 1962 SC 527; Grindlays Bank Ltd. vs.
Central Govt. Industrial Tribunal, [1981] 2 S.C.R. 341:
1980 Supp SCC 420; State of Punjab vs. Davinder Pal
262
[2024] 2 S.C.R.
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Singh Bhullar, [2011] 15 SCR 540 : (2011) 14 SCC
770; New India Assurance Co. Ltd. vs. Krishna Kumar
Pandey, (2021) 14 SCC 683; Budhia Swain vs. Gopinath
Deb, [1999] 2 SCR 1189 : (1999) 4 SCC 396; Union
Bank of India vs. Financial Creditors of M/s Amtek Auto
Ltd. & Ors., Civil Appeal No.4620 of 2023 - relied on.
New Okhla Development Authority vs. Anand Sonbhadra,
[2022] 5 SCR 319 : (2023) 1 SCC 724; RE: Cognizance
For Extension of Limitation, [2021] 2 SCR 640 : (2021)
5 SCC 452 - referred to.
List of Acts
Insolvency and Bankruptcy Code, 2016; The Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016; U.P. Industrial Area
Development Act, 1976; Companies Act, 2013; National Company
Law Tribunal Rules, 2016; Code of Civil Procedure, 1908.
List of Keywords
Inherent power of the Tribunal; Recall application; Claim submitted
with proof; Form not as specified in CIRP Regulations; Form
directory not mandatory; Ancillary or incidental powers; pari materia.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.7590-7591
of 2023
From the Judgment and Order dated 24.11.2022 of the National
Company Law Appellate Tribunal in CAAT (I) No. 867 of 2021 and
IA No. 2315 of 2021
Appearances for Parties
Ravindra Kumar, Sr. Adv, Binay Kumar Das, Vipin Saxena, Ms. Neha
Das, Ms. Priyanka Das Advs. for the Appellant.
Dr. Abhishek Manu Singhvi, Siddharth Bhatnagar, Sr. Advs.,Vardhman
Kaushik, Nishant Gautam, Dhruv Joshi, Abhinav Singh, Mayank
Sharma, Ms. Sanjana Mehrotra, Pracheta Kar, Aditya Sidhra, Nadeem
Afroz, Ajay Kanojia, Ayush Sharma, V M Kannan, G.P. Madaan,
Aditya Madaan, Mrs. Harimohana N, Naresh Kaushik, Mrs. Lalita
Kaushik, Advs. for the Respondents.
[2024] 2 S.C.R.
263
Greater Noida Industrial Development Authority v.
Prabhjit Singh Soni & Anr.
Judgment / Order of the Supreme Court
Judgment
Manoj Misra, J.
1.
These appeals under Section 62 of the Insolvency and Bankruptcy
Code, 20161 are directed against the judgment and order2 of the
National Company Law Appellate Tribunal, Principal Bench, New
Delhi3 passed in Company Appeal (AT) (Ins.) No. 867 of 2021 and
I.A. No. 2315 of 2021, whereby the appellant's appeal against the
order of the National Company Law Tribunal, New Delhi4 dated
05.04.2021 has been dismissed.
2.
By the order dated 05.04.2021, NCLT had dismissed two applications
filed by the appellant under Section 60(5) of the IBC, namely:
(a) I.A. No.1380/ 2021, inter alia, to recall the order dated 04.08.2020
passed by NCLT in I.A. No. 2201 (PB)/2020 in Company Petition
No. (IB)-272 (ND)/ 2019; and
(b) I.A. No.344/ 2021, inter alia, questioning the decision of the
Resolution Professional (hereinafter referred to as the RP) in
treating the appellant as an operational creditor and not informing
the appellant about the meetings of the Committee of Creditors5.
Factual Background
3.
The appellant being a statutory authority constituted under Section
3 of the U.P. Industrial Area Development Act, 19766 acquired land
for setting up an urban and industrial township. On 28.10.2010, one
of the plots of land acquired by it, namely, Plot No. 01-C, Sector
16C, Greater Noida, District Gautam Budh Nagar, U.P., was allotted,
by way of lease for 90 years, to M/s. JNC Construction (P) Ltd (the
1
 IBC
2
 Order dated 24.11.2022
3
 NCLAT
4
 NCLT
5
COC
6
1976 Act
264
[2024] 2 S.C.R.
