Office of the Collector of Electricity Duty Vs. Shri Raj Kumar Podar. - Adjudicating Authority imposed cost on RP for disputing the claim without obtaining legal opinion.

 NCLT Ahmedabad (02.08.2021) In Office of the Collector of Electricity Duty Vs. Shri Raj Kumar Podar. [IA/ 70(AHM) 2021 in C.P.(IB) 497/NCLT/AHM/2019 ] Adjudicating Authority imposed cost on RP for disputing the claim without obtaining legal opinion.

• It may also be useful to mention that Section 18(1)(b) of IBC, 2016 uses the term "Collate”. This word has not been defined in the Code, however, as per Merriam-Webster Dictionary, this term means (a) to compare critically (b) to collect, compare carefully in order to verify and often to integrate or arrange in order. As per free dictionary, it means to examine and compare carefully in order to note points of agreement or disagreement. The term “Collate” also means the grouping together of related items to provide a record of events and facilitate further processing.

• Regulation 13 of CIRP Regulations authorises IRP or RP to verify the claims. The process of verification involves authentication or confirmation of truthfulness. However, RP in this process cannot act in arbitrary manner. 

• In case of any doubt as regard to legality of claim and that too of this magnitude, Resolution Professional is duly empowered to take legal opinion so that matter can be closed in a satisfactory manner without approaching this Authority to the extent possible.

• We may further add that Applicant/Creditor has given detailed reply narrating the legal position which would be applicable and no reply has been given by RP to the Applicant on such legal submissions. The RP has also not taken a legal opinion to ascertain the correct legal position, as no such opinion has been brought on record.

• Thus, according to us it is a case where Resolution Professional has disputed the claim for the sake of disputing and without any substantial reason. This has resulted into burdening of this Adjudicating Authority, hence, in our opinion, Resolution Professional needs to be made liable and accountable for this.

Excerpts of the order;

# 1) Through this application, the Applicant is seeking direction from this Adjudicating Authority to the Resolution Professional to admit the claim of Applicant with respect to the statutory dues to the tune of Rs. 42.74 Crores, which represents principal sum of Electricity Duty as well as interest upto January, 2020. 

# 2) The facts, in brief, are that the Corporate Debtor had set up a 50 MW power plant comprising of 2 Generating Sets of 25 MW each. The Corporate Debtor for said Generating sets applied for registration in Form C, which was granted by the Applicant department on 04.06.2013. It is claimed by the Applicant that Corporate Debtor was liable to pay electricity duty under Rule 9 of the Bombay Electricity Duty(Gujarat) Rules, 1986. However, Corporate Debtor defaulted in payment of said electricity duty since the commissioning of the power plant. The Applicant filed its claim with the Resolution Professional in the course of CIRP proceeding, which were initiated in respect of the Corporate Debtor vide order of this Adjudicating Authority dated 08.01.2020. It is further submitted that on the E-mail sent by the Resolution Professional on 24.03.2020, the Applicant submitted its claims on 08.04.2020. The Resolution Professional, however, on 29.06.2020 required documents to be provided for verification and admission of claims of the Applicant, to which a detailed reply was submitted by the Applicant on 09.07.2020. The Resolution Professional, however, vide its E mail dated 16.12.2020, on the basis of its interpretation of the provisions of Gujarat Electricity Duty Act, 1958 rejected the claims of the Applicant. It is also submitted that response to E-mail of Resolution Professional rejecting the claim of Applicant was filed on 20.07.2020, in spite of that Resolution Professional did not admit the claims, hence, this application. 

# 3) The learned counsel appearing on behalf of Applicant after narrating these basic facts took legal plea that Resolution Professional is to act in administrative capacity and Resolution Professional does not have power to adjudicate upon the claims submitted by a creditor, hence, such action of Resolution Professional is against the mandate of law. For this proposition, reliance has been placed on decision of the Hon'ble Supreme Court in the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs Union of India & Ors. [2019(4) SCC 17) and in the of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. [2019 SCC OnLine SC 1478]. 

# 4) On merits, the learned counsel contended that as per Rule 9 of Bombay Electricity Duty (Gujarat) Rules, 1986, the Corporate Debtor, being a person other than a licensee, was required to pay the duty after getting the registration done in prescribed Form C of said rule. It was also pleaded that the Corporate Debtor was governed by the provision of Section 4(2) or Section 4(5) of Gujarat Electricity Duty Act, 1958, however, on enquiry from the Bench, the learned counsel took stand that the Corporate Debtor fell under the provision 4(5) of Gujarat Electricity Duty Act, 1958, as it was generating electricity for consumption of its parent company. It was also claimed that the Resolution Professional has wrongly interpreted the provisions of Electricity Duty Act, 1958 and Rules made thereunder in not admitting its claims. 

