Ghyansham Misra and Sons v EARC

 Limiting the Jurisdiction of the NCLT under section 60(5)

FACTUAL BACKGROUND

• This case relates to an application filed by the Successful Resolution applicant u/s 60(5) of the IBC,2016 r/w Rule 11 & 56 of NCLT Rules, 2016 for constantly refusing to acknowledge the terms of the Resolution Plan as approved by the Hon’ble Tribunal vide dated 22.06.2018 in CP(IB)No. 371/2017. The applicant is seeking from the Hon’ble Tribunal for appropriate penal orders and directions against Respondent. Applicant No.2 was admitted into CIRP vide an order dated 03.08.2017 in CP (IB) No. 371/2017 by the Hon’ble Tribunal.
• APNRL benefited with certain credit facilities from IIFL and it is secured by Applicant No.2 by pledging the shares of APNRL total of Rs. 22.40 Crores. Thereafter, Respondent No.1 claims to be assignee of the debt of APNRL from IIFL. As due to losses and incapability to pay the dues, the financial creditor is bound to file the insolvency application with CP No. 371/KB/2017 u/s 7 of IBC,2016 before the Hon’ble Tribunal.
• Further the application was considered and admitted on 3.8.2017 for the CIRP was initiated by the Hon’ble Tribunal. During the moratorium period u/s 14 of the IBC,2016, the Respondent No.1 illegally proceeded to transfer the invoked shares to its own which cause the violation of moratorium period. Applicant No.2 wrote an email to the Respondent No.1 for that invocation of pledge of share is contrary to the order of mortarium.
• Thereafter the Respondent No.1 proceeded to file an application C.A(IB) No. 470/KB/2018 before the Hon’ble Tribunal challenging the decision of the Resolution Professional. The Resolution plan of Applicant is approved by the Hon’ble NCLAT & Hon’ble Supreme Court, applicant is entitled to 22 .40 crores shares held by EARC for monetize the same.
• Thereafter 22^nd June 2018 the respondent issue a fresh notice of invocation dated 17.7.2018 for violating the terms of the approved Resolution Plan and further the respondent transferred the pledged share in his favor on 2^nd May 2018. The respondent filed an appeal CA(AT) insolvency No. 444/2018 before the NCLAT and the appeal was dismissed and it was held that the Resolution Plan is rightly approved.

CONTENTION OF APPLICANT

In the resolution plan of the applicant approved by NCLT-Kolkata in CA.No.402/KB/2018 by order dated 22.06.2018 provided a provision to the pledged shares of APNRL held by corporate debtor, thus after the approval of Resolution plan the rights of the respondent over the secured shares are extinguished. As a successful resolution applicant, the applicant has the right to hold the shares of APNRL of the corporate debtor, now with the physical possession of respondent. In the plan it is provided for retention of the pledged shares of 22.40 crores of APNRL held by corporate debtor amounting a total of Rs.22.40 crores with further liberty to monetize the same as part of the implementation of the resolution plan. The resolution plan approved by NCLT binding upon all stake holders under section 31(1) of IBC 2016. The respondent issued fresh notice of invocation dated 17.07.2018 in violation of resolution plan. The respondent wrongly invoked and transferred pledged shares in its favour. Letter was sent to respondent to surrender the pledged shares, even after the receipt of letters and reminders the respondent failed to surrender the pledged shares hence this application.

CONTENTION OF RESPONDENT

The respondent has a legal right for the Possession of the shares. In the resolution plan it is mentioned that the applicant intends to monetise the shares as and when the opportunity is presented. The resolution plan has neither dealt with the issue pertaining to pledge of shares nor explicitly extinguished the rights of the pledgee. The issue of pledge of shares has not yet been decided on its own merits before any forum till date. The applicant is described as a mere trustee of the pledged shares. The pledged shares are excluded from the approved resolution plan.

ISSUES INVOLVED

1. Whether the rejection of claim of respondent by resolution professional amounts to extinguishment of pledge created under document dated 05.12.2014?
2. Whether the rights of the respondent over the shares of APNRL as an assignee of pledge is got extinguished because of approval of resolution plan of the applicant by NCLT-Kolkata by order dated 22.06.2018?
3. Whether the defence plea of the respondent in this application over the shares of APRNL as an assignee of pledge is barred under the principal of resjudicata in view of order dated 22.06.2018 passed in Ι.Α.No.470/KB/2018?
4. Whether the applicant is entitled for possession of pledged shares of APNRL in pursuance of order dated 22.06.2018 passed in IA No.402 & 470/KB/2018 as prayed in the application?

COURT FINDINGS

1. The Resolution Professional causing rejection of claims of the respondent due to he invoked the pledge during the moratorium period does not leads to extinguishment of pledge.

2. The NCLT order was confirmed by NCLAT- Delhi in C.A No. 437/2018 by order dated 23.04.2019 and confirmed by Apex court in Civil Appeal No. 8129/2019 by order dated 13.04.2021. The claim of the respondent was rejected because the respondent invoked the pledge during the moratorium period.

3. There the validity of pledge of shares of APNRL, and entitlement of the respondent to retain the secured shares and enforce its right are not involved hence the plea of resjudicata is not applicable.

4. The right of the respondent to enforce the share pledge agreement is not extinguished because of the approval of resolution plan by order dated 22.06.2018 and the applicant has no right to claim the possession of pledged shares.

JUDGEMENT

The Authority came to a conclusion that during the period of moratorium the invocation notice issued is not valid and in consequence held that rejection of claim of the respondent by Resolution professional is valid. There the validity of pledge of shares of APNRL, and entitlement of the respondent to retain the secured shares and enforce its right are not involved hence the plea of resjudicata is not applicable.  It is concluded that the approval of resolution plan of the applicant by NCLT has not extinguished pledge right of the respondent in respect of shares of APRNL and the approved plan doesn’t recognize or con fer any right upon the applicant over the pledged APNRL shares and the order passed in CA No. 470/KB/2018 will not operate as resjudicata in the consequence. The Appeal is dismissed.

REFERENCES

1. Vikas Dahiya Vs Arrow Engineering Ltd CA(AT)(Ins) No. 699 & 812/2022
2. Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs NBCC(India) Ltd. & Ors (Civil Appeal No. 3395/2020)

CLICK HERE TO DOWNLOAD THE JUDGEMENT