NATIONAL COMPANY LAW APPELLATE TRIBUNAL

AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) (INS) No. 332 of 2023
(Under Section 61 of the Insolvency and Bankruptcy Code, 2016,
read with Rule 22 of the NCLAT Rules, 2016)
(Arising out of the `Impugned Order’ dated 25.05.2023 in
IA No. 399 / BB / 2020 in CP (IB) No. 189/BB/2018, passed by the
`Adjudicating Authority’, (`National Company Law Tribunal’,
Bengaluru Bench)

In the matter of:

ESSEL FINANCE ADVISORS AND

MANAGERS LLP
Having Registered Office at
A Wing, 18th Floor, Marathon Futurex,
N.M. Joshi Marg,
Lower Parel,
Mumbai – 400013
Email: [email protected]
Represented by its Authorized Signatory
Mr. Vishnu Prakash Rathore …. Appellant

V.

MR. PANKAJ SRIVASTAVA

LIQUIDATOR
For M/s. Samruddhi Realty Limited
Having its Office at:
No, 29, 1st Floor, SN Complex,
14th Main Road, E-Block Extension,
Sahakara Nagar,
Bengaluru – 560092 …. Respondent No. 1

ASSETS CARE AND

RECONSTRUCTION ENTERPRISE
LTD. (ACRE)
Having Registered Office at:
2nd Floor, Mohan Dev Building,
13, Tolstoy Marg,

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 1 of 56
New Delhi – 110001
Having Branch Office at:
B1504, One BKC, G-Block,
Bandra Kurla Complex,
Mumbai – 400051 …. Respondent No. 2

Phoenix ARC Private Limited

Having its Office at:
No. 22, ``Kotak House’’,
4th Floor, M.G. Road,
Bangalore – 560001
Email: [email protected] …. Respondent No. 3

Present:

For Appellant : Mr. V.V. Sivakumar & Mr. SR. Tejas, Advocates

For Respondent No. 1 : Mr. Abhishek Anand, Advocate for R1

JUDGMENT
(Hybrid Mode)

Justice M. Venugopal, Member (Judicial):

Introduction:

The Appellant has preferred the instant Comp. App (AT) (CH) (INS.) No.

332 of 2023, on being dissatisfied with the `Impugned Order’, dated 25.05.2023

in IA No. 399 / BB / 2020 in CP (IB) No. 189/BB/2018 (Filed by the

`Respondent No. 1 / Appellant’), under Section 9 of the I & B Code, 2016,

passed by the `Adjudicating Authority’, `National Company Law Tribunal’,

Bengaluru Bench, Bengaluru.

Comp. App (AT) (CH) (INS) No. 332 / 2023

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2. The `Adjudicating Authority’, `National Company Law Tribunal’,

Bengaluru Bench, while passing the `Impugned Order’, dated 25.05.2023 in IA

No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018 (Filed by the `Respondent

No. 1 / Appellant’), under Section 9 of the I & B Code, 2016, among other

things, at Paragraph Nos. 12 to 16, had observed the following:

12. ``Moreover on perusal of the relationship note sent by the Respondent No.1 to Liquidator
which is attached along with the rejoinder it is seen that Respondent No. 1 had invested up
to Rs. 55 crores by subscribing to 5500 redeemable secured non-convertible debentures of Rs.
1,00,000/- each. Accordingly, respondent No. 1 falls within the purview of ‘ financial
institution’ as mandated under section 45 (i) (c) (i) and 45 (I) (c) (ii) of Reserve Bank of India
Act, 1934.

13. It is pertinent to point out that there has been no objection filed on behalf of respondent
No. 2, and accordingly this Tribunal forfeited the right to file objection on 25.08.2022.
Further, on perusal of the documents submitted by the Liquidator it is seen that respondent
No. 2 vide email dated 17.04.2020 has informed that the charge over the properties of the
Corporate Debtor will not be relinquished to the Liquidation Estate and it will proceed under
the SARFAESI Act for the sale of properties of the Corporate Debtor. Further, vide email dated
18.06.2020 respondent No. 2 gave assurance to the Liquidator to pay the Liquidation Process
costs of the Corporate Debtor. The said email has been found attached along with the
petition.

14. It is seen from the submissions made by the Liquidator that he had vide letter dated
26.08.2020 informed respondent No. 3 to pay the their share of Liquidation Cost of Rs.
36,74,771/- , which included the approved liquidation cost of Rs. 6,68,898/- and Liquidator’s
Fee of Rs. 30,05,873/-. However, it is seen that respondent No. 3 has submitted its intention
to opt out of the Liquidation process and to deal with the secured assets as per Section 52 of
Insolvency and Bankruptcy Code. It is pertinent to note that both the Liquidator and 3rd
respondent admit regarding the payment of Liquidation Cost of Rs. 6,68,898/-. However, the
Liquidator contented that an amount of Rs. 30,05,873/- towards the Liquidator’s fee is still
pending. In this connection it is relevant to mention here that in the written submission, the
respondent No. 3 has explained that they have filed a Writ Petition challenging the
constitutional validity of Regulation 2A and 21A of The Insolvency and Bankruptcy Board of
India (Liquidation Process) Regulations, 2016. However, the same is not relevant here, and
the Respondent No. 3 are directed to pay the portion of the Liquidator’s fees which is pending
against them.

15. The Hon’ble NCLAT, New Delhi, in the case of “State Bank of India v. Navjit Singh”, dated
16.03.2022 Company Appeal (AT) (Insolvency) No. 151 of 2022 held that, even if the secured
creditor proceeds to realise its security interest it is liable to pay fee as contemplated under
Comp. App (AT) (CH) (INS) No. 332 / 2023
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 Regulation 21 A (2)(a). Further, Hon’ble NCLAT in the case of “Small Industries Development
Bank of India v. Shri Vijender Sharma” dated 02.11.2022, in Company Appeal (AT)
(Insolvency) No. 1027 of 2021, held that compliance of regulations 2(ea), 2-A, 21-a and 37 of
the Liquidation Process Regulations and Section 52/53 of the IBC are absolutely necessary
even if the secured creditor proceeds to realise its security interest.

16. Accordingly considering the facts and circumstance of the case and in light of the
judgment cited supra this tribunal is of the considered opinion that the Respondent 1, 2 and 3
have to defray their portion of Liquidation Process Costs in terms of Regulation 2A of the IBBI
(Liquidation Process) Regulations, 2016.’’

and disposed of the IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018

accordingly.

Appellant’s Submissions:

3. The Learned Counsel for the Appellant submits that the Appellant / 1st

Respondent in IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, on

25.05.2023 was called upon to contribute their portion of `Liquidation Process

Costs’, when such costs are neither due nor payable from the Appellant as the

Appellant has chosen to opt out of the `Liquidation Process’, to realise its

`Security Interest’.

4. According to the Appellant, it is representing `Debenture Holders’, who

are `Secured Financial Creditors’, and neither the `Appellant’ nor the

`Debenture Holders’, are `Financial Institutions’, and as per Regulation 2A of

the IBBI (Liquidation Process) Regulations, 2016, the `Appellant’, cannot be

called upon to pay these `Liquidation Costs’, let alone to pay these `costs

upfront’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

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5. The Learned Counsel for the Appellant contends that the `Appellant’, is

not a Financial Creditor, who is a `Financial Institution’, as defined under

Section 3(14) of the I & B Code, 2016, and Section 45-I of the Reserve Bank of

India Act, 1934 and that neither the `Appellant’ nor the `Debenture Holders’

(for whom, it is the `Investment Manager’ or `Financial Creditors’), who are

`Financial Institutions’, hence, not liable to contribute to any `Sums’, towards

`Liquidation Costs’.

6. The Learned Counsel for the Appellant submits that the `Appellant’, is an

`Investment Manager’, established by the `Essel Group’, to undertake `Fund

Management Activities’, and investments in `Funds’, on behalf of Persons/

Entities, whose Funds it manages. Furthermore, the Appellant, primarily invests

in `Secured and Redeemable Non-convertible Debenture Instruments’, on

behalf of certain `Debenture Holders’, such as , `India Asset Growth Fund’,

`India Asset Growth Fund-II, Eduskill Realtors LLP and Elegant Marbles &

Granite Industries Limited (hereinafter referred to as the `Debenture Holders’).

7. It is the version of the Appellant that it entered into `Debenture

Subscription Agreements’, dated 30.09.2016 (3 Nos. – Series A, Series B and

Series C) with the `Corporate Debtor’ for the subscription of 7,500 (Seven

Thousand Five Hundred) senior, secured, unlisted, redeemable, non-convertible

debentures with a face value of Rs.1,00,000/- (Rupees One Lakh Only) each,

aggregating to Rs.75,00,00,000/- (Rupees Seventy Five Crores Only).

Comp. App (AT) (CH) (INS) No. 332 / 2023

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8. The Learned Counsel for the Appellant points out that the main CP (IB)

No. 189 / BB / 2018, under which, the Impugned Order in IA No. 399 / BB /

2020, was passed, was filed by Moonbeam Advisory Pvt. Ltd. as the

`Operational Creditor’, under Section 9 of the `Code’, against `M/s. Samruddhi

Realty Limited’ (`Corporate Debtor’), for initiating `Corporate Insolvency

Resolution Process’, against the `Corporate Debtor’, which came to be admitted

by the `Adjudicating Authority’ / `NCLT’, vide its `Order’, dated 16.04.2019.

Later, the `Committee of Creditors’ of the `Corporate Debtor’, was constituted.

After several Meetings held by the `Committee of Creditors’, it was decided by

the `Committee of Creditors’, that no `Resolution’, was possible for the

`Corporate Debtor’.

9. The Learned Counsel for the Appellant, brings to the notice of this

`Tribunal’ that the maximum period, permitted by the `Adjudicating Authority’,

for the `Corporate Insolvency Resolution Process’, got expired on 17.02.2020

and in IA No. 116 / 2020, filed by the `Resolution Professional’ of the

`Corporate Debtor’, the `Adjudicating Authority’ / `Tribunal’, was pleased to

pass an `Order’, dated 13.03.2020 for Liquidation of the `Corporate Debtor’ and

the `1st Respondent’, was appointed as the `Liquidator’. As a matter of fact, the

Appellant has while being on the `Committee of Creditors’, contributed various

Sums (to the tune of approximately INR Rs. 18 Lakhs), towards `CIRP costs’,

but till date, not received its `Share of Reimbursement’ of those costs.

