Kishorkumar Bachuram Kapdi vs Nitin Narang, Resolution ...
2021 Latest Caselaw 16201 Guj

       C/SCA/11620/2021                           ORDER DATED: 14/10/2021




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/SPECIAL CIVIL APPLICATION NO. 11620 of 2021

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                KISHORKUMAR BACHURAM KAPDI
                           Versus
 NITIN NARANG, RESOLUTION PROFESSIONAL OF M/S. AFCAN IMPEX
                         PVT. LTD.
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Appearance:
MR NANDISH CHUDGAR WITH MS NIDHI N PRAJAPATI(10572) for the
Petitioner(s) No. 1
for the Respondent(s) No. 3
MR RASHESH PARIKH WITH MS NITU CHATURVEDI WITH MR ADITYA S
RAVAL(9674) for the Respondent(s) No. 1
KULDEEP K ADESARA(9222) for the Respondent(s) No. 1
MS MOHINI BHAVSAR FOR MR BHARAT JANI(352) for the Respondent(s)
No. 2
MR KM PARIKH(575) for the Respondent(s) No. 1
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 CORAM:HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
                  Date : 14/10/2021
                   ORAL ORDER

1. By this petition, under Article 226 and 227 of the Constitution of India, the petitioner, has prayed for appropriate order or direction directing the respondent no. 1 to get the valuation of the stock value afresh through an IBBI registered valuer and with a further direction to the respondent no. 1 not to consider the valuation report dated 30.04.2021 for the purpose of the Corporate Insolvency Resolution Process(hereinafter referred to as 'CIR process') of M/s. Afcan Impex Pvt. Ltd.

2. The brief facts of the case are:

2.1. That M/s. Afcan Impex Pvt. Ltd. , is a MSME Unit and Kandla- SEZ. The petition has been filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'the Code of 2016') against M/s. Afcan Impex Pvt. Ltd.. The respondent no. 3 i.e. adjudicating authority, has passed an order dated 17.02.2021

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admitting the petition and initiating the CIR process of M/s. Afcan Impex Pvt. Ltd., followed by appointment of respondent no. 1 as Interim Resolution Professional under Section 13(1)(c) of the Code of 2016 for carrying out the CIR process. It is also the case of the petitioner that the Committee of Creditors of the respondent No. 2 have appointed the respondent no. 1 as the Resolution Professional, for the entire CIR process. According to the petitioner, as a part of the CIR process the respondent no.1 is required to carry out valuation of all the properties and assets of the Corporate Debtor and prepare an Information Memorandum which would be the basis for the prospective resolution applicants to submit their resolution plans.

2.2 It is the case of the petitioner that the IRP/RP had got the valuation of the stocks carried out by a Chartered Accountant Firm viz. M/s. Chirag L. Thacker & Co., which had prepared the Stock Audit Report/Valuation Report dated 30.04.2021. The said valuation report was circulated in the second CoC Meeting held on 05.05.2021. The petitioner, is aggrieved by the said Valuation Report dated 30.04.2021, wherein the goods worth Rs. 5 Crores are sought to be valued at approximately Rs.10,00,000/-. This led to the filing of an application on 29.06.2021 before the respondent No. 3 numbered as IA No. 480/2021 in CP (IB) No. 280/2020 inter alia praying for Stock Audit Report/Valuation Report dated 30.04.2021 to be set aside with a further direction to the respondent not to consider the Stock Audit Report.

2.3 The application was listed for hearing and after hearing, the adjudicating authority had issued a notice to the respective parties with a further direction to them to file the reply and the matter, was ordered to be listed for further consideration on 21.09.2021. According to the petitioner, the application should have been heard at the earliest failing which, the hearing of the application would be

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rendered academic, since the last date for submission of the resolution plan was 16.08.2021. Being aggrieved, the petitioner has filed the captioned writ petition with the aforementioned prayers. So far as prayer 16(a) is concerned Mr. Chudgar learned advocate appearing for the petitioner, states that the said prayer, by efflux of time, has been rendered infructuous.

3. The respondent no. 1 being the Resolution Professional, has filed its reply dated 26.08.2021, inter alia, pointing out that the present writ petition, is neither maintainable nor sustainable in the eyes of law inasmuch as, the petitioner has already invoked the jurisdiction of the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (hereinafter referred to as "the Tribunal") by way of filing an application being I.A. No. 480/2021 seeking similar reliefs i.e. the Court having the jurisdiction in terms of Section 60(5) of the Code of 2016. It is also pointed out that the application filed by the respondent no. 1 against the petitioner under the provisions of sub-section (2) of Section 19 of the Code of 2016, is also pending before the Tribunal which, will be decided and therefore, the reliefs sought for by the petitioner, are neither maintainable nor sustainable. While adverting to the grievance of the petitioner i.e. the valuation report dated 30.04.2021, it is submitted that the Stock Audit Report produced by the petitioner in the petition, is not the valuation report, on the basis of which the Information Memorandum is prepared and plans are approved of the prospective resolution applicants nor, the same forms the basis of valuation under the provisions of the Code of 2016.