# 5) The learned counsel for the Resolution Professional and Resolution Professional in person appeared and made submissions in support of stands taken by the Resolution Professional for not admitting the claim of the Applicant. The Resolution Professional also submitted that it had not admitted the claim, therefore, the issue of rejection of claim was not involved, hence, Resolution Professional did not act beyond its mandate under law. It was also pleaded that Resolution Professional was well within its power to not to admit such claim as per provisions of Code, as disputed claims cannot be admitted mechanically by Resolution Professional and in such situation the Applicant could approach this Adjudicating Authority. 

# 6) We have considered the submissions made on behalf of both the parties and material on record. As far as, first plea regarding scope of responsibility and nature of duties, which can be performed by the Resolution Professional during the CIRP is concerned, it is noted that on commencement of CIRP, IRP is appointed to conduct CIRP, who publishes notice under Section 13 inviting claims in terms of provisions of Section 15 of IBC, 2016. As per Section 15 of the IBC, 2016, such public announcement contains the last date of submission of claims. As per Section 18(1)(b) of the IBC, 2016, IRP is required to receive and collate claims submitted by the creditors to him pursuant to public announcement made under Section 13 and 15 of the IBC, 2016. As per Section 25(2)(e) of the IBC, 2016 Resolution Professional is required to maintain and update the list of claims. Regulation 7 to 9 (A) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations2016 (hereinafter called "CIRP Regulations”) prescribed the mode and manner in which claims will be filed by various categories of creditors. The existence of a claim by a creditor may be proved on the basis of various documents as prescribed in such regulations. As per Regulation 10 of CIRP Regulations, IRP/RP has got the power to call for such other evidence or clarification as it deems fit from a creditor for substantiating the whole or part of its claims. As per Regulation 12, creditor is required to submit the proof of claims within the specified period or latest before 90th day of the insolvency commencement of the date. Regulation 13 of CIRP Regulations provides for verification of claims and maintenance of list of creditors. Such list of creditors should contain the details of amount claimed by them, the amount of their claims admitted and security interest, if any. The IRP is also obliged to update such list. As per Regulation 14, IRP/Resolution Professional is required to make best estimate of the amount of claim based on the information available with him, which can also be revised subsequently on receipt of additional information warranting such revision. Thus, IRP/RP is not only required to receive and collate the claims but it is also obliged to verify such claims, as per regulations, if we look at the provisions of Regulation 13, it clearly provides for details as regard to amount claimed and amount of claims admitted, therefore, by necessary implication, it means that all the claims submitted cannot be admitted as such. This is also so because for resolution of insolvency of a Corporate Debtor, claim amount is the most significant aspect. It is not only the amount but nature of such claims as well as security interest, if any, is also to be determined by the IRP/RP. This aspect is also significant from the perspective of settlement of claims. In our view, if this contention of the Applicant is admitted then the very purpose of appointing IRP/RP shall be defeated, as in that situation every claimant would approach this Adjudicating Authority only because even coc is not empowered to take a final call in respect of said aspect. It may also be useful to mention that Section 18(1)(b) of IBC, 2016 uses the term "Collate”. This word has not been defined in the Code, however, as per Merriam-Webster Dictionary, this term means (a) to compare critically (b) to collect, compare carefully in order to verify and often to integrate or arrange in order. As per free dictionary, it means to examine and compare carefully in order to note points of agreement or disagreement. The term “Collate” also means the grouping together of related items to provide a record of events and facilitate further processing. The procedure for further processing is prescribed in the Regulation narrated briefly herein before. Regulation 13 of CIRP Regulations authorises IRP or RP to verify the claims. The process of verification involves authentication or confirmation of truthfulness. However, RP in this process cannot act in arbitrary manner. In case of any doubt as regard to legality of claim and that too of this magnitude, Resolution Professional is duly empowered to take legal opinion so that matter can be closed in a satisfactory manner without approaching this Authority to the extent possible. Thus, considering this legal position, we hold that RP, though not having power to adjudicate upon the claim is duty bound to discharge his duties as regarding to collation of claims 