Comp. App (AT) (CH) (INS) No. 332 / 2023

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10. It is projected on the side of the Appellant that the 1 st Respondent, after

being appointed as `Liquidator’, by this `Tribunal’, through an `Order’, dated

13.03.2020, issued Public Announcement in Form B of Schedule II of the

Liquidation Process Regulations, calling for `submission of the Claims’, on or

before 17.04.2020. The Appellant, acting on behalf of the `Debenture Holders’,

filed its `Claim’, dated 17.04.2020, in Form D of Schedule II, wherein the

`Appellant’, has specifically mentioned that it is not relinquishing its `Security

Interest’, and that it chose to stand outside the `Liquidation Estate’, and realise

its `Security Interest’, in the `Assets’ of the `Corporate Debtor’, on its own, as

mentioned in Section 52 of the Code. After the receipt of various `Claim

Forms’, the `1st Respondent / Liquidator’, has complied with the `Consolidated

Lists of Creditors’, and published it, on the `Website’ of the `Corporate Debtor’.

11. According to the Appellant, the primary duty of the `Liquidator’, under I

& B Code, 2016, is to maximise the `Value of the Assets’, and Balance the

interests of all `Stakeholders’, in a time bound manner. However, the `2nd

Respondent’, had failed to perform its duties, as mentioned under Section 35 of

the Code. A total of 364 Claims were received (after the Public Announcement

was made), to the tune of INR 511,522,76,009/- of which, 348 Claims to the

tune of INR 413,93,51,268/- were admitted. However, Claims amounting to

INR 79,54,72,801/- were rejected, and `Claims’, to an extent of INR

17,92,21,035 were classified, as being under `Verification’, as on 11.01.2021.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 7 of 56
There are no `Auction Notices’, published by the 1st Respondent / Liquidator,

nor have any recoveries have been made by the `Liquidator’.

12. The Appellant’s repeated requests to the Liquidator to furnish the details

of recoveries made fell into deaf ears and this indicates that from March 2020

namely, the `Commencement of Liquidation’, the `1st Respondent / Liquidator’,

had not made any recoveries, which reflects on the incompetence and inability

of the `1st Respondent’, in handling the `Liquidation Process’ of this

magnitude.

13. The 1st Respondent / Liquidator, according to the Appellant, had failed to

assist and co-operate with the `Secured Creditors’ (who stood outside the

`Liquidation Estate’), in realising their `Security Interest’. In fact, the Appellant

had identified a suitable Buyer for the immovable property owned by the

Corporate Debtor in Survey Nos. 256/2, 256/3, and 256/4 of Kaduvathi Village,

Nandi Hobli, Chikkaballapura Taluk & Chikkaballapura District (hereinafter

referred to as the `Song of Winds Project’), which was mortgaged in favour of

the `Appellant’ and the `Debenture Trustee’, along with `Development Rights’

and its `Share of Unsold Stocks’.

14. The Appellant had intimated the Liquidator / 1st Respondent through

Letter dated 27.10.2021 and sought the assistance of the Liquidator in ensuring

that there is a smooth transfer of the Mortgage Properties to identify the Buyer

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 8 of 56
at the earliest and no reply was received from the 1st Respondent / Liquidator to

this letter and this non-cooperative and a lackadaisical attitude of the 1st

Respondent / Liquidator has not only stalled the Transaction Process, but also,

impleaded the whole process, undertaken by the `Appellant’ for taking

possession of selling and disposing off the `Securities’, exclusively created in

their favour.

15. According to the Appellant, it preferred an Application, in IA No. 178 /

2022, seeking appropriate directions against the Liquidator, under Section 52(5)

of the I & B Code, 2016, which is still pending adjudication. Since, the

Liquidator had acted in complete breach of fiduciary obligations to the

Corporate Debtor and had failed to protect the interests of the `Corporate

Debtor’, and its `Creditors’.

16. The Appellant had filed an Interlocutory Application, seeking

replacement of `Liquidator’ of the `Corporate Debtor’, and an `Application’,

seeking replacement of the `Liquidator’ of the Corporate Debtor and removal of

`1st Respondent / Liquidator’, and the said Application is numbered as IA No.

472 / 2022, before the `Adjudicating Authority / Tribunal’, and is still pending

adjudication.

17. The Learned Counsel for the Appellant points out that in view of the

Prayer, as formulated by the Liquidator himself in IA No. 399 / BB / 2020, the

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 9 of 56
subsequent arguments relating to the applicability of Regulation 21A of the

IBBI (Liquidation Process), Regulations are of no avail and not relevant for the

purpose of adjudicating, in the present `Appeal’.

18. According to the Appellant, only those who are both (a) Financial

Creditor and (b) Financial Institutions, as defined in the I & B Code, 2016, may

be called upon by the `Liquidator’, to contribute the `Liquidation Costs’, under

certain circumstances.

19. It is the stand of the Appellant that it is only the `Financial Creditors’,

who are `Financial Institutions’, in terms of Regulation 2A of the IBBI

Liquidation Process Regulations, it is only the `Financial Creditors’, who are

`Financial Institutions’, who may be called upon, by the `Liquidator’, to

contribute the excess of the `Liquidation Costs’, over the `Liquids Assets’ of the

`Corporate Debtor’, in proportion to the `Financial Debts’, owed to them, by the

`Corporate Debtor’.

20. The Learned Counsel for the Appellant submits that the term `Financial

Institution, is defined under Section 3(14) of the I & B Code, 2016, which reads

as under:

``3(14) ``financial institution’’ means

(a) a scheduled bank;

(b) financial institution as defined in Section 45-1 of the Reserve Bank of India Act,
1934;

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 10 of 56
 (c) public financial institution as defined in clause (72) of Section 2 of the Companies
Act, 2013; and

(d) such other institution as the Central Government may by notification specify as a
financial institution.’’

(II) Section 45-I of the RBI Act, 1934, clearly mentions that a `Financial Institution’,
is a `Non-Banking Institution’, which carries on as its business various activities
among other things including Financing, whether by way of making Loans or
Advances or Acquisition of Shares, Stocks, Bonds, Debentures or Securities, issued by
a `Local Authority’, etc.’’

21. According to the Appellant, an `Entity’, to fall within the definition of

`Financial Institution’, under 45-I of the RBI Act, 1934, it should be a `Non-

Banking Institution’, and should carry on as its Business or part of its Business,

any of the various activities specified in Section 45-I. Further, the term `Non-

Banking Institution’, is defined in Section 45-I (e) of the RBI Act, as a

`Company’, `Corporation’ or a `Co-operative Society’.

22. The functions performed by the Appellant and the Debenture Holders it

represents are set out below, will indicate that the `Appellant’, the `Debenture

Holders’, cannot qualify to be considered as `Financial Institutions’.

Entity Name Entity Kind Nature of Functions Relevant Annexures

Essel Finance Advisors Limited Liability Scheme Sponsor and Claim Form Annexure
and Managers LLP Partnership under the Investment Manager – G (Pg 121)
LLP Act, 2008 for India Asset Growth Relationship Note
Fund and India Asset Annexure – U (Pg 30 of
Growth Fund II, rejoinder)
undertaking fund
management activities
and investments in
funds on behalf of
persons/entities whose
funds it manages.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 11 of 56
India Asset Growth Alternative Investment Category-II Alternative Certificate of
Fund Fund registered by Investment Fund Registration Annexure-
SEBI registered with SEBI K (Pg 185)
and regulated by SEBI
AIF Regulations, Relationship Note
primarily investing in Annexure – U
senior, secured, (Pg 30 of rejoinder)
unrated, unlisted and
redeemable non-
convertible debenture
instruments.

India Asset Growth Alternative Investment Category-II Alternative Certificate of

Fund II Fund registered by Investment Fund Registration Annexure-
SEBI registered with SEBI L (Pg 185)
and regulated by SEBI
AIF Regulations, Relationship Note
primarily investing in Annexure – U
senior, secured, (Pg 30 of rejoinder)
unrated, unlisted and
redeemable non-
convertible debenture
instruments.

Eduskill Realtors LLP Limited Liability Engages in businesses LLP Agreement –

Partnership under the like owning and Annexure – I
LLP Act, 2008 developing real estate (Pg 14) Cl. 5
assets and business of
owning. running and
managing schools,
colleges, etc.

Elegant Marbles & Company registered Main objects relate to Memorandum of

Grani Industries under the Companies engaging in the Association (MoA) –
Limited Act, 1956 business of minerals of Annexure-J (Pg 175)
all descriptions like Refer Cl. III.A
marble, granite, etc.
and ancillary activities
relating to the said
business of minerals.

14. It is evident from the table produced above that the Appellant, Eduskill Realtors LLP, India Asset
Growth Fund and India Asset Growth Fund II are neither a company, corporation or a cooperative
society. Therefore, they cannot by any stretch of imagination be construed to be "non-banking
institution".

15. Further, even though Elegant Marbles & Granite Industries Limited is a company and may be
termed as a "non-banking institution", it is not in the business of financing and in fact, is mainly in the
business of minerals as is set out in the main clauses of memorandum of association. Therefore,
Elegant Marbles & Granite Industries Limited also cannot come within the meaning of a

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 12 of 56
financial institution. Even the provisions of Clauses 8 and 10 of the Ancillary Objects of the MoA as
pointed out by the Learned Counsel for the Liquidator does not aid their argument since Clause 8 is
relatable to `business which the company is authorized to carry on..’ and Clause 10 pertains to issue
of debentures by the company and not subscription of debentures.’’

23. According to the Appellant, Eduskill Realtors, LLP, India Asset Growth

Fund and India Asset Growth Fund-II are neither a Company, a Corporation or

a Co-operative Society. They cannot, by any stretch of imagination, be

construed to be `Non-Banking Institution’.

24. The Learned Counsel for the Appellant contends that even though the

Elegant Marbles and Granite Industries Limited is a Company and may be

termed as a `non-banking institution’, it is not in the business of Financing and

in fact, is mainly in the business of Minerals as is set out in the main `Clauses of

the Memorandum of Association’. As such, Elegant Marbles and Granite

Industries Limited, also cannot come within the meaning of a `Financial

Institution’.

25. According to the Appellant, even the provisions of Clauses 8 & 10 of the

`Ancillary Objects of the MOA’, as pointed out by the Learned Counsel for the

`Liquidator’, does not aid their arguments, since Clause 8 is relatable to the

`business’, which the Company is authorized to `carry on’, and Clause 10

pertains to `Issue of Debentures’, by the `Company’, and not the `Subscription

of Debentures’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 13 of 56
26. The Learned Counsel for the Appellant points out that neither the

`Appellant’ nor the `Debenture Holders’, it acts on behalf of the fall within the

definition of Non-banking Institution, under Section 45-I(e) of the RBI Act and

hence, not liable to contribute towards `Liquidation Costs’.