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Corporate Debtor7) for a residential project, by charging premium,
payable in instalments starting from 29.10.2012 up to 29.04.2020,
after initial moratorium of 24 months, albeit subject to payment of
interest as well as penal interest, while reserving right to cancel the
lease and resume the demised land, subject to certain conditions.
The CD committed default in payment of instalments and was served
with demand cum pre-cancellation notice.
4.
A Company Petition No. (IB) 272 (PB)/ 2019 was filed against the CD
for initiating Corporate Insolvency Resolution Process8, which was
admitted on 30.05.2019. Consequent thereto, claims were invited
through a public announcement.
5.
Pursuant to the public notice, in the month of January 2020, appellant
submitted a claim of Rs. 43,40,31,951, being unpaid instalments
payable towards premium for the lease. The claim was set up by
the appellant as a financial creditor of the CD.
6.
However, the RP treated the appellant as an operational creditor and,
vide e-mail dated 04.02.2020, requested the appellant to submit its
claim in Form B, as an operational creditor of the CD.
7.
The appellant did not submit its claim afresh as an operational creditor.
In the meantime, the COC approved a plan which was presented to
the Adjudicating Authority (NCLT) for approval. The NCLT vide order
dated 04.08.2020 approved the same.
8.
On getting information through letter dated 24.09.2020 that the plan
has been finalised and approved, on 06.10.2020 the appellant filed
I.A. No.344 of 2021 questioning, inter alia, the resolution plan, the
decision of the RP to treat the appellant as an operational creditor,
and all actions in pursuance thereof. Another I.A. No.1380/2021
was filed on 15.03.2021 seeking, inter alia, recall of the order dated
04.08.2020.
9.
In the two applications referred to above, the appellant pleaded,
inter alia, that, --
7
CD
8
CIRP
[2024] 2 S.C.R.
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Greater Noida Industrial Development Authority v.
Prabhjit Singh Soni & Anr.
(a) there was gross error on part of the RP in treating the appellant as
an operational creditor, particularly, when it had no adjudicatory
power under Regulation 13 of The Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 20169;
(b) the resolution plan erroneously states that appellant did not
submit a claim when, in fact, it was submitted;
(c)
appellant being owner of the land with statutory charge over
assets of the CD ought to have been given top priority for its
dues as a secured creditor;
(d) no opportunity of hearing was given to the appellant by the
COC, and the entire process right up to the approval of the
plan by the Adjudicating Authority was ex parte.
NCLT's Order
10. The NCLT, vide order dated 5.4.2021, rejected the aforesaid
applications, inter alia, on the ground that, despite lapse of seven
months between the date of filing its claim in January, 2020 and
the date of approval of the plan in August 2020, the appellant took
no steps against the RP for not taking a decision on its claim, even
though it was aware about initiation of the CIRP, and now it is not
permissible to take a decision on the claim application of the appellant
as the CIRP is complete consequent to approval of the plan.
Appeal before NCLAT
11. Aggrieved with the order of the NCLT, the appellant filed an appeal
before the NCLAT, inter alia, on the following grounds:
(i)
The appellant was a financial creditor and, therefore, ought to
have been a member of the COC. On account of absence of
the appellant in the COC, the approval of the resolution plan
by the COC and, thereafter, by the NCLT is rendered invalid;
9
CIRP Regulations 2016
266
[2024] 2 S.C.R.
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(ii)
By virtue of Sections 1310, 13A11and 1412of the 1976 Act, the
appellant had a charge over the assets of the CD and was
therefore a secured creditor within the meaning of Section
3(30)13 read with Section 3(31)14 of the IBC, yet the resolution
plan does not treat the appellant as a secured creditor;
(iii) The appellant had submitted its claim with proof, yet the appellant
was shown as one who submitted no claim. Additionally, the
appellant was neither informed of the meetings of the COC nor
adequate amount, commensurate to its status as a secured
creditor and owner of the land with statutory rights, was allocated
to it in the resolution plan, which is violative of the provisions
of Section 30(2)15 of the IBC; and
10
Section 13.- Imposition of penalty and mode of recovery of arrears.- Where any transferee makes any
default in the payment of any consideration money or instalment thereof or any other amount due on
account of the transfer of any site or building by the Authority or any rent due to the Authority in respect
of any lease, or where any transfer or occupier makes any default in payment of any amount of fee or
tax levied under this Act the Chief Executive Officer may direct that in addition to the amount of arrears,
a further sum not exceeding that amount shall be recovered from the transferee or occupier, as the
case may be, by way of penalty.