# 7) In this legal background, now we would examine the facts of this matter. It is noted that in the present case, RP himself has approached the Applicant to file its claims, if any, with all necessary documents and the claim has been made thereafter. The RP also requested to file additional documents. Till this stage nothing appears to be wrong, however, thereafter the Resolution Professional has not admitted the claim for the reason that there is no legal liability to pay such amount of such Electricity Duty based upon the interpretation of the provisions of Section 4(1) of Gujarat Electricity Duty Act 1958. It is also to be noted that earlier the parent company of the Corporate Debtor who has consumed the energy generated by the Corporate Debtor approached the Competent Authority to grant exemption under Section 3(2)(vii) of the relevant statute, which was not granted. The Applicant has also provided the details of duty payable from March, 2012 to March, 2019, which amounts to Rs. 42.74 Crores. In the first E-mail sent on 24.03.2020, the RP has admitted that the Corporate Debtor was supplying power to its holding company. It has also been mentioned that both entities were sharing the same premises and staff. It is also stated that the holding company was undergoing winding up process under Companies Act, 2013 before Hon ble Bombay High Court. Now, we come to the merits of the claim filed by the Applicant, it is not in dispute that application by the Corporate Debtor has been made in Form C, which is prescribed for a person who is governed by Section 4(2) and 4(5) of the Gujarat Electricity Duty Act, 1958. It is also not in dispute that application has been filed under Rule 9 of Bombay Electricity Duty (Gujarat) Rules, 1986. It is also noted from the reply of the Applicant that in case of Applicability of Section 4(1) of the Gujarat Electricity Duty Act, 1958 prescribed Forms are A and B and governing rule for this provision for completion of formalities is Rule 3 of said Rules. Thus, on this basis only it can be said that the RP has not correctly appreciated the provisions of liability and has wrongly invoked the provisions of Section 4(1) of the Gujarat Electricity Duty Act, 1958 for disputing the claim filed by the Applicant, whereas, in the present case Section 4(2) or Section 4(5) Gujarat Electricity Duty Act, 1958 is applicable. Accordingly, we direct the RP to consider the claim of the Applicant and admit the same after due verification as per relevant provisions of IBC, 2016 and CIRP Regulations, 2016. 

# 8) We may further add that Applicant/Creditor has given detailed reply narrating the legal position which would be applicable and no reply has been given by RP to the Applicant on such legal submissions. The RP has also not taken a legal opinion to ascertain the correct legal position, as no such opinion has been brought on record. Further, it is generally observed that even for small issues like applications under Section 19(2) of the IBC, 2016, the legal counsels are appointed and argue the matter before this Adjudicating Authority, hence, it does not stand to reason as to why RP did not consider it appropriate, in the present case, to take a legal opinion before not admitting such claim of this magnitude of a statutory body and disputing the same relying on a provision of Section 4(1) of Gujarat Electricity Duty Act, 1958, which even to a layman would not be found to be applicable, if more fact of filing of an application in Form C and registration granted by competent authority is taken into consideration. Thus, according to us it is a case where Resolution Professional has disputed the claim for the sake of disputing and without any substantial reason. This has resulted into burdening of this Adjudicating Authority, hence, in our opinion, Resolution Professional needs to be made liable and accountable for this. Accordingly, we impose a cost of Rs. 50,000/ - (Rupees Fifty Thousands Only) on Resolution Professional, which RP is required to deposit from his personal account to Prime Minister Relief Fund and submit the proof of payment along with acknowledgment of receipt of payment within 10 days. 

9) Accordingly, this application is allowed and disposed of in above terms. 

-------------------------------------------------

Amar Universal Private Limited v/s. SK Wheels Private Limited - Delay in verification of claim of creditor, cost imposed on Resolution Professional

 NCLT Mumbai (16.10.2019) in Amar Universal Private Limited v/s. SK Wheels Private Limited [MA NO. 2319/2019 IN C.P. (IB) 4301/2018 ] In the instant case, RP kept pending verification of the claim of the creditor, due to pending dispute, as submitted by the RP before the tribunal. Tribunal imposed the cost on RP.

Excerpts of the order;

# 2. The Applicant submits that the Corporate Debtor in June 2015 had approached him to occupy the Premises owned by the Applicant. Accordingly, the parties entered into a Leave and License Agreement dated 07.08.2015, based on the agreement it was decided that a License Fee was due and payable on or before 7th of each Calendar Month.

 

# 3. The Applicant further states that the Corporate Debtor was irregular in making payment of the license fees and since June 2018, the Corporate Debtor with mala fide intention defaulted in making monthly payments of the said license fees.