3.1 It is clarified that the petitioner was requested to provide the inventory however, the petitioner did not provide and accordingly the respondent no. 1 was compelled to visit the factory/plant of the Corporate Debtor to take over the assets in term do Section 18(1)(f) of the Code of 2016. Since some inventory was lying in the factory

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premises, therefore to ascertain the inventory, M/s. Chirag L Thacker accountancy firm, was appointed for carrying out the Stock Audit Report.

3.2 While referring to the provisions of Section 29 and 36 of the Code of 2016, it is stated that the Information Memorandum has been prepared in terms of the said provisions and the valuation as mentioned in the Stock Audit Report is not part or mentioned in the Information Memorandum. It is also the stand of the respondent no. 1, that there is duty cast upon it being the Resolution Professional in terms of Regulation 27 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as "the Regulations of 2016") . It is the stand of the respondent no. 1 that on 09.04.2021, the valuers, for valuation of land and building; securities or financial assets; plant and machinery have been appointed to determine the liquidation value in accordance with the Regulation 35 of the Regulations of 2016 confirmed by the members of the Committee of Creditors. It is also further stated that the valuation of properties/ assets on the basis of which the liquidation value has to be determined, the said properties/assets are being conducted by the independent registered valuers duly registered with IBP appointed. It is also the case of the respondent that edifice on which the present writ petition has been filed, is misconceived. It is therefore submitted that the present petition with the prayers, is misconceived.

4. Mr. Nandish Chudgar, learned advocate, submitted that the Stock Audit Report/ Valuation Report was carried out by the Chartered Accountant firm and circulated in the second Committee of Creditors meeting held on 05.05.2021, it would be appreciated that the goods worth Rs. 5 Crore are sought to be valued at approximately Rs. 10 Lakhs and that the valuer, has considered the entire stock as garbage without understanding the nature of

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business of Corporate Debtor. It is also submitted that the nature of business of the Corporate Debtor, is such that the Corporate Debtor is importing old and used clothes (wearable and non-wearable), from foreign countries namely western countries. Such imported clothes, are segregated into wearable and non-wearable clothes and after completing the packaging are exported to economically poor African countries and remaining non-wearable clothes are mutilated and are sold in the Domestic Tariff Area. It is therefore submitted that the IRP/RP and the valuer, without understanding the nature of the business of the Corporate Debtor, had labelled the used clothes imported for the purpose of segregation and re-export as garbage and has valued the stock/raw-material approximately Rs. 10 Lakhs. It is also submitted that in view of the artificially undervalued and manipulated valuation report, the resolution plan that was submitted would also be commercially under-valued prejudicially affecting the petitioner who is also the guarantor of the Corporate Debtor.

4.1 It is because of this that the petitioner had filed an application being I.A. No. 480/2021 before the Tribunal and the petitioner has approached this Court when the matter was adjourned somewhere in the month of September 2021 on that day also, the hearing did not take place and now, the matter has been adjourned to 06.12.2021, prejudicially affecting the case of the petitioner. It is submitted that as is clear from the order of the Tribunal, the petitioner has been asked to approach the IBBI as per the provisions of Code of 2016.

4.2 Mr. Chudgar, learned advocate has also placed on record the affidavit dated 13.10.2021, inter alia, pointing out that the petitioner has received a notice dated 04.10.2021 requiring the petitioner as a guarantor to make good the short fall. It is therefore submitted that there is a clear case of lack of bona fides on the part of the

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respondent in maximizing the value of the assets of the Corporate Debtors. Such action on the part of the respondent has prejudiced the petitioner as a guarantor.

5. On the other hand, Mr. Rashesh Parikh learned advocate appearing for the respondent no. 1, Resolution Professional, at the outset, has submitted that the edifice on which the present petition, has been filed is misconceived inasmuch as the stock audit report cannot be construed to be a valuation report and that it is only a inventory report. It is also submitted that M/s. Afcan Impex Pvt. Ltd. the Corporate Debtor was requested to provide the details however, since it did not, the respondent no.1 was compelled to appoint Chirag L. Thacker the Chartered Accountant for the purpose of carrying out the stock audit report. Accordingly, the report has been prepared. However, the same cannot be construed to be a valuation report. It is also submitted that so far as the valuation aspect is concerned, vide six communications all dated 09.04.2021, the valuers have been appointed for valuations of (i) land and building;

(ii) Securities or financial assets and (iii) plant & machinery and therefore to say that the Stock Audit Report is a valuation report is a mis-conception on the part of the petitioner.