11
Section 13.A- Any amount payable to the Authority under Section 13 shall constitute a charge over the
property and may be recovered as arrears of land revenue or by attachment and sale of property in the
manner provided under Sections 503, 504, 505, 506, 507, 508, 509, 510, 512, 513, and 514 of the Uttar Pradesh Municipal Corporations Act, 1959 [Act 2 of 1959] and such provisions of the said Act shall
mutatis mutandis apply to the recovery of dues of an authority as they apply to the recovery of a tax
due to a Municipal Corporation, so however, that references in the aforesaid Sections of the said Act to
"Municipal Commissioner", "Corporation Officer" and "Corporation" shall be construed as references to
"Chief Executive Officer" and "Authority" respectively:
provided that more than one modes of recovery shall not be commenced or continued simultaneously
12
Section 14.- Forfeiture for breach of conditions of transfer.- (1) in the case of non-payment of consideration money or any installment thereof on account of the transfer by the Authority of any site or building
or in case of breach of any condition of such transfer or breach of any rules or regulations made under
this Act, the Chief Executive Officer may resume the site or building so transferred and may further
forfeit the whole or any part of the money, if any, paid in respect thereof.
(2) Where the Chief Executive Officer orders resumption of any site or building under sub-section (1)
the Collector may, on his own requisition, cause possession thereof to be delivered to him and may for
that purpose use or causes to be used such force as may be necessary
13
Section 3 (30).- "secured creditor" means a creditor in favour of whom a security interest is created.
14
Section 3(31).- "security interest" means right, title or interest or a claim to a property, created in favour
of, or provided for a secured creditor by a transaction which secures payment or performance of an
obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other
agreement or arrangement securing payment or performance of any obligation of any person:
Provided that security interest shall not include a performance guarantee.
15
Section 30. Submission of Resolution Plan. - (1).....................

(2) The resolution professional shall examine each resolution plan received by him to confirm that each
resolution plan-
(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board
in priority to the payment of other debts of the corporate debtor;
(b) provides for the payment of debts of operational creditors in such manner as may be specified by
the Board which shall not be less than-
(i) the amount to be paid to search creditors in the event of a liquidation of the corporate debtor
[2024] 2 S.C.R.
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Greater Noida Industrial Development Authority v.
Prabhjit Singh Soni & Anr.
(iv) The NCLT failed to address and appreciate the grounds taken
in the correct perspective.
Findings of NCLAT
12. The appeal preferred by the appellant was dismissed by observing,
inter alia,
(i)
the materials on record reflect that the RP had informed the
appellant vide e-mail dated 04.02.2020 about its status as an
Operational Creditor and to submit its claim in Form 'B', yet
the appellant chose not to file its claim;
(ii)
in New Okhla Development Authority vs. Anand Sonbhadra16,
it was held that disbursement is an indispensable requirement
to constitute a financial debt within the meaning of Section
5(8)17 of the IBC and, that too, the disbursement must be from a
under section 53;
(ii) the amount that would have been paid to such creditors, if the amount to be distributed under
the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of
section 53;
whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in
favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less
than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the
event of a liquidation of the corporate debtor.
Explanation 1.-- For the removal of doubts, it is hereby clarified that a distribution in accordance with the
provisions of this clause shall be fair and equitable to such creditors.
Explanation 2.-- For the purposes of this clause it is hereby declared that on and from the date of commencement of the Insolvency and Bankruptcy Code [Amendment] Act, 2019, the provisions of this
clause shall also apply to the corporate insolvency resolution process of a corporate debtor----
(i) where the resolution plan has not been approved or rejected by the adjudicating authority;
(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not
time barred under any provision of law for the time being in force; or
(iii) where a legal proceeding has been initiated in any court against the decision of the adjudicating
authority in respect of a resolution plan;
(c) provides for the management of the affairs of the corporate debtor after approval of the resolution
plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in force;
(f) conforms to such other requirements as may be specified by the Board.