27. The Learned Counsel for the Appellant points out that the `Committee of

Creditors’, in their `12th Meeting’, that took place on 13.02.2020 has explicitly

stated that `Liquidation Costs’, are to be met by the `Financial Creditors’, being

`Financial Institutions’, as per `Regulations 2A of the Liquidation Process

Regulations’.

28. According to the Appellant, the 1st Respondent / Liquidator, through a

Letter dated 07.04.2020, has accepted that the Appellant, is not a `Financial

Creditor’, who is a `Financial Institution’, is therefore, not liable to pay the

`Liquidation Costs’. In fact, the 1st Respondent / Liquidator, cannot be permitted

to backtrack from the stand taken by it, without cogent evidence and

explanation to submit the same.

29. The Learned Counsel for the Appellant contends that the Paragraph 12 of

the `Impugned Order’, as relied on the relationship note Annexure-U (Page 30

of the Rejoinder), and merely stated that the Appellant is a `Financial

Institution’, as it invested upto Rs.55 Crores, by subscribing to `5500

Redeemable Secured Non-Convertible Debentures’. In fact, in the `Impugned

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Page 14 of 56
Order’, there is not even a whisper, as to how the `Appellant’ or the `Debenture

Holders’, fall within the definition of `Financial Institution’, and in short, the

`findings’, in the `Impugned Order’, are not supported by any reasons,

whatsoever and deserves to be set aside.

30. The Learned Counsel for the Appellant points out that the `upfront

contribution’, liable to be made as per Regulation 2A of the IBBI Liquidation

Process Regulations, was applicable to `Institutional Financial Creditors’, only.

Hence, only `Financial Creditors’, who are `Financial Institutions’, were called

upon to pay these `Expenses’, as it would prove `burdensome’ otherwise.

Hence, any endeavour, by the `Liquidator’, to fasten this `Liability’ on

`Financial Creditors’, who are not `Financial Institutions’, would defeat the

purpose of the enactment and would cause hardship to this `Class of Financial

Creditors’.

31. According to the Appellant, Section 52 & 53 of the I & B Code, 2016,

make it amptly clear that `Secured Financial Creditors’, choosing to `opt out of

the Liquidation Process’, may enforce, realise, settle, compromise or deal with

`Secured Asset’, in accordance with `Law’. When that being the case, any

`Demand’, by the `Liquidator’, towards `Liquidation Costs’, as a `pre-

condition’, to grant permission, to opt out of the `Liquidation Process’, runs

counter, to the `Scheme’ of the I & B Code, 2016.

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Page 15 of 56
32. The Learned Counsel for the Appellant points out that the calculation of

Liquidation Costs, provided by the `Liquidator’, is not as per what is permitted

under the Code and applicable Regulations. Further, the `Appellant’, continues

to stand outside the `Liquidation Estate’ and enforce its `Security Interest’, on

its own. Resultantly, the Liquidator, cannot be permitted to treat the `Security

Interest’ of the Appellant, as part of the `Liquidation Estate’.

33. The Learned Counsel for the Appellant, while summing up, prays for

allowing of the instant `Appeal’, by setting aside the `Impugned Order’, dated

25.05.2023 in IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, passed

by the `Adjudicating Authority’, National Company Law Tribunal’, Bengaluru

Bench.

1st Respondent / Liquidator’s Contentions:

34. The Learned Counsel for the 1st Respondent / Liquidator submits that the

`Adjudicating Authority’ / `Tribunal’, while passing the `Impugned Order’, in

IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, had adhered to the

provisions of the I & B Code, 2016, and the Liquidation Regulations, by taking

into consideration the `Order’ of this `Tribunal’, dated 16.03.2022, in State

Bank of India V. Navjit Singh (vide Comp. App (AT) (INS) 151 of 2022),

wherein at Paragraph 6, it is observed as under:

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Page 16 of 56
 6. ``We have considered the submissions of Learned Counsel for the
parties and perused the record. In so far as the claim of the Appellant is
concerned of Rs. 29,34,54,879.59/- it has been admitted by the Liquidator
the said claim is the claim admitted in the Liquidation Process and no

further adjudication was called for with regard to the said claim. In the
present case, the admission of the claim is not sought to be challenged by
State Bank of India. In so far as the payment of Liquidator's Fee in
paragraph 13 as noted above, Adjudicating Authority has disposed of the
application with the direction to make payment of Liquidator's Fee and
ensure compliance of Regulations 2(ea), 2A, 21A, 37 of the Liquidation
Regulations and Section 52/53 of the Code. The order passed by the
Adjudicating Authority does not warrant any interference. What was
directed was as per Liquidation Regulation 21A as extracted in
Paragraph 10 of the Judgment from which it is clear, even if the secured
creditor proceeds to realise its security interest it is liable to pay fee as
contemplated under Regulation 21A(2)(a). The Adjudicating Authority
has only directed the Applicant to follow the regulations as noted in
paragraph 13. Company Appeal (AT) (Insolvency) No. 151 of 2022.’’

35. The Learned Counsel for the 1st Respondent / Liquidator points out that

the Appellant falls under the category of `Financial Institution’, as per Section 3

(14) (b) of the I & B Code, 2016, read with Section 45–I (c) of Reserve Bank of

India Act, 1934, and the same reads as under:

``3. In this Code, unless the context otherwise requires.-

(14) ``financial institution’’ means-

(b) financial institution as defined in section 45-I of the Reserve Bank
of India Act, 1934;

45-I. Definitions

(c) ``financial institution’’ means any non-banking institution which

carries on as its business or part of its business any of the following
activities, namely:-
Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 17 of 56
 (i) the financing, whether by way of making loans or advances or
otherwise, of any activity other than its own;

(ii) the acquisition of shares, stock, bonds, debentures or securities

issued by a Government or local authority or other marketable securities
of a like nature:’’

36. The Learned Counsel for the 1st Respondent / Liquidator points out that

the `Non-Banking Institution’, is defined as under:

45-I e) "non-banking institution" means a company, corporation or co-

operative society;
f) "non-banking financial company" means-
i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as its
principal business the receiving of deposits, under any scheme or
arrangement or in any other manner, or lending in any manner;
(iii) such other non-banking institution or class of such institutions,
as the Bank may, with the previous approval of the Central
Government and by notification in the Official Gazette, specify.’’

37. According to the 1st Respondent, the Appellant has filed a `Claim’ on

behalf of the Eduskill Realtors LLP, which is a `Limited Liability Partnership’

as well as Elegant Marbles and Granite Industries which is a Private Limited

and hence, the question of them being non-banking financial institution will not

arise. Further, the Learned Counsel for the 1st Respondent / Liquidator proceeds

to point out that the Appellant was the Member of the `Committee of Creditors’

of the `Corporate Debtor’, on the basis of Investment made of Rs.55 Crores, by

subscribing `5500 Redeemable Secured Non-Convertible Debentures of

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 18 of 56
Rs.1,00,000 and had 79.82% Share of Financial Institutions, for funding the

estimated `Liquidation Costs’.

38. The Learned Counsel for the 1st Respondent submits that in terms of

regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, `Secured

Creditors’, who do not relinquish their `Security Interest’, in the `Liquidation

Estate’, is mandated to pay the amount, as payable under Clause (a) and sub-

clause (i) of clause (b) of sub-section (1) of Section 53 of the Code, which

would also include the Appellant herein.

39. The Learned Counsel for the 1st Respondent / Liquidator, adverts to

Section 21A of the IBBI (Liquidation Process) Regulations, 2016, which reads

as under:

“21-A. Presumption of security interest.-

(1) A secured creditor shall inform the liquidator of its decision to

relinquish its security interest to the liquidation estate or realise its
security interest, as the case may be, in Form C or Form D of
Schedule II:

(2) Where a secured creditor proceeds to realise its security interest, it

shall pay –

(a) as much towards the amount payable under clause (a) and sub-clause
(i) of clause (b) of sub-section (1) of section 53, as it would have shared
in case it had relinquished the security interest, to the liquidator within
ninety days from the liquidation commencement date; and

(b) the excess of the realised value of the asset, which is subject to
security interest, over the amount of his claims admitted, to the liquidator

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 19 of 56
 within one hundred and eighty days from the liquidation commencement
date:

(3) Where a secured creditor fails to comply with sub-regulation (2), the
asset, which is subject to security interest, shall become part of the
liquidation estate.”

40. The Learned Counsel for the 1st Respondent / Liquidator, takes a plea that

no provision of the I & B Code, 2016 or Regulation, provides `for an

enlargement of time’, to pay the `Liquidation Costs’, when the `Secured

Creditor’, exercise its right, under Section 52 of the Code.

41. The Learned Counsel for the 1st Respondent / Liquidator, refers to the

Judgment dated 02.11.2022 in Small Industries Development Bank of India

(SIDBI) V. Shri. Vijender Sharma (vide Comp. App (AT) (INS) 1027 of 2021),

wherein, at Paragraphs 19 & 21, it is observed as under:

19. ``On the basis of detailed discussion in the aforementioned

paragraphs, it becomes abundantly clear that the Resolution Professional
was following the procedure as set out in the Liquidation Process
Regulations with regard to the disposal of secured assets, including the
HSIIDC Bawal Property in which SIDBI has expressed its intent to
realise its security interest. It also becomes clear that due to
misinterpretation and lack of proper understanding of the procedure,
SIDBI was unable to follow the requirements as was being communicated
to him by the liquidator and, hence the liquidator had to approach the
Adjudicating Authority thrice in the course of liquidation to seek
necessary directions qua the Appellant. We also find that such difficulties
being faced by the liquidator were being brought to the knowledge of the
Stakeholders' Consultation Committee and necessary directions for
further actions were being obtained by the liquidator.

….
Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 20 of 56
 21. It thus becomes quite clear that compliance of regulations 2(ea), 2-A,
21-A and 37 of the Liquidation Process Regulations and Section 52/53 of
the IBC are absolutely necessary even if the secured creditor proceeds to
realise its security interest.’’