5.1 It is also submitted that the present petition at the outset is not maintainable and sustainable in the eyes of law inasmuch as for the very same cause of action the application of the petitioner is pending before the Tribunal and since then the Tribunal is seized of the matter. It is submitted that the Apex Court in the case of Jai Sing vs. Union of India and Others reported in (1977) 1 SCC 1 has held and observed that it would be impermissible to pursue two parallel remedies in respect of the same matter at the same time. It is also submitted that the present petition may not be entertained on this ground as well, inasmuch as the Interlocutory Application No. 480 of 2021 in CP (IB) No. 289 of 2021 is pending consideration before the

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tribunal. It is also submitted that even otherwise, the apprehension raised on the part of the petitioner is misplaced for when, the tribunal, would be considering the application, at that time, all the applications filed by the respective parties will betaken into consideration by the tribunal including the application of the petitioner.

5.2 Mr. Parikh, learned advocate has also submitted that the present petition is not maintainable in view of an alternative efficacious remedy available under the Code of 2016. It is submitted that the Code of 2016 is a complete Code in itself and therefore the present petition may not be entertained. In support of the said contention reliance is placed on the judgment of the Apex Court in the case of Embassy Property Developments Pvt. Ltd. vs. State of Karnataka reported in 2020 (13) SCC 308. It is submitted that before the Apex Court, the issue was whether the High Court ought to have interfered under Articles 226/227 of the Constitution of India, with an order passed by the National Company Law Tribunal in a proceeding under the Code of 2016 ignoring the availability of statutory remedy of appeal to the National Company Law Appellate Tribunal and if so, under what circumstances. It is submitted that the Apex Court has held and observed that it is beyond any doubt that the Code of 2016 is a complete Code in itself. Reference has been made to the judgment in the case of Innoventive Industries Ltd. vs. ICICI Bank Ltd. reported in (2018) 1 SCC 407 wherein it has been held that the Code of 2016 is an exhaustive Code under the subject matter of insolvency in relation to corporate entities and others. It is also true that the Code of 2016 is a single unified umbrella Code, covering the entire gamut of law relating to the insolvency resolution of corporate persons and others in a time bound manner. It has also been observed that insofar as insolvency resolution of Corporate Debtors and personal guarantors are concerned, any order passed by the NCLT is appealable to NCLAT

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under Section 61 of IBC Code, 2016 and orders of NCLAT are amenable to the appellate jurisdiction of the Apex Court under Section 62. Mr. Parikh, learned advocate therefore, submitted that not only the Corporate Debtors but also for the guarantors, there is an inbuilt mechanism provided under the Code of 2016 and the present petition by the guarantor shall not be entertained and be relegated to the alternative remedy available to him under the Code of 2016.

6. Ms. Mohini Bhavsar, learned advocate appearing for Mr. Bharat Jani, learned advocate appearing for the respondent no. 2 has adopted the arguments advanced by Mr. Rashesh Parikh, learned advocate appearing for the respondent no. 1.

7. Heard learned advocates appearing for the respective parties and perused the documents available on record.

8. Petitioner has essentially, prayed for the reliefs and relevant for the present purpose, are extracted hereinbelow:-

"16. ..

A. Your Lordships may be pleased to issue writ of mandamus/certiorari and/or an appropriate writ, order or direction, directing the Respondent no.3 to hear and dispose of the Application being IA No. 480/2021 in CP (IB) 289/2020 filed by the Petitioner herein, before 16/08/2021 and be further pleased to stay the further Corporate Insolvency Resolution Process of M/s. Afcan Impex Pvt. Ltd. till appropriate final orders are passed by Respondent no.3 in IA no.480/2021 in CP (IB) 289/2020.

OR IN THE ALTERNATIVE

B. Your Lordship may be pleased to issue a writ of mandamus and/ or any other appropriate writ, order or direction, directing the Respondent no.1 to get the valuation of the stock valued afresh through an IBBI Registered Valuer and be further pleased to direct the Respondent no.1 not to consider the Valuation Report dated 30/04/2021 (at Annexure-A) for the purpose of the Corporate Insolvency Resolution Process of M/s. Afcan Impex Pvt. Ltd."

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Pertinently, the petitioner had prayed for the direction directing the respondent no. 3 to hear and dispose of the application being IP No. 480 of 2021 in CP/IB No. 289/2020 filed by the petitioner before 16.c08.2021. Mr. Chudgar, learned advocate, at the outset stated before this Court that the said prayer is not pressed by the petitioner. Therefore, so far as the first prayer is concerned, it should not detain this Court any further.