16
[2022] 5 SCR 319 : (2023) 1 SCC 724
17
Section 5(8).-"financial debt" means a debt along with interest, if any, which is disbursed against the
consideration for the time value of money and includes -
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit facility or its dematerialised equivalent;
(c) any amount raised pursuant to any note, purchase facility or the issue of bonds, notes, debentures,
loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or higher purchase contract which is deemed as a
financial or capital lease under the Indian Accounting Standards or such other accounting standards as
may be prescribed;
(e) receivables sold or discounted other than any receivables sold on non-recourse basis;
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creditor to a debtor, and as the lease executed by the appellant
was not a financial lease or capital lease, the appellant does
not qualify as a financial creditor;
(iii) the resolution plan was approved by the Adjudicating Authority
on 04.08.2020, and the successful resolution applicant (SRA)
seeking implementation of the plan informed the appellant
vide letter dated 24.09.2020 about the plan, yet I.A. No.344/
2021 was not filed before 06.10.2020 and I.A. No. 1380/2021,
seeking recall, was filed only on 15.03.2021, which shows that
the appellant had not been diligent in pursuing its right, if any,
therefore the challenge, post approval of the resolution plan,
is liable to be rejected; and
(iv) there appears no material irregularity in the approval of the
Resolution Plan, particularly, when the commercial wisdom of
the COC is not justiciable.
13. We have heard Sri Ravindra Kumar, learned senior counsel, for the
appellant; Dr. Abhishek Manu Singhvi, learned senior counsel, for
respondent no.2 (Resolution Applicant); and Sri V.M. Kannan for
respondent no.1 (Resolution Professional).
Submissions on behalf of the appellant
14. The learned counsel for the appellant, inter alia, submitted:
(a) There is no dispute that appellant had submitted its claim with
proof on 30.01.2020 as a financial creditor having security
interest over the assets of the CD. Even if the appellant was
not a financial creditor, the resolution plan ought to have noticed
(f) any amount raised under any other transaction, including any forward sale or purchase agreement,
having the commercial effect of a borrowing;
Explanation.-- For the purposes of this sub clause,--
(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount
having the commercial effect of a borrowing; and
(ii) the expressions, "allottee" and "real estate project" shall have the meanings respectively assigned
to them in clauses (d) and (zn) of Section 2 of the Real Estate (Regulation and Development Act, 2016
(16 of 2016);
(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market
value of such transaction shall be taken into account;
(h) any counter indemnity obligation in respect of a guarantee, indemnity bond, documentary letter of
credit or any other instrument issued by a bank or financial institution;
(i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items
referred to in sub-clauses (a) to (h) of this clause;
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its claim as a secured creditor whereas the order of approval
dated 4.8.2020 describes the appellant as one who did not
submit its claim.
(b) The meetings of the COC were not notified to the appellant to
enable its participation. In absence thereof, the resolution plan
stood vitiated.
(c)
At the time of approving the resolution plan, the adjudicating
authority failed to consider whether the plan had made provisions
commensurate to appellant's claim, and the statutory charge
which the appellant enjoyed over the assets of the CD. Not
only that, it overlooked the ownership and statutory rights
of the appellant over the land and thereby failed to consider
whether the plan was feasible and viable. In absence of such
consideration, the order of approval stood vitiated.
(d) The finding that there had been a delay on part of the appellant
in pursuing its remedies is misconceived, particularly when it was
established on record that I.A. No.344/ 2021 was filed promptly
on 6.10.2020 upon getting information on 24.09.2020 from the
monitoring agency regarding approval of the plan. Likewise,
I.A. No.1380/ 2021 was filed immediately on 15.03.2021 when
suspension of the period of limitation for any suit, appeal,
application or proceeding, imposed between 15.03.2020 and
14.03.2021, was lifted in terms of this Court's order dated
8.03.2021 in RE: Cognizance For Extension of Limitation18.
