Judgments

KALPRAJ DHARMASHI VS KOTAK INVESTMENT ADVISORS LTD. : CASE SUMMARY

The Supreme Court in Kalpraj Dharmashi Vs Kotak Investment Advisors Ltd. (2021) 10 SCC 401 held that principle of Section 14 of Limitation Act will be applicable on IBC proceedings. The Supreme Court also reiterated that commercial wisdom of the CoC is not to be interfered with excepting the limited scope as provided under Section 30 and 31 of IBC.

FACTS OF THE CASE

Ricoh India Ltd. (Corporate Debtor)  filed an application under Section 10 IBC for initiating CIRP.  Vide order dated 14.05.2018, the application was admitted and IRP was appointed.

During CIRP,  fifth and aast Form G was published inviting Resolution Plans, which was to be submitted  on or before 08.01.2019. Kotak Investment Advisors Ltd (KIAL) and Karvy Data Management Systems Ltd submitted their Resolution Plans on 08.01.2019. WeP Solutions Ltd submitted Resolution Plan on 13.01.2019 and Kalpraj submitted Resolution Plan on 27.01.2019.

CoC approved the Resolution Plan of Kalpraj and submitted the same to the Adjudicating Authority for approval of Resolution Plan.  KIAL filed an application objecting to the Plan on the ground that permitting Kalpraj to submit Resolution Plan beyond last dated mentioned in Form G was illegal. NCLT approved the Resolution Plan and rejected application of KIAL. KIAL filed writ petition before Bombay High Court which was dismissed. KIAL filed appeal before NCLAT. NCLAT allowed the appeal and directed CoC to take a decision afresh. Against order of NCLAT four appeals were filed before the Supreme Court.

FINDINGS OF THE SUPREME COURT

The Supreme Considered three issues in this matter – (i) Whether appeals filed by KIAL before NCLAT was within limitation ? (ii) Whether there was waiver and acquiescence by KIAL ? and (iii) Whether NCLAT was right in law in interfering with the decision of CoC of approving the Resolution Plan of Kalpraj ?

Whether appeal filed by KIAL before NCLAT was within limitation ?

The Supreme Court noted that judgment of NCLAT was dated 28.11.2019.  As per Section 61 IBC Appeal was to be filed on or prior to 28.12.2019. Appeal could have been filed within a further period of 15 days i.e. 12.01.2020  in case sufficient cause was shown. If time taken in making available certified copy available then the appeal has to be filed on or before 02.02.2020. However the appeal was filed on 18.02.2020.

KIAL has filed Writ Petiiton on before High Court on 11.12.2019 which was dismissed on 28.01.2020. Whether this period could be excluded under Section 14 of the Limitation Act ?

It has been contended that Section 14 of Limitation Act only excludes time taken in bonafide proceedings before a Court and not quasi-judicial authorities.

The Supreme Court relied on M.P. Steel Corporation Vs. Commissioner of Central Excise (2015) 7 SCC 58  and observed that principle of Section 14, which is a principle based on advancing the cause of justice would certainly apply to exclude time taken in prosecuting proceedings which are boan fide  pursued with diligence but which end without a decision on the merits of the case.

One of the grounds taken by the KIAL before High Court was breach of principle of natural justice which is within the jurisdiction of High Court under Article 226 despite availability of alternative remedy. The Supreme held that KIAL was entitled to extension of period during which it was bona fide prosecuting a remedy before the High Court with due diligence.

Whether there was waiver and acquiescence by KIAL ?

It was  contended that the KIAL has had unconditionally and unequivocally agreed and accepted the terms of process memorandum  and surrendered all or any claim in respect of Resolution Plan as such KIAL does not have any right to challenge the process.

The Supreme Court relied on Central Inland Water Transport Corporation Ltd Vs Brojo Nath Ganguly (1986) 3 SCC 156 and observed that Court will not enforce and will, when called upon to do so, strike down an unfair or unreasonable contract or an unfair and unreasonable clause in a contract entered into between the parties who are not equal in bargaining power. Principle will apply when a man has no choice or rather no meaningful choice, but to give his assent to the contract, or sign on dotted line in a prescribed form or to accept a set of rules however unfair or unreasonable a clause may be.

In the instant case KIAL has no option than to accept the terms of the Contract. The Supreme Court held that KIAL cannot be said to be bound by such unconscionable clause.

It was contended that KIAL has submitted revised plans after Kalpraj was permitted to submit Resolution Plan as such KIAL has waived its rights.

The Supreme Court observed that for constituting acquiescence of waiver it must be established that though a party knows the material facts and is conscious of his legal rights in a given matter, but fails to assert its rights at earliest possible opportunity, it creates an effective bar or waiver against him.

KIAL has vide e-mail dated 29.01.2019 has objected to acceptance of belated Resolution Plan of the Kalparaj. It has reiterated its objection to participation of Kalpraj on many occasions. It has no other option except to submit revised plans.

The Supreme Court held that KIAL has not waived or acquiesced its right to challenge the decision of RP or CoC.

Whether NCLAT was right in law in interfering with the decision of CoC of approving the Resolution Plan of Kalpraj ?

The Supreme Court observed that scope of jurisdiction of NCLT and NCLAT has been considered in K. Sashidhar Vs. Indian Overseas Bank (2019) 12 SCC 150  , Committee of Creditors of Essar Steel  India Ltd Vs. Satish Kumar Gupta (2019) SCC Online SC 1478  and Bank of Maharastra Vs. Padmanabhan Venktesh (2020) 11 SCC 467. It is well settled that Statute has not invested jurisdiction and authority either with NCLT or NCLAT to review the commercial decision exercised by CoC of approving Resolution Plan or rejecting it. The commercial wisdom of the CoC is not to be interfered with excepting the limited scope as provided under Section 30 and 31 of IBC.

The Supreme Court observed that all decisions of the RP have been approved by the CoC. The creditor which voted in favor of KIAL is Kotak Bank which has voting rights of 0.97%.  

The Supreme Court concluded that NCLAT was not justified in interfering with decision of CoC.

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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