42. The Learned Counsel for the 1st Respondent / Liquidator, adverts to the

decision in DBS Bank India Limited v. Kuldeep Verma, Liquidator of Eastern

Gases Limited, vide Comp. App (AT) (INS) No. 1048 of 2022, wherein, at

Paragraph No. 2, it is observed as under:

2. ``Brief facts of the case necessary to be noted for deciding this Appeal

are:-

(iii) The Appellant informed the Liquidator on 08.04.2019 about its

decision to realize its security interest as per Section 52 (i)(b) of the
Code in respect of long term loan by remaining outside the liquidation
process to realize its debts. Liquidator agreed to hand over possession of
assets to the Appellant. Appellant informed the Liquidator that
realization of security interest would happen at a rate of Rs. 14.44 Crore.
The liquidator informed the Appellant that no person has approached the
liquidator willing to buy the assets at price higher than the price
intimated by the Appellant. Sale of the assets took place on 22.10.2020.
Sale proceeds were received by the Appellant. Appellant informed the
completion of sale process. Liquidator enquired about the calculation of
the amount realized from the sale of the exclusively charged assets. In
meeting of the Stakeholders Committee held on 13.09.20, Appellant
informed that it is entitled to retain the interest amount till the date of
distribution to recover its debt and not only the amount at the time of
filing of the claim in Form-D. Liquidator filed I.A. No. 883 of 2021,
seeking following directions:

"i. Necessary direction upon the Respondent to pay a sum of Rs. 1.84
crores to the Liquidation estate on account of the excess realized moneys
as per Section 52(7) of the Code;

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 21 of 56
 ii. Necessary direction of interest @12% should be paid by the
respondent on the withheld amount of Rs. 1.84 crores from 1st April,
2021 till the date of payment of this amount by the Respondent to the
Liquidator Estate."

(iv) The Adjudicating Authority after hearing both the parties had
allowed the I.A. No. 883 of 2021. Following order has been passed in
paragraph 9:

"For the foregoing reasons, we allow this IA and direct the

respondent bank to pay an amount of Rs. 1.84 crores to the
liquidation estate along with interest @6% on this amount from 1st
of April, 2021, till the date of its actual payment by the respondent
to the liquidation estate. IA 883/KB/2021 is disposed of and CP
No. 482/KB/2017 is listed for progress report on 29 August, 2022."

``20. We have noticed above that statutory scheme provides

submission of claim on a liquidation commencement date which is
a fixed connotation. When a statute provides for liquidation
commencement date as a date up to which claims can be filed and
proved, no claim thereafter can be entertained by the Liquidator.
The amount of interest which was retained by the Appellant
claiming to be interest in addition to the claim as filed by it in
Form D till the date of realization of receipt of the sale, cannot be
permitted to be retained by the Appellant and the Adjudicating
Authority has rightly passed the order allowing application filed by
the Liquidator to hand over the additional amount to the
Liquidator. Learned Counsel for the Appellant submits that out of
Rs. 1.84 Crores, amount of Rs. 20 Lakhs have already been paid.’’

43. The Learned Counsel for the 1st Respondent / Liquidator contends that

the instant `Appeal’, is filed without applying for the `Certified Copy’ of the

`Impugned Order’, and no explanation is given on behalf of the Appellant. In

this regard, the Learned Counsel for the 1st Respondent, refers to the Judgment

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 22 of 56
dated 22.10.2021 of the Hon’ble Supreme Court (vide Civil Appeal No. 3327 /

2020) in the matter of V. Nagarajan v. SKS Ispat and& Power Limited & Ors.,

wherein it is held that the `Aggrieved Party’, is expected to exercise due

diligence and apply for a `Certified Copy’, upon `Pronouncement of the Order’,

it seeks to assail and the relevant Paragraph 21 of the aforesaid Judgment, reads

as under:

21. ``….. must be based on a harmonious interpretation of the applicable

legal regime, given that the IBC is a Code in itself and has overriding
effect. Sections 61(1) and (2) of the IBC consciously omit the requirement
of limitation being computed from when the “order is made available to
the aggrieved party”, in contradistinction to Section 421(3) of the
Companies Act. Owing to the special nature of the IBC, the aggrieved
party is expected to exercise due diligence and apply for a certified copy
upon pronouncement of the order it seeks to assail, in consonance with
the requirements of Rule 22(2) of the NCLAT Rules. Section 12(2) of the
Limitation Act allows for an exclusion of the time requisite for obtaining
a copy of the decree or order appealed against. It is not open to a person
aggrieved by an order under the IBC to await the receipt of a free
certified copy under Section 420(3) of the Companies Act 2013 read with
Rule 50 of the NCLT and prevent limitation from running. Accepting such
a construction will upset the timely framework of the IBC. The litigant
has to file its appeal within thirty days, which can be extended up to a
period of fifteen days, and no more, upon showing sufficient cause. A
sleight of interpretation of procedural rules cannot be used to defeat the
substantive objective of a legislation that has an impact on the economic
health of a nation.’’

44. The Learned Counsel for the 1st Respondent / Liquidator, refers to

Paragraph 19 of the Hon’ble Supreme Court of India Judgement dated

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 23 of 56
22.10.2021, in V. Nagarajan V. SKS ISPAT Power Limited & Ors. (vide Civil

Appeal No. 3327 / 2020), wherein, it is observed as under:

19. ``…….The import of Section 12 of the Limitation Act and its

explanation is to assign the responsibility of applying for a certified copy
of the order on a party. A person wishing to file an appeal is expected to
file an application for a certified copy before the expiry of the limitation
period, upon which the “time requisite” for obtaining a copy is to be
excluded. However, the time taken by the court to prepare the decree or
order before an application for a copy is made cannot be excluded. If no
application for a certified copy has been made, no exclusion can ensue.
In fact, the explanation to the provision is a clear indicator of the legal
position that the time which is taken by the court to prepare the decree or
order cannot be excluded before the application to obtain a copy is made.
It cannot be said that the right to receive a free copy under Section
420(3) of the Companies Act obviated the obligation on the appellant to
seek a certified copy through an application.’’

45. The Learned Counsel for the 1st Respondent / Liquidator, while winding

up, submits that the `Impugned Order’, dated 25.05.2023, in IA No. 399 / BB /

2020 in CP (IB) No. 189 / BB / 2018, passed by the `Adjudicating Authority /

NCLT’, Bengaluru Bench, in observing that the `Respondent Nos. 1, 2 & 3’,

have to defray their portion of `Liquidation Process Costs’, in terms of

Regulation 2A of the IBBI (Liquidation Process) Regulations, 2016, is free

from any legal infirmities.

Evaluation:

46. Before the `Adjudicating Authority’ / `NCLT’, Bengaluru Bench, the

`1st Respondent / Liquidator / Petitioner’, had filed IA No. 399 / BB / 2020 in

Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 24 of 56
CP (IB) No. 189 / BB / 2018 (under Regulation 2A, read with Regulation 4,

21A (2) of the Insolvency and Bankruptcy Board of India (Liquidation Process)

Regulations, 2016, and read with Rule 11 of NCLT Rules, 2016, praying for

issuance of `appropriate directions’, to the Respondents, to forthwith defray

their portion of `Liquidation Process’ costs, in terms of Regulation 2A of the

IBBI (Liquidation Process) Regulations, 2016, as already approved in the `12th

Meeting’ of the `Committee of Creditors’ and the `Liquidator Fee’, in terms of

the provisions of the I & B Code, 2016, and to allow the `Application’.

47. According to the 1st Respondent / Liquidator of M/s. Samruddhi Realty

Limited, the `Adjudicating Authority / Tribunal’, on 16.04.2019 was pleased to

admit the CP (IB) No. 189 / BB / 2018, filed on behalf of the `Operational

Creditor / M/s. Moonbeam Advisory Private Limited’, against the `Corporate

Debtor’, for initiating the `CIRP’, under Section 9 of the I & B Code, 2016.

48. As a matter of fact, in view of the rejection of the `Resolution Plan’, by

the Members of the `Committee of Creditors’, and in view of the `CIRP’ Period,

expiring on 17.02.2020, the `Resolution Professional’, preferred an

`Application’, in IA No. 1116 of 2020, as per Section 33(1) of the Code,

seeking `Liquidation of the `Corporate Debtor’. The `Adjudicating Authority /

Tribunal’, by an Order dated 13.03.2020, passed an `Order of Liquidation’, for

the `Corporate Debtor’. Also that, the `Adjudicating Authority’, had appointed

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 25 of 56
the 1st Respondent / Liquidator as `Liquidator’, through an `Order’ dated

13.03.2020.

49. The `Adjudicating Authority’ / `NCLT’, on 13.03.2020, had passed the

`Order’, as under:

``In view of the above facts and circumstances of the case, the

Adjudicating Authority, by exercising powers confessed on it. U/s. 33 of

the IBC 2016. IA No. 116 / 2020 in CP (IB) No. 189 / BB / 2018 is hereby

disposed of with following directions:

1. We hereby order that M/s. Samruddhi Realty Ltd. Respondent /

Corporate Debtor to be liquidated in the manner as laid down in

Chapter III (Liquidation Process) Part II of the Code.

2. We hereby appointed Pankaj Srivastava, IP, Bearing Reg. No.

IBBI/IPA- 001/IP-P00245/2017-18/1047 as Liquidator subject to the

terms and conditions to be agreed upon the parties in the light of the

extant provisions of the IBBI.’’

50. It comes to be known that the 1st Respondent / Liquidator, as per

Regulation 12 of the Insolvency and Bankruptcy Board of India (Liquidation

Process) Regulations, 2016, made a Public Announcement in FORM – B of the

Schedule – II on 17.03.2020 in Deccan Herald and Prajavani and stipulated the

last date of submission of Claim as 17.04.2020.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 26 of 56
51. The Respondents, filed their `Claims’ in prescribed FORM – D as the

`Financial Creditors’ with the 1st Respondent / Liquidator. During the `CIRP’,

the Respondents were the `Financial Creditors’, constituting the `Committee of

Creditors’. Before the `Liquidation Order’, being passed by the `Adjudicating

Authority / Tribunal’, in the `12th Meeting’ of the `Committee of Creditors’,

convened on 13.02.2020, the `Committee of Creditors’, had approved a sum of

Rs.98,77,020/- (for twelve months), to be contributed to the `Liquidation Cost

Account’ and the following are details:

Resolution ``RESOLVED THAT Regulation 2A of IBBI (Liquidation Process)

For Approval of Regulations, 2016, it is hereby approved to contribute the excess of
Liquidation Costs the liquidation costs over the liquid assets of the corporate debtor, as
estimated by the liquidator, in proportion to the financial debts owed
to the lenders by the Corporate Debtor and the contributions shall be
deposited in a designated escrow account to be opened and
maintained in a scheduled bank, within seven days of the passing of
the liquidation order as given below:

Particulars Amount (INR)

Liquidator & Support Team As per Fee agreed at CoC /
Regulation
Legal Counsel Fees 19,11,600
MCA filing fees & professional 1,02,900
charges (Liquidation status and
FY 19, FY 20 financials)
Auditor Fees Receipts and 70,800
Payments account
OPE for Liquidator and team 12,00,000
Statutory Audit Fees for FY 20 8,26,000
Website Charges and 1,80,000
Maintenance
Public Announcement of 6,50,000
Liquidation
Sub-Total (A) 49,41,300
Operational Costs
Salaries & Consultant Fees 31,56,000
Corporate Office Rent & 14,16,000
Maintenance
Other admin overheads 3,63,720
Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 27 of 56
 Sub-Total (B) 49,35,720
TOTAL (A + B) 98,77,020