Submissions on behalf of the respondents
15. Dr. Abhishek Manu Singhvi, leading the arguments on behalf of the
respondents, submitted that the issue as to whether dues payable to
an Industrial Area Development Authority, like the appellant, towards
lease/ allotment premium / rental, would be a financial debt or not is
no longer res integra, as it stands settled by a decision of this Court
in Anand Sonbhadra (supra), wherein it has been held that it is not
a financial debt. Therefore, the appellant had no voting right in the
COC. And since the appellant pressed its case only on the ground
that it is a financial creditor, its challenge to the order of approval
had no basis. More so, when the commercial wisdom of the COC
18
[2021] 2 SCR 640 : (2021) 5 SCC 452
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is not justiciable. Further, once the resolution plan, which makes a
provision for the appellant, is approved by the Adjudicating Authority,
it cannot be questioned through a recall application.
Analysis
16. Before we proceed to test the correctness of the impugned order
against the weight of rival submissions, it would be useful to have
a look at the statutory provisions of the IBC and the Regulations
framed thereunder with reference to the corporate insolvency
resolution process.
17. As per the provisions of the IBC, on admission of a petition, and
declaration of a moratorium under Section 13, a public announcement
is made inviting claims against the CD by a specified date. The
manner in which a public announcement is to be made and claims
are to be submitted, is described in the CIRP Regulations 2016.
18. Regulation 719 of CIRP Regulations, 2016 deals with submission of a
claim by a person who claims himself to be an operational creditor.
Such claim is to be submitted in Form B specified in the Schedule.
Whereas Regulation 820 deals with submission of a claim by a person
who claims himself to be a financial creditor. Such a claim is to be
submitted in Form C. Regulations 8-A, 9 and 9-A deal with other
classes of creditors with which we are not concerned here.
19
7. Claims by operational creditors.-(1) A person claiming to be an operational creditor, other than
workman or employee of the corporate debtor, shall submit claim with proof to the interim resolution
professional in person, by post or by electronic means in Form B of the Schedule:
Provided that such person may submit supplementary documents or clarifications in support of the
claim before the constitution of the committee.
(2) The existence of debt due to the operational creditor under this regulation may be proved on the
basis of-
(a) the records available with an information utility, if any; or
(b) other relevant documents, including-
(i) a contract for the supply of goods and services with corporate debtor;
(ii) an invoice demanding payment for the goods and services supplied to the corporate debtor;
(iii) an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any; or
(iv) financial accounts.
20
8. Claims by financial creditors.-(1) A person claiming to be a financial creditor, other than a
financial creditor belonging to a class of creditors, shall submit claim with proof to the interim resolution
professional in electronic form in Form C of the Schedule:
Provided that such person may submit supplementary documents or clarifications in support of the
claim before the constitution of the committee.
(2) The existence of debt due to the financial creditor may be proved on the basis of-
(a) the records available with an information utility, if any; or
(b) other relevant documents, including-
(i) a financial contract supported by financial statements as evidence of the debt;
(ii) a record evidencing that the amounts committed by the financial creditor to the corporate
debtor under a facility has been drawn by the corporate debtor;
(iii) financial statements showing that the debt has not been paid; or
(iv) an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any.
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19. Regulation 1221 mandates submission of proof of the claim by the
date specified. Whereas, Regulation 1322 speaks of verification of
claims by the interim resolution professional (IRP) or the RP, as the
case may be. Regulation 1423 provides for determination of amount
of claim where the amount claimed is not precise.
20. The use of the words "a person claiming to be an operational
creditor" in the opening part of Regulation 7, and the words "a
person claiming to be a financial creditor" in Regulation 8, indicate
that the category in which the claim is submitted is based on the
own understanding of the claimant. Thus, there could be a situation
where the claimant, in good faith, may place itself in a category to
which it does not belong. However, what is important is, the claim
so submitted must be with proof. As to what could form proof of the
debt/ claim is delineated in sub-regulation (2) of Regulations 7 and
8 of the CIRP Regulations, 2016.
21
12. Submission of proof of claims.-(1) Subject to sub-regulation (2), a creditor shall submit claim
with proof on or before the last date mentioned in the public announcement.
(2) A creditor, who fails to submit claim with proof within the time stipulated in the public announcement,
may submit the claim with proof to the interim resolution professional or the resolution professional, as
the case may be, on or before the ninetieth day of the insolvency commencement date.
(3) Where the creditor in sub-regulation (2) is a financial creditor under Regulation 8, it shall be included in the committee from the date of admission of such claim:
Provided that such inclusion shall not affect the validity of any decision taken by the committee prior to
such inclusion.