 

# 4. Thereafter, the Applicant who was aggrieved by the default in the payment of license fees committed by the Corporate Debtor issued a letter on 11.07.2018 to the Corporate Debtor as a reminder to immediately clear the pending dues or else the Applicant would be compelled to terminate the Agreement. However, since the said letter was completely ignored by the Corporate Debtor, the Applicant issued a second reminder dated 23.03.2018, as per which a time of two days was given to clear the dues.

 

# 5. Even after these reminders the Corporate Debtor failed to clear the pending dues of the license fees and therefore the Applicant vide a Termination Notice dated 23.08.2018, after which the Applicant through a Final Notice dated 19.09.2018 directed the Corporate Debtor to vacate the said premises within 15 days.

 

# 6. Once again since the Final Notice fell on deaf years of the Corporate Debtor, the Applicant thereafter filed a Civil Suit against the Corporate Debtor in the month January 2019 beading number in the court of Civil Judge, Senior Division, Thane. Applicant vide this suit prayed the court for vacating the premises and for possession, recovery of arrears of monthly license fees valuing Rs. 1,08,44,655/-.

 

# 7. A petition against the said Corporate Debtor was filed and the same was admitted on 29.03.2019 by an order of this Tribunal. Therefore, due to aforesaid order the moratorium was declared in accordance with section 14 of the Code and the suit between the Applicant and the Corporate Debtor came on a stand still.

 

# 8. Applicant filed his claim before the Resolution Professional as per the provisions of the Code. The Applicant filed his claims in Form-B under the Regulation 7 of Insolvency and Bankruptcy Board of India, Regulations, 2016.

 

# 9. The Applicant has further apprised the bench that even after various communications with the Resolution Professional and providing him with every document required by him, the Resolution Professional has not accepted his claim and has also not cited a reason for the

same.

 

# 10. Reply has been filed on behalf of the Resolution Professional wherein he has denied every argument and averment made by the Applicant and based on the said Reply he has raised mainly following objections with regards to this Application

• a) This Application is not maintainable since the Applicant has not come to the court with clean hands. It is stated that the disputed premises, since it had been handed over to the Corporate Debtor by the Applicant it was not in a proper condition for which the Corporate Debtor had to carry out repairs. It is submitted that the since the Corporate Debtor failed to fulfill his obligation the Applicant herein was compelled get the repairs done from time to time. Due to this the Corporate Debtor ended up paying an amount of Rs. 2,53,81,621/- towards the repairs. When a dispute regarding the same was raised by the Corporate Debtor, the Applicant assured to adjust the said amount towards payment of monthly license fee payable.

• b) Another objection raised by the Respondent is that there have been various discrepancies with regards to the claim submitted by the Applicant, such as the Form B submitted is not duly signed, the Applicant seems to have claimed monthly license fee by raising tax invoices but the same have not been declared and uploaded on the GST Portal. Applicant also claimed interest on outstanding license fee when it is stated by the Respondent that there is no provision in the Agreement for the same.

• c) It is also argued that the said Application is not maintainable since the Resolution Professional has not yet decided on the claim of the Applicant and the same is under consideration as it is pending for clarification and substantiation from the Applicant.

 

# 15. It is trite law that this tribunal has been provided with vast powers under section 60 (5) of the Code. Therefore, based on the above this bench is of the view that the actions or rather inaction on the part of the Resolution Professional in not taking a decision with respect to the claim of the Applicant is an abuse of the powers given to him under the code and contrary to justice and public policy. His actions are nothing more but an abuse of his dominant position.

 

#16. Furthermore, the arguments raised by the counsel representing Resolution Professional cannot be at all considered since the Applicants has complete right over the possession of his land and his dues, hence we are of the view that since the Resolution Professional seems to have been sitting over the claim of the Applicant for a long time and this cannot be allowed since the same would cause heavy prejudice to the Applicant and defeat the purpose of the Code.

 

# 18. This kind of injustice carried out by the Resolution Professional herein is completely unacceptable. The landowner is just not entitled to receive the license fee but also, he has to right to receive the possession of the said premises. The tenancy rights automatically get terminated, the moment default in payment of rent is committed.

 

# 19. Hence, this Miscellaneous Application is allowed with cost, and the Resolution Professional is directed to hand over of the possession of the said premises forthwith to the Applicant and pay the claim amount as raised by the Applicant in his claim within a week from the date of this order.

 

# 20. Accordingly based on the above discussion, this Application is allowed with cost of Rs. 1,00,000/- to be paid by the Resolution Professional to the Applicant within a week from the date of this order.

-----------------------------------