52. Indeed, the `Committee of Creditors’, during `CIRP’, comprised of the

following `Financial Creditors’, having Voting Share, as under:

Amount Admitted Share of Financial Institutions for

Claimed Claim funding Liquidation Costs
Name of (in INR Crore) (in INR Crore) % Amount
Creditor
Essel Finance 89.9 84.15 79.82 78,83,441
Advisors &
Managers LLP
Phoenix ARC 7.22 7.14 6.77 6,68,898
Pvt Ltd
Indiabulls 15.83 14.14 13.41 13,24,680
Housing
Finance Ltd
100% 98,77,020

53. According to the 1st Respondent / Liquidator, the `Liquidator’, in terms of

Regulation 2A of the IBBI (Liquidation Process) Regulations, 2016, may call

upon the `Financial Creditors’, to contribute the `excess Liquidation Costs’, and

as per Regulation 2A of the IBBI (Liquidation Process) Regulations 2016, read

with the Approval of the `Committee of Creditors’, through an `email dated

02.04.2020’, the Petitioner / 1st Respondent / Liquidator, had sought for the

remittance of a Sum of Rs.78,83,441/-, being the Share of the 1st Respondent /

Appellant, towards the `Liquidation Costs’, in the account of the `Liquidation

Costs Account’ of the `Corporate Debtor’, from the 1st Respondent / Appellant,

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 28 of 56
being a `Financial Creditor’, and also a `Financial Institution’, which was duly

approved in the `12th Committee of Creditors Meeting’.

54. The 1st Respondent / Appellant, through an email dated 03.04.2020, had

informed the 1st Respondent / Petitioner / Liquidator, that `they are not liable to

pay the `Liquidation Costs’, as they do not fall under the category of `Financial

Institutions’.

55. According to the 1st Respondent / Liquidator, the Respondents are

`Financial Institution’, falling within the meaning of the term, `Financial

Institution’, and Section 2 (14) of the I & B Code, 2016, defines a `Financial

Institution’, as under:

(14) ``financial institution’’ means-

(a) a scheduled bank;

(b) financial institution as defined in section 45-I of the Reserve Bank of

India Act, 1934 (2 of 1934);

(c) public financial institution as defined in clause (72) of section 2 of the

Companies Act, 2013 (18 of 2013); and

(d) such other institution as the Central Government may by notification

specify as a financial institution.’’

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 29 of 56
56. Continuing further, according to the 1st Respondent / Liquidator, the
`Financial Institution’, is defined as per Section 45-I of the RBI Act, 1934,
which reads as under:

``(c) ``financial institution" means any non-banking institution which carries

on as its business or part of its business any of the following activities,
namely:--

(i) the financing, whether by way of making loans or advances or otherwise, of

any activity other than its own;

(ii) the acquisition of shares, stock, bonds, debentures or securities issued by a

Government or local authority or other marketable securities of a like nature;

(iii) letting or delivering of any goods to a hirer under a hire-purchase

agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972.

(iv) the carrying on of any class of insurance business;

(v) managing, conducting or supervising, as foreman, agent or in any other

capacity, of chits or kuries as defined in any law which is for the time being in
force in any State, or any business, which is similar thereto;

(vi) collecting, for any purpose or under any scheme or arrangement by

whatever name called, monies in lump sum or otherwise, by way of
subscriptions or by sale of units, or other instruments or in any other manner
and awarding prizes or gifts, whether in cash or king, or disbursing monies in
any other way, to persons from whom monies are collected or to any other
person, [but does not include any institution, which carries on as its principal
business,--
(a) agricultural operations; or
(aa) industrial activity; or]
(b) the purchase, or sale of any goods (other than securities) or the providing
of any services; or
(c) the purchase, construction or sale of immovable property, so, however, that
no portion of the income of the institution is derived from the financing of
purchases, constructions or sales of immovable property by other persons;]’’

57. According to the 1st Respondent / Liquidator, the `Respondents’, are well

within the meaning of the term `Financial Institutions’, and hence, is liable to
Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 30 of 56
pay the `Liquidation Process Costs’, as per Regulation 2A of the Liquidation

Process Regulation, 2016.

58. The 1st Respondent / Liquidator through emails dated 02.04.2020 and

07.04.2020, had sought remittance towards the `Liquidation Costs’, as

stipulated under Liquidation Process Regulations, 2016, in the `account of the

Liquidation Costs Account of the Corporate Debtor’, from the 2nd Respondent /

India Bulls Asset Reconstruction Company, being the `Financial Creditor’ and

the `Financial Institution’ of the `Corporate Debtor’.

59. The 2nd Respondent / India Bulls Asset Reconstruction Company

Limited, sent its `updated Claim’, through an `email’, dated 17.04.2020,

pursuant to the `commencement of Liquidation of the Corporate Debtor’ and

further, informed the Petitioner / 1st Respondent / Liquidator that a `hard copy

of the Claim Form’, shall be submitted, once `Lock Down’, is lifted.

60. Furthermore, through an email dated 17.04.2020, the 2nd Respondent /

India Bulls Asset Reconstruction Company Limited had informed the 1 st

Respondent / Petitioner / Liquidator that being a `Financial Creditor’ the 2nd

Respondent have an exclusive `Charge’ / `Mortgage’, over the `properties’ of

the `Corporate Debtor’. Also that, the 2nd Respondent / India Bulls Asset

Reconstruction Company Limited, had informed that the `Charge’, over the

Property, will not be relinquished to the `Liquidation Estate’, and they will

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 31 of 56
proceed under SARFAESI Act 2002, for the `Sale of the Properties of the

Corporate Debtor’.

61. Apart from the above, the 2nd Respondent, had informed the 1st

Respondent / Petitioner that any `excess proceeds’, from the Property of the

`Corporate Debtor’, will be paid to the Petitioner / 1st Respondent and the

`Relinquishment Letter’, will be provided, after the `Lock Down’, is lifted.

62. The 1st Respondent / Petitioner had informed the 2nd Respondent / India

Bulls Asset Reconstruction Company Limited, through an email dated

21.04.2020 that as per Regulation 21A (2) of the Liquidation Process

Regulations, 2016, the 2nd Respondent / India Bulls Asset Reconstruction

Company Limited, has to pay the `Liquidation Costs’, as approved during the

`CIRP’, by the `Committee of Creditors’.

63. Besides this, the 1st Respondent / Petitioner, through an `email’, dated

03.06.2020. had again informed the 2nd Respondent / India Bulls Asset

Reconstruction Company Limited, to send a communication for `opting out of

the Liquidation Process of the Corporate Debtor’ and further informed, that the

`permission’ for `opting out of the Liquidation Process’, will only be granted,

after the due fulfilment of the requirements, under the I & B Code 2016 and

Regulations, thereunder. In fact, the 1st Respondent / Petitioner / Liquidator, had

again requested the 2nd Respondent / India Bulls Asset Reconstruction Company

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 32 of 56
Limited, to remit their `Share of Liquidation Process Costs’, to an extent of Rs.

3,93,09,894/-.

64. It transpires that the 2nd Respondent / India Bulls Asset Reconstruction

Company Limited, through an `email’, dated 18.06.2020, had sought documents

for costs incurred during the `Liquidation Process’ of the `Corporate Debtor’,

and gave an assurance to pay the `Liquidation Process Costs’ of the `Corporate

Debtor’.

65. That apart, the 1st Respondent / Petitioner, had requested the 3rd

Respondent / Phoenix ARC Private Limited, through an email dated

17.06.2020, to provide the communication to `opt out of the Liquidation

Process’ of the `Corporate Debtor’, in the prescribed format and the 1 st

Respondent / Liquidator / Petitioner, had requested the 3rd Respondent / Phoenix

ARC Private Limited, to pay the `Liquidation Process costs’, as per the

provisions of the Code. In fact, the 3rd Respondent / Phoenix ARC Private

Limited, through an `email’, dated 19.06.2020, had submitted their `Claim’, in

the prescribed format along with an affidavit in support and informed the 1 st

Respondent / Petitioner / Liquidator that the same was sent through `Courier’,

as well to the 1st Respondent / Petitioner.

66. Indeed, the 3rd Respondent / Phoenix ARC Private Limited, through an

`email’, dated 23.06.2020, had informed the 1st Respondent / Petitioner /

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 33 of 56
Liquidator, that the `Sale Proceeds’, as per Section 53(1)(a), the `Liquidation

Process Costs’, shall be recovered from the `Sale Proceeds’ of the `Assets’ and

also that Regulation 2A of the Liquidation Process Regulations, 2016, apply to

the Financial Institutions. Besides that, the 3rd Respondent / Phoenix ARC

Private Limited, had stated that they wished to `opt out of the Liquidation’,

however, they being an `ARC’, they are not liable to pay `Liquidation Process

Costs’.

67. Indeed, because of the `Lock Down’, in the meanwhile, the 1st

Respondent / Petitioner / Liquidator, had filed an IA No. 277 / 2020, seeking

exclusion of period from 25.03.2020 to 22.07.2020, from the `Liquidation

Process Period’, and that the `Adjudicating Authority’ / `Tribunal’, through an

`Order’, dated 21.08.2020, was pleased to exclude the period from 25.03.2020

to 22.07.2020, from the `Liquidation Process Period’.

68. Through a letter dated 26.08.2020, the 1st Respondent / Petitioner /

Liquidator, had informed the Appellant / 1st Respondent, and `their respective

Share of Liquidation Costs of Rs.1,91,96,224/-’ (Rupees One Crore Ninety One

Lakhs Ninety Six Thousand Two Hundred and Twenty Four Only), which

includes the approved Liquidation Costs and Liquidation Fee) and further

requested to remit their respective Share, as a whole or at least 30% within 5

days from the issuance of the Letter.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 34 of 56
69. In reality, the 1st Respondent, through a letter dated 26.08.2020, had

provided the Liquidator’s Fee Estimate, as per Regulation 4(2)(b) of the

Liquidation Process Regulations, 2016, which runs as follows:

Amount of 7 to 12 145.00
Realization Months
From To Net Fees
On the first 1 3.75 - 1.00 1.00 0.04
crore
On the next 9 2.80 1.00 9.00 8.00 0.22
crores
On the next 40 1.88 10.00 40.00 30.00 0.56
crores
On the next 50 0.94 40.00 50.00 10.00 0.09
crores
On further 0.19 50.00 145.00 95.00 0.18
sums realized
Sub-total 1.10
Amount 7 to 12 145.00
Distributed to months
Stakeholders
From To Net Fees
On the first 1 1.88 - 1.00 1.00 0.02
crore
On the next 9 1.40 1.00 9.00 8.00 0.11
crores
On the next 40 0.94 10.00 40.00 30.00 0.28
crores
On the next 50 0.48 40.00 50.00 10.00 0.05
crores
On further 0.10 50.00 145.00 95.00 0.10
sums realized
Sub-total 0.56
TOTAL FEES 1.66

70. It is evident that the 1st Respondent / Petitioner, through a letter dated

26.08.2020, had informed the 2nd Respondent / India Bulls Asset Reconstruction

Company Limited that their `respective Share of Liquidation Costs of

Rs.35,64,024/-’, which includes the `approved Liquidation Costs and

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 35 of 56
Liquidation Fee’, and further, requested to `remit their respective Share as a

whole’ or `at least 30%’, within `5 days, from the issuance of the Letter’.

