The division judge bench of Justice Ashok Bhushan, Barun Mitra, Member (Technical), and Arun Baroka, Member (Technical) of the National Company Law Appellate Tribunal in the case of Ethenic Agencies Pvt. Ltd. Vs Mr. K.G. Somani, Erstwhile Liquidator – Delicious Coco Water Pvt. Ltd. & Anr held that the proceeding which undertook in the liquidation proceedings cannot be ignored nor can be washed out only on the ground that in the balance sheet of the Corporate Debtor the name of the Appellant was reflected.
Brief Facts:
The factual matrix of the case is that the name of the Appellant was there in the balance sheet of the corporate debtor. However, the claim filed by the appellant after the publication was made by the liquidator was rejected, and then, the appeal under Section 42 of the IBC was also rejected on the grounds of limitation. Furthermore, the scheme was submitted under Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 which was approved by the SIDBI the 100% Financial Creditor. Thereafter, the application was filed by the appellant challenging the scheme on the ground that the Appellant was also a Financial Creditor whose consent was required for approval of the scheme. However, the application was rejected and the present appeal is filed.
Contentions of the Appellant:
The learned counsel appearing on behalf of the Appellant submitted that even if the appellant's claim was turned down in the liquidation process, the appellant is still considered a financial creditor since it appears on the balance sheet.
Observations of the Court:
The Hon’ble Court observed that there is no doubt that the Appellant, acting as a Financial Creditor, submitted a claim, which was denied by both the Liquidator and the Adjudicating Authority. The Appellant's claim was rejected, which made it obvious that neither the claim nor the appellant's entitlement to any claim under the waterfall mechanism could be accepted in the liquidation proceedings.
It was furthermore observed that the fact that the appellant's name showed up on the Corporate Debtor's balance sheet does not excuse or dismiss the proceedings that were conducted throughout the liquidation process. The adjudication process, which resulted in the claim being rejected, must be followed in the liquidation proceedings. The scheme was included in the liquidation proceedings as well.
Based on these considerations, the court was of the view that the adjudicating authority committed no mistake.
The decision of the Court:
With the above direction, the court dismissed the appeal.
Case Name: Ethenic Agencies Pvt. Ltd. Vs Mr. K.G. Somani, Erstwhile Liquidator – Delicious Coco Water Pvt. Ltd. & Anr
Coram: Hon’ble Mr. Justice Ashok Bhushan, Hon’ble Mr. Barun Mitra, Member (Technical), and Hon’ble Mr. Arun Baroka, Member (Technical)
Case No.: Company Appeal (AT) (Insolvency) No. 1305 of 2023
Advocates for the Appellant: Mr. Sudhir Makkar, Sr. Advocate with Ms. Anushka Sarkar, Ms. Veera Mathai, Advocates.
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