Since Shareholders Of Corporate Debtor Do Not Fall Within Definition Of “