71. The 1st Respondent / Liquidator, had provided the `Liquidator’s Fee

Estimate’, as per Regulation 4 (2)(b) of the Liquidation Process Regulations,

2016, which runs as under:

Amount of 7 to 12 145.00
Realization Months
From To Net Fees
On the first 1 3.75 - 1.00 1.00 0.04
crore
On the next 9 2.80 1.00 9.00 8.00 0.22
crores
On the next 40 1.88 10.00 40.00 30.00 0.56
crores
On the next 50 0.94 40.00 50.00 10.00 0.09
crores
On further 0.19 50.00 145.00 95.00 0.18
sums realized
Sub-total 1.10
Amount 7 to 12 145.00
Distributed to months
Stakeholders
From To Net Fees
On the first 1 1.88 - 1.00 1.00 0.02
crore
On the next 9 1.40 1.00 9.00 8.00 0.11
crores
On the next 40 0.94 10.00 40.00 30.00 0.28
crores
On the next 50 0.48 40.00 50.00 10.00 0.05
crores
On further 0.10 50.00 145.00 95.00 0.10
sums realized
Sub-total 0.56
TOTAL FEES 1.66

72. The 1st Respondent / Petitioner / Liquidator, had informed the 3 rd

Respondent / Phoenix ARC Private Limited, through letter dated 26.08.2020,

their `respective Share of Liquidation Costs of Rs.36,74,771/-’, (which includes,

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 36 of 56
the `approved Liquidation Costs and Liquidator Fee’) and requested to `remit

their respective Share as a whole’ or `at least 30%’ within `5 days, from the

issuance of the Letter’. In fact, the 1st Respondent / Petitioner / Liquidator, had

provided the Liquidator’s Fee Estimate, as per Letter dated 26.08.2020, as per

Regulation 4(2)(b) of the Liquidation Process Regulations, 2016.

73. Later, the 3rd Respondent / Phoenix ARC Private Limited, on 09.09.2020,

had `paid the pro-rata Share of the Approved Liquidation Costs of Rs.6,68,898/-

, to the 1st Respondent / Petitioner, but, a Sum of Rs.30,05,873/-, towards the

Liquidator’s Fee is still pending’.

74. According to the 1st Respondent / Petitioner / Liquidator, the

`Respondents’, had completely failed to `remit their portion of the Liquidation

Process Costs’, and the `Liquidator’s Fee’, as per provisions of the I & B Code,

2016 and Regulations, made thereunder, which as per Regulation 2A(2), are

required to be deposited within 7 days from the `commencement of the

Liquidation Process’.

75. It is represented on behalf of the 1st Respondent / Petitioner / Liquidator

that `any delay’, in depositing the `Liquidation Costs’ by the `Respondents’, is

delaying the `Liquidation Process’ and the `Liquidator’, is unable to perform his

duties, as mandated under the I & B Code, 2016.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 37 of 56
76. Also that, because of the `inaction of the Respondents’, by not defraying

`their portion of `Liquidation Process Costs’, which were duly approved in the

`12th Meeting of Committee of Creditors’, is creating hurdle in the `Liquidation

Process’ of the `Corporate Debtor’ and hindering the 1st Respondent / Petitioner

/ Liquidator, to discharge his duties, as per the I & B Code, 2016.

77. Hence, the IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018 is filed in a

`Bona fide’ manner, and in the `interest of Justice’, the said Application, may be

allowed by issuing necessary directions to the Respondents, to forthwith defray the

portion of `Liquidation Process costs’, as per `Regulation 2A of the IBBI (Liquidation

Process) Regulations’.

Appellant / 1st Respondent’s Objections:

78. The Appellant / 1st Respondent (M/s. Essel Finance Advisors &

Managers LLP) in its Objection Statement, before the `Adjudicating Authority’

/ `Tribunal’, in IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, had

mentioned that in terms of Regulation 2A of the Liquidation Process

Regulations, it is only the `Financial Creditors’, who are `Financial Institutions’,

who may be called upon by the `Liquidator’, to contribute the `excess of the

Liquidation Costs’, over the `Liquid Assets’ of the `Corporate Debtor’, in

proportion to the `Financial Debt’, owed to them, by the `Corporate Debtor’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 38 of 56
79. The clear cut stand of the Appellant / 1st Respondent, before the

`Adjudicating Authority’ / `Tribunal’, is that `Financial Institution’, as per

Section 3 (14) of the I & B Code, 2016, and hence, is not liable to contribute

towards `Liquidation Costs’, as per Regulation 2A of the Liquidation Process

Regulations.

80. The other contention of the Appellant / 1st Respondent, before the

`Adjudicating Authority’ / `Tribunal’ in IA No. 399 / BB / 2020 in CP (IB) No.

189 / BB / 2018 is that for an `Entity’, to come within the definition of

`Financial Institution’, under Section 45-I of the Reserve Bank of India Act,

1934, it ought to be a `Non-banking Institution’, and `ought to `carry on’, as its

`business’ or `part of its business’, any of the various activities mentioned in

Section 45-I.

81. Furthermore, according to the Appellant / 1st Respondent, it is a `Scheme

Sponsor’ and `Investment Manager’, which acts for the `benefit of the

`Debenture Holders’ and its `Nominee’. In fact, the Appellant / 1 st Respondent

is an `Limited Liability Partnership’, set up under the LLP Act, 2008 and hence,

the Appellant / 1st Respondent cannot be construed, by any stretch of

imagination to be a `Non-Banking Institution’, as defined under Section 45-I of

the Reserve Bank of India Act, 1934.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 39 of 56
82. The Appellant / 1st Respondent, before the `Adjudicating Authority’ /

`Tribunal’, that none of the `Debenture Holders’ Viz. India Asset Growth Fund,

India Asset Growth Fund – II, Eduskill Realtors LLP and Elegant Marbles and

Granites Industries Limited, also fall within the definition of the `Financial

Institution’, as per Section 45-I of the Reserve Bank of India Act, 1934.

Therefore, it is contended on behalf of the Appellant / 1 st Respondent that as per

Section 3 (14) of the Code, they are `not liable to contribute to the Liquidation

Costs’.

83. The submission of the Appellant / 1st Respondent in the instant `Appeal’,

before this `Tribunal’ is that the `main object and nature of the business of

Eduskill Realtors LLP and Elegant Marbles and Granites Industries Limited’,

will establish that the `Business Activities’, carried out by the `Debenture

Holders’, do not fall within the nature of the business activities, covered as per

Section 45-I of the Reserve Bank of India Act, 1934.

84. According to the Appellant / 1st Respondent, since it is a `Limited

Liability Partnership’, it does not fall within the ambit of `Non-Banking

Institution’, as mentioned in Section 45-I of the RBI Act, 1934. Also that, the

Appellant / 1st Respondent, had clarified that it is not a `Financial Creditor’,

who are `Financial Institution’ and therefore, are `not liable to contribute any

sums’, towards `Liquidation Costs’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 40 of 56
85. The prime contention advanced on behalf of the Appellant / 1 st

Respondent is that on 13.02.2020, the `Committee of Creditors’, in their 12th

Meeting, had explicitly stated that `Liquidation Costs’, are to be met by the

`Financial Creditors’, being `Financial Institution’, as per Regulation 2A of the

Liquidation Process Regulations, vide Annexure-M, Page 187 of the `Appeal

Paper Book of the Appellant’. Besides this, through a letter dated 07.04.2020,

the 1st Respondent / Liquidator had accepted that the `Appellant’, is not a

`Financial Creditor’, who is a ``Financial Institution’ and he is not liable to pay

`Liquidation Costs’. Therefore, a stand is taken on behalf of the Appellant that

the 1st Respondent / Liquidator / Petitioner cannot be permitted to backtrack

from the stand taken by it, without cogent evidence and explanation to

substantiate the same (vide Annexure P – Page 199 of the Appeal Paper Book of

the Appellant).

86. The Learned Counsel for the Appellant, before this `Tribunal’, submits

that the `Impugned Order’, is not a `Speaking Order’ and the `Adjudicating

Authority’ / `Tribunal’, had failed to consider that the `Appellant’, has Business

or part of its Business, does not carry any of the activities mentioned in Section

45-I of the RBI Act, 1934.

87. The prime contention of the Appellant, is that when the `pre-condition of

being a Financial Institution’, was not satisfied, the `Appellant’, cannot be

called upon, to contribute towards `Liquidation Costs’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 41 of 56
88. The Learned Counsel for the Appellant points out that the `Impugned

Order’ of the `Adjudicating Authority’ / `Tribunal’, calls upon the `Appellant’,

being a `Financial Creditor’, who is not a `Financial Institution’, to pay `upfront

Liquidation Costs’, when such contribution / sums by `Secured Creditors’, who

stand outside the `Liquidation Estate’, are not even contemplated, under the I &

B Code, 2016.

89. The Learned Counsel for the Appellant, points out that the `Adjudicating

Authority’ / `Tribunal’, had failed to consider the repercussions of the

`Impugned Order’, in as much as the `Secured Financial Creditors’, who `opt

out of the Liquidation Process’, are `liable to pay Exorbitant Liquidation Costs’,

before even realising their interest, in their `Secured Assets’ and in any event,

the `Impugned Order’ is liable to interfered with by this `Tribunal’, in `Appeal’,

by setting aside the same, to `secure the ends of Justice’.

90. Dealing with the plea of the Appellant, the `Impugned Order’, made in IA

No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, passed by the

`Adjudicating Authority’ / `Tribunal’, Bengaluru Bench, is a `non-speaking’

and `unreasoned’ one, this `Tribunal’, points out that the `Adjudicating

Authority’ / `Tribunal’, in the `Impugned Order’ dated 25.05.2023 in IA No.