9. So far as the second prayer is concerned, the grievance of the petitioner, is improper valuation of the assets/ properties and stocks of the Corporate Debtor. The edifice on which the petition has been filed is the Stock Audit Report prepared by the Chartered Accountant Chirag L. Thacker & Co. As is discernible from the record, since the petitioner, did not provide the inventory records and the books of accounts of the Corporate Debtor, the factory/plant of the Corporate Debtor, was visited to take over the assets of the Corporate Debtor and to ascertain the inventory. M/s. Chirag L. Thacker accountancy firm, was appointed for carrying out the Stock Audit Report. The respondent no.1, has clearly stated that the Stock Audit Report is neither the valuation report on the basis of which Information Memorandum is prepared and plans would be approved of the prospective resolution nor the same would be forming basis of valuation under the provisions of the Code of 2016. Further, the six communications all dated 09.04.2021, have been placed on record indicating the appointment of the valuer for the valuation of land & building of M/s. Afcan Impex Pvt. Ltd.. Therefore, the edifice on which the petition has been filed by the petitioner is erroneous.

10. This Court, without going into the merits or demerits of the case is of the opinion that the Code of 2016, being a Code unto itself and in absence of any exceptional grounds made out by the petitioner before this Court, the petition does not deserve to be entertained in exercise of the powers under Article 226 of the

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Constitution of India. It is well settled proposition of law that entertainment of a petition is not barred even if the alternative efficacious remedy is available, however, the contingencies for entertainment of the writ petition have to be satisfied. The grievance that the valuation is on a lower side depicting artificial valuation, cannot be said to be falling within the exception and therefore, this Court, is of the opinion that the petition does not deserve to be entertained at this stage. Reliance is placed by Mr.Parikh, learned advocate on the judgment in the case of Embassy Property Developers Pvt. Ltd. (supra). The Apex Court has held and observed that the Code of 2016 being a complete Code unto itself, interference by the High Court under Article 226, would be unwarranted. The Apex Court, in paragraphs. 10 and 11 has observed thus:

"10. In the backdrop of the facts narrated and in the light of the rival contentions extracted above, the first question that arises for consideration is as to whether the High Court ought to interfere, under Article 226/227of the Constitution, with an order passed by NCLT in a proceeding under the IBC, 2016, despite the availability of a statutory alternative remedy of appeal to NCLAT.

11. It is beyond any pale of doubt that IBC, 2016 is a complete Code in itself. As observed by this Court in M/s Innoventive Industries Limited vs. ICICI Bank, it is an exhaustive code on the subject matter of insolvency in relation to corporate entities and others. It is also true that IBC, 2016 is a single Unified Umbrella Code, covering the entire gamut of the law relating to insolvency resolution of corporate persons and others in a time bound manner. The code provides a three-tier mechanism namely (i) the NCLT, which is the Adjudicating Authority (ii) the NCLAT which is the appellate authority and (iii) this court as the final authority, for dealing with all issues that may arise in relation to the reorganisation and insolvency resolution of corporate persons. In so far as insolvency resolution of Corporate Debtors and personal guarantors are concerned, any order passed by the NCLT is appealable to NCLAT under Section 61 of the IBC, 2016 and the orders of the NCLAT are amenable to the appellate jurisdiction of this court under Section 62. It is in this context that the action of the State of Karnataka in bypassing the remedy of appeal to NCLAT and the act of the High Court in entertaining the writ petition against the order of the NCLT are being questioned."

11. The Apex Court while referring to the judgment in the case of Innoventive Industries Ltd. (supra) wherein, it has been held that the

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Code of 2016 is an exhaustive Code in the subject matter of insolvency in relation to corporate entities and others. The proposition propounded by the Apex Court, is that the Code of 2016, is single unified umbrella Code covering the entire gamut of law relating to insolvency resolution of corporate persons and others in a time bound manner. So far as the, personal guarantors are concerned, the Apex Court has observed that if any orders are passed by the Tribunal, the orders are appealable to National Company Law Appellate Tribunal (hereinafter referred to as the 'Appellate Tribunal') under Section 61 of the Code of 2016, and the orders of the Appellate Tribunal, are amenable to the appellate jurisdiction of the Apex Court under Section 62.

12. Pertinently, Code of 2016 is a Code unto itself, providing for inbuilt mechanism. Section 61 of the Code of 2016 provides for appeals which starts with non-obstante clause. Any person aggrieved by the order of the adjudicating authority, has a liberty to prefer an appeal before the Appellate Tribunal and further appeal before the Supreme Court on question of law arising out of the order, if any, passed by the Appellate Authority under the Code of 2016. Therefore, there is an efficacious alternative remedy available to the petitioner to ventilate his grievance. In view of the aforesaid law enunciated by the Apex Court, and the fact that efficacious alternative remedy is available to the petitioner, this Court is of the opinion that the prayer prayed for by the petitioner does not deserve to be granted, invoking the extra-ordinary jurisdiction under Article 226 of the Constitution of India. Accordingly, the petition is not entertained and is hereby dismissed. No order as to costs.

(SANGEETA K. VISHEN,J) SINDHU NAIR