22
13. Verification of claims.-(1) The interim resolution professional or the resolution professional, as
the case may be, shall verify every claim, as on the insolvency commencement date, within seven
days from the last date of the receipt of the claims, and thereupon maintain a list of creditors containing
names of creditors along with the amount claimed by them, the amount of their claims admitted and the
security interest, if any, in respect of such claims, and update it.
(2) The list of creditors shall be-
(a) available for inspection by the persons who submitted proofs of claim;
(b) available for inspection by members, partners, directors and guarantors of the corporate debtor
or their authorised representatives;
(c) displayed on the website, if any, of the corporate debtor;
(ca) filed on the electronic platform of the Board for dissemination on its website:
Provided that this clause shall apply to every corporate insolvency resolution process ongoing and
commencing on or after the date of commencement of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2020;
(d) filed with the adjudicating authority; and
(e) presented at the first meeting of the committee.
23
14. Determination of amount of claim.-(1) Where the amount claimed by a creditor is not precise
due to any contingency or other reason, the interim resolution professional or the resolution professional, as the case may be, shall make the best estimate of the amount of the claim based on the
information available with him.
(2) The interim resolution professional or the resolution professional, as the case may be, shall revise
the amounts of claims admitted, including the estimates of claims made under sub-regulation (1), as
soon as may be practicable, when he comes across additional information warranting such revision."
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21. Once a claim is submitted with proof under any of the Regulations
(i.e., Regulations 7, 8, 8-A, 9 and 9-A), the IRP or the RP, as the
case may be, as per Regulation 13, has to verify the claim, as on
the insolvency commencement date, and thereupon maintain a list
of creditors containing names of creditors along with the amount
claimed by them, the amount of their claims admitted and the security
interest, if any, in respect of such claims, and update it in terms of
Regulation 12 A24.
22. As it could be noticed from the CIRP Regulations, 2016, on submission
of a claim with proof, the IRP or the RP, as the case may be, has to
verify the claim and prepare a list of creditors containing names of
creditors along with the amount claimed by them and security interest,
if any, the logical conclusion derivable from the provisions analysed
above would be that the Form in which a claim is to be submitted
under the CIRP Regulations 2016 is directory and not mandatory.
What is important is, the claim must be supported by proof.
23. On collation of claims received against the CD, the IRP has to
constitute a COC. As per Section 21 (2) of the IBC, subject to other
provisions of Section 21, the COC must comprise all financial creditors
of a CD. Under Section 22 of the IBC, the COC appoints an RP in
its first meeting. It may, however, resolve to appoint the IRP as the
RP, subject to confirmation by the Board.
24. The RP has many important duties. Some of the duties which an
RP has to perform, under Section 25 of the IBC, are to: (a) take
immediate custody and control of all the assets of the CD, including
the business records of the CD; (b) maintain an updated list of
claims; (c) convene and attend all meetings of the COC; (d) prepare
information memorandum in accordance with Section 29 read with
Regulation 36 of the CIRP Regulations 201625; (e) invite prospective
24
!2 A. Updation of claim. - A creditor shall update its claim as and when the claim is satisfied, partly
or fully, from any source in any manner, after the insolvency commencement date.
25
Regulation 36. Information memorandum. - (1) Subject to sub regulation [4], the resolution professional shall submit the information memorandum in electronic form to each member of the committee
within 2 weeks of his appointment, but not later than 54th day from the insolvency commencement
date, whichever is earlier.
(2) the information memorandum shall contain the following details of the corporate debtor--
[a] assets and liabilities with such description, as on the insolvency commencement date, as are
generally necessary for ascertaining their values.
Explanation.- Description includes the details such as date of acquisition cost of acquisition, remaining useful life identification number, depreciation charged, book value, and any other relevant
details.
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resolution applicants to submit a resolution plan or plans; and (f)
present all resolution plans at the meetings of the COC.
25. The meetings of the COC are to be conducted by the RP. Sub
section (3) of Section 2426, inter alia, provides that the RP shall
give notice of each meeting of the COC to the operational creditors
or their representative(s) if the amount of their aggregate dues is
not less than ten percent of the debt. Regulation 19 of the CIRP
Regulations, 2016 further mandates the RP to ensure that notice of
the meeting is given to every participant.