399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, had dealt with the main

contention raised by the Appellant / 1st Respondent that it does not fall within

the category of `Financial Institution’, mentioned about the relationship note,

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 42 of 56
sent by the Appellant / 1st Respondent to the 1st Respondent / Liquidator /

Petitioner, which was attached along with the `Rejoinder’, etc., and also pointed

out that there was no objection filed on behalf of the 2nd Respondent and that the

`Adjudicating Authority’ / `Tribunal’, had `forfeited the right to file objection

on 25.08.2022. Moreover, the `Adjudicating Authority’ / `Tribunal’, in

Paragraph 13 of the `Impugned Order’, had observed that `further, on perusal of

the documents submitted by the Liquidator it is seen that Respondent No. 2 vide

email dated 17.04.2020 has informed that the charge over the properties of the

Corporate Debtor will not be relinquished to the Liquidation Estate and it will

proceed under the SARFAESI Act for the sale of properties of the Corporate

Debtor. Further, vide email dated 18.06.2020 Respondent No. 2 gave assurance

to the Liquidator to pay the Liquidation Process costs of the Corporate Debtor.

The said email has been found attached along with the Petition’.

91. The `Adjudicating Authority’ / `Tribunal’, in the `Impugned Order’, at

Paragraph No. 14, had mentioned that `in this connection, it is relevant to

mention here that in the Written Submission, the Respondent No. 3 has

explained that they have filed a Writ Petition, challenging the constitutional

validity of Regulation 2A and 21A of The Insolvency and Bankruptcy Board of

India (Liquidation Process) Regulations, 2016. However, the same is not

relevant here, and the Respondent No. 3 are directed to pay the portion of the

Liquidator’s fees which is pending against them’ and by referring to the

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 43 of 56
decision of this `Tribunal’, in State Bank of India V. Navjit Singh dated

16.03.2022 (vide Comp. App (AT) (INS) No. 151 of 2022), wherein it was held

that `even if the Secured Creditor proceeds to realise its Security Interest it is

liable to pay fee as contemplated under Regulation 21 A(2)(a). Further,

Hon’ble NCLAT in the case of `Small Industries Development Bank of India v.

Shri Vijender Sharma’, dated 02.11.2022, in Company Appeal (AT)

(Insolvency) No. 1027 of 2021, held that compliance of regulations 2 (ea), 2-A,

21-a and 37 of the Liquidation Process Regulations and Section 52/53 of the

IBC are absolutely necessary even if the Secured Creditor proceeds to realise

its Security Interest’, and opined that the Respondent Nos. 1, 2 & 3 were to

defray their portion of `Liquidation Process Costs’, in terms of Regulations 2A

of the IBBI (Liquidation Process) Regulations, 2016, and the IA No. 399 / BB /

2020 in CP (IB) No. 189 / BB / 2018, was `disposed of’, accordingly.

92. It is not out of place for this `Tribunal’, to make a significant mention that

`reasons’ are the `Heart & Soul’ of an `Order’, passed by an `Adjudicating

Authority’ / `Tribunal’. A `reasoned Order’, will have an `appearance of

Justice’. An `unreasoned Order’, may be `valid’, from the point of view of an

`Aggrieved Person’.

93. A cursory perusal of the `Impugned Order’, as referred to Supra, makes it

candidly clear that the `Impugned Order’, is not an `unreasoned’ one, but, a

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 44 of 56
`speaking and a reasoned Order’. Therefore, the `contra plea’, taken on behalf of

the `Appellant’, is `not acceded to’, by this `Tribunal’.

94. The Appellant in the present `Appeal’ as well as in the `Claim Form’, had

preferred a `Claim’, on behalf of Eduskill Realtors LLP, which is a `LLP’ as

well as `Elegant Marbles & Granite Industries Limited’ and therefore, they

being a `Non-Banking Financial Institution’, may not `arise’, in this considered

opinion of this `Tribunal’.

95. The Appellant / 1st Respondent / Essel Finance Advisors & Managers

LLP, had invested upto Rs.55 Crores by subscribing to `5500 Redeemable

Secured Non-Convertible Debentures of Rs. 1 Lakh each’ and therefore, the

`Appellant / 1st Respondent’, comes within the ambit of `Financial Institution’,

as per Section 45(i)(c)(i) and 45(I)(c)(ii) of Reserve Bank of India Act, 1934.

96. It must be borne in mind when a `Secured Creditor’, exercise its right as

per Section 52 of the I & B Code, 2016, there is no provision in the I & B Code,

2016 or Regulation, which provides for `extension of time’, to pay the

`Liquidation Costs’. Also that, it is quite clear from the Regulation 21A of the

Liquidation Process Regulations, 2016, that the `Secured Creditors’, who do not

relinquish their `Security Interest’, in the `Liquidation Estate’ is required to pay

the Sum as payable under clause (a) and sub-clause (i) of clause (b) of sub-

section (1) of Section 53 of the Code, which includes the `Appellant’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 45 of 56
97. In the present case, even though the `Appellant’, has taken a plea that it

and the `Debenture Holders’, it represents are not `Financial Institutions’ and

not liable to `pay the Liquidation Costs’, being a `Member’ of the `Committee

of Creditors’ of the `Corporate Debtor’, on the basis of `Investment’, made of

Rs.55 Crores, by subscribing 5500 Redeemable Secured Non-Convertible

Debentures of Rs.1,00,000/- etc., it is one of the `Financial Creditors’ and being

a `Financial Institution’, in the considered opinion of this `Tribunal’, is liable to

pay the `Liquidation Costs’, as per the I & B Code, 2016. Even as per

`Regulation 2A of the Liquidation Process Regulations, 2016’, the Appellant as

a `Financial Creditor’ and also a `Financial Institution’, is required to pay the

`Liquidation Process Costs’, in the event such `Financial Creditor’, exercising

its right to enforce its `Security’, in the teeth of the ingredients of Section 52 of

the I & B Code, 2016. Continuing further, it must be borne in mind that there is

nothing in the I & B Code, 2016 or the Regulation, which provides for

extension / elongation of time, to pay the `Liquidation Costs’, especially when

the exercise of right by the `Secured Creditor’ is pressed into service, in terms

of the `Code’.

98. The Learned Counsel for the 1st Respondent / Liquidator / Petitioner

points out that the instant `Appeal’, is filed without the `certified copy’ of the

`Impugned Order’, made in IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB /

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 46 of 56
2018, dated 25.05.2023 and the Appellant has not given any reason for the

same.

99. The Learned Counsel for the 1st Respondent / Liquidator / Petitioner,

refers to the Judgment of Hon’ble Supreme Court in V. Nagarajan v. SKS Ispat

& Power Ltd. & Ors. (vide Civil Appeal No. 3327 / 2020 dated 22.10.2021),

wherein, at Paragraph 21, it is observed as under:

21. ``….. must be based on a harmonious interpretation of the applicable

legal regime, given that the IBC is a Code in itself and has overriding
effect. Sections 61(1) and (2) of the IBC consciously omit the requirement
of limitation being computed from when the “order is made available to
the aggrieved party”, in contradistinction to Section 421(3) of the
Companies Act. Owing to the special nature of the IBC, the aggrieved
party is expected to exercise due diligence and apply for a certified copy
upon pronouncement of the order it seeks to assail, in consonance with
the requirements of Rule 22(2) of the NCLAT Rules. Section 12(2) of the
Limitation Act allows for an exclusion of the time requisite for obtaining
a copy of the decree or order appealed against. It is not open to a person
aggrieved by an order under the IBC to await the receipt of a free
certified copy under Section 420(3) of the Companies Act 2013 read with
Rule 50 of the NCLT and prevent limitation from running. Accepting such
a construction will upset the timely framework of the IBC. The litigant
has to file its appeal within thirty days, which can be extended up to a
period of fifteen days, and no more, upon showing sufficient cause. A
sleight of interpretation of procedural rules cannot be used to defeat the
substantive objective of a legislation that has an impact on the economic
health of a nation.’’

100. The Learned Counsel for the 1st Respondent / Liquidator / Petitioner,

adverts to the Paragraph 19 of the Judgment of Hon’ble Supreme Court in the

aforesaid V. Nagarajan’s case, wherein, it is observed as under:

Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 47 of 56
 19. ``…….The import of Section 12 of the Limitation Act and its
explanation is to assign the responsibility of applying for a certified copy
of the order on a party. A person wishing to file an appeal is expected to
file an application for a certified copy before the expiry of the limitation
period, upon which the “time requisite” for obtaining a copy is to be
excluded. However, the time taken by the court to prepare the decree or
order before an application for a copy is made cannot be excluded. If no
application for a certified copy has been made, no exclusion can ensue.
In fact, the explanation to the provision is a clear indicator of the legal
position that the time which is taken by the court to prepare the decree or
order cannot be excluded before the application to obtain a copy is made.
It cannot be said that the right to receive a free copy under Section
420(3) of the Companies Act obviated the obligation on the appellant to
seek a certified copy through an application.’’

101. At this stage, this `Tribunal’, aptly points out Rule 22 (1), (2) & (3) of the

NCLAT Rules, 2016, which reads as under:

``22. Presentation of appeal.-

(1) Every appeal shall be presented in Form NCLAT-1 in triplicate by the

appellant or petitioner or applicant or respondent, as the case may be, in
person or by his duly authorised representative duly appointed in this
behalf in the prescribed form with stipulated fee at the filing counter and
non-compliance of this may constitute a valid ground to refuse to
entertain the same.

(2) Every appeal shall be accompanied by a certified copy of the

impugned order.

(3) All documents filed in the Appellate Tribunal shall be accompanied by

an index in triplicate containing their details and the amount of fee paid
thereon.’’

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 48 of 56
102. As a matter of fact, it is only the time required if the `Application’, is

made that can be excluded as a time requisite, as per decision in Umda V.

Rupchand AIR 1929 Nag. 1 (FB). Further, the burden to show that no party of

the delay was due to his latches is on `Applicant’ or `Appellant’, as per decision

in Sitaram v. Chamali Bai AIR 1969 MP 310. The time requisite for securing

the copy is not only applicable to cases where the Applicant is required to

obtain `Copy’, at its own instance, but also, to cases where under the Statute is

entitled to get the copy from the `Authority’. In such case also, is entitled to the

exclusion for the period taken for obtaining the particular copy, which is

annexed with the `Memorandum of Appeal’, as per decision in Manager

M.C.C.P. V. Bai 1986 (2) CCC 9 (MP).

103. Rule 50 of the NCLT Rules, 2016, provides that the `Registry’, shall send

the `Certified Copy’ of `Final Order’, passed to the `Parties’ concerned `Free of

Cost’ and the `Certified Copies’, may be made available with costs, as per

`Schedule of Fees’, in all other cases.

104. In the decision of Hon’ble Supreme Court of India in State of Uttar

Pradesh v. Maharaj Narain, reported in AIR 1968 SC at Page 960, it is held that

the `time requisite’, for obtaining a copy is to be ascertained from the copy

actually filed along with the `Memorandum’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 49 of 56
105. It is worth for this `Tribunal’, to make a useful reference to the decision

of the Hon’ble Supreme Court of India, in Lala Balmukund V. Lajwanti,

reported in AIR 1975 SC 1089, wherein, it is observed as under:

``In our opinion, the expression "time requisite" as used in s. 12(2) in the
phrase in question, means all the time counted from date of the
pronouncement of the judgment (the same being under Or. 20, r. 7, CPC,
the date of the decree) which would be properly required for getting a
copy of the decree, including the time which must ex-necessitate elapse in
the circumstances of the particular case, before a decree is drawn up and
signed. If any period of the delay in preparing the decree was attributable
to the default or negligence of the appellant, the latter shall not be
entitled to the exclusion of such period under s. 12(2) of the Limitation
Act, 1908.’’

106. According to the Appellant, it is representing the `Debenture Holders’,

who are secured `Financial Creditors’ and further, while being on the

`Committee of Creditors’, had contributed various Sums (to the tune of approx.

INR 18 Lakhs), towards `Corporate Insolvency Resolution Process costs’, etc.

107. It is the version of the Appellants (Petitioners in IA No. 1007 / 2023) that

the copy of the `Impugned Order’ in IA No. 399 / BB / 2020 in CP (IB) No. 189

/ BB / 2018, was passed on 25.05.2023 and the same was uploaded on the

`Adjudicating Authority / Tribunal’s Website and further, the Appellants, have

accessed the `Impugned Order’ on 29.05.2023 and seek `Leave’, to produce a

copy of the `Impugned Order’, as uploaded on the Website of the `Adjudicating

Authority’ / `Tribunal’, and undertakes to apply for and obtain a `Certified

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 50 of 56
Copy’ of the `Impugned Order’, if and when, directed by this `Appellate

Tribunal’.

108. It is to be remembered that the Rule 14 of the NCLAT Rules, 2016,

enjoins the `Appellate Tribunal’, under the caption `power to exempt’, to

exempt the `Parties’, from compliance with any requirement of these `Rules’,

and may give such directions in matters of practice and procedure, as it may

consider just and expedient on the Application, moved in this behalf to render

`substantial justice’. The `discretionary waiver’, is not an automatic exception,

but, an `Application’, is to be moved on behalf of the `concerned Petitioners’,

ofcourse, showing `sufficient cause’ and in this regard, the `Appellate Tribunal’,

is to exercise its `subjective discretion’, in a `judicious manner’, by applying its

thinking mind, in the considered opinion of this `Tribunal’.

109. Admittedly, in the instant case on hand, the Appellants, have not filed any

`Interlocutory Applications’, seeking to exempt them, from filing the `Certified

Copy’ of the `Impugned Order’, passed by the `Adjudicating Authority’ /

`Tribunal’, dated 25.05.2023 in IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB

/ 2018. In this connection, this `Tribunal’, aptly points out that Rule 22(2) of

NCLAT Rules, 2016, in a `crystalline manner’, provides for the

`accompaniment of a `Certified Copy’ of the `Impugned Order’, in every

`Appeal’.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 51 of 56
110. It is not out of place for this `Court’ / `Tribunal’, to make a pertinent

mention that in the decision of the Hon’ble Supreme Court of India in Sagufa

Ahmed v. Upper Assam Plywood Products (P) Limited, reported in (2021), 2

SCC at Page 317, it is clarified that the `Statutory Mandate’ of a `Free Copy’, is

not to enable litigants to take two bites at the apple, where they could compute

limitation from either when the `Certified Copy’, is received on the litigant’s

`Application’ or received as a `Free Copy’, from the `Registry’ – whichever is

later’.

111. Also that, it cannot be overlooked that the obligation of the Appellants /

Petitioners, to obtain a `Certified Copy’ of the `Impugned Order’, through an

`Application’, and to annexe the same with the `Appeal’ is a `mandatory’ one,

in terms of Rule 22(2) of the NCLAT Rules, 2016, in the considered opinion of

this `Tribunal’.

112. Earlier, the Petitioners / Appellants in IA No. 1007 of 2023 in Comp. App

(AT) (CH) (INS) No. 332 of 2023, sought to condone the purported delay of 11

days (according to them), but, according to the `Office of the Registry’, the

delay comes to 14 days and this `Tribunal’, had allowed the IA No. 1007 / 2023

on 24.01.2024, by directing the `Appellants’, to pay a Costs of Rs.3,000/-, to the

`Prime Minister’s Relief Fund’, to be paid by them, within two weeks from

24.01.2024. The `Appellants’, have paid the said Costs of Rs.3,000/-.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 52 of 56
113. The obligation of the `Affected / Aggrieved Party’, to exercise due

diligence and to apply for a `Certified Copy’, upon `Pronouncement of the

Order’, it decides to challenge in tune with the requirement of Rule 22(2) of the

NCLAT Rules, 2016, is because of the special character of the I & B Code,

2016.

114. To put it succinctly, the filing of a `Certified Copy’ (`Paid Cost Copy’), is

not an empty ritualistic formality, in the considered opinion of this `Tribunal’. It

cannot be gainsaid that only when the `Petitioner / Appellant / Aggrieved

Party’, applies within the `prescribed period of Limitation’, as envisaged, under

Section 61 (2) of the `Code’, the time taken to secure the `Certified Copy’, will

be excluded from the `Computation of Period of Limitation’.

115. In the present case on hand, before this `Tribunal’, the Appellants in

Comp. App (AT) (CH) (INS) No. 332 of 2023, had furnished the `Free of Cost

Copy’ of the `Impugned Order’, dated 25.05.2023, passed by the `Adjudicating

Authority’ / `NCLT’, Bengaluru Bench, in IA No. 399 / BB / 2020 in CP (IB)

No. 189 / BB / 2018 (`Certified’ to be `True Copy’ of the `Original’).

116. In terms of Rule 22(2) of the NCLAT Rules, 2016, a `Certified Copy’ of

the `Impugned Order’, shall accompany every `Appeal’ to be filed, before the

`Office of the Registry’. Only in a `Paid Certified Copy’, by an `Aggrieved

Party’, the details Viz. when the Application for Certified Copy of the

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 53 of 56
Impugned Order was made by the `Applicant’, when it was made ready, when it

was handed over / taken delivery, etc., will find a place, ofcourse, duly signed

by the Deputy / Asst. Registrar of the `Adjudicating Authority’ / `Tribunal’.

117. The instant Comp. App (AT) (CH) (INS) No. 332 of 2023, filed by the

`Appellants’ are concerned, the copy of the `Impugned Order’, was accessed by

them and made available to their knowledge on the Official Website of the

`Adjudicating Authority’ / `Tribunal’, on 29.05.2023. As a matter of fact, the

instant `Appeal’, came to be filed on 08.07.2023, through efiling, before the

`Office of the Registry’.

118. In so far as the Appellants are concerned, since they have not applied for

the `Certified Copy’ of the `Impugned Order’, the `Invocation of Section 12 of

the Limitation Act, 1963’, which specifies that `time requisite for obtaining the

copy of the `Order’, appealed shall be excluded, does not arise on any score.

119. The fact of the matter is, that in respect of the `Appellants / Petitioners’,

since no Application for securing a `Certified Copy’ of the `Impugned Order’

was made, on their behalf, no exclusion of `time requisite’, as per Section 12 of

the Limitation Act, 1963, will ensue in their favour, as opined by this

`Tribunal’, in a clear cut manner.

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 54 of 56
120. Considering the fact that the `Appellants’, have averred in Paragraph 6 of

the `Memorandum of Appeal’, under the caption `Limitation’ that a copy of the

`Order’, was accessed by them and made available to their knowledge on the

Official Website of the `Adjudicating Authority’ / `Tribunal’, on 29.05.2023,

and the instant `Appeal’, came to be filed on 08.07.2023 and the `delay of

purported 11 days’ (according to the `Appellants / Petitioners’) and according to

the `Registry’, it is 14 days, being condoned in IA No. 1007 / 2023 in the instant

`Appeal’, on 24.01.2024, it is held by this `Tribunal’ that the filing of the

`Certified Copy’ of the `Impugned Order’, is to accompany the instant `Appeal’,

mandatorily (unless an `Exemption Application’, being filed by the `Party’,

seeking it, to exempt from filing of the `Impugned Order’ and `appropriate

Orders’, for allowing the said `Application’, being obtained thereon, from this

`Appellate Tribunal’), and in the present case, even though, as per Rule 14 of

the NCLAT Rules, 2016, `no exemption’, is sought for, by the `Appellants /

Petitioners’, by an `Application’, to file the `Certified Copy’ of the `Impugned

Order’, by `not exhibiting any sufficient cause’, yet this `Tribunal’, at the final

stage of the disposal of the instant `Appeal’, keeping in mind of the `substantive

objective’ of the `I & B Code’, 2016, exercising its inbuilt and an inherent

power, directs the `Appellants’, to file the `Certified Copy’ of the `Impugned

Order’, within two weeks, from the `date of Pronouncement of this Judgment’,

for meeting the `ends of Justice’, and to prevent an `Aberration of Justice’, and

answers accordingly.
Comp. App (AT) (CH) (INS) No. 332 / 2023
Page 55 of 56
121. Be that as it may, in the light of detailed foregoing deliberations, this

`Tribunal’, on a careful consideration of respective contentions, advanced on

either side, and considering the entire conspectus of the attendant facts and

circumstances of the instant case, in an encircling manner, comes to an

irresistible conclusion that the `Impugned Order’, dated 25.05.2023 in IA No.

399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, passed by the `Adjudicating

Authority’ / `NCLT’, Bengaluru Bench, in directing the `Appellants’, `1st

Respondent’ and `two other Respondents’, to `Defray their portion of

Liquidation Process Costs’, is free from any legal infirmities. Viewed in that

perspective, the instant `Appeal’, is devoid of merits and it fails.

Result:

In fine, the instant Comp. App (AT) (CH) (INS.) No. 332 / 2023, is

`Dismissed’. No costs. The connected pending `Interlocutory Applications’, if

any, are closed.

[Justice M. Venugopal]
Member (Judicial)

[Ajai Das Mehrotra]

Member (Technical)

15/03/2024

SR / TM

Comp. App (AT) (CH) (INS) No. 332 / 2023

Page 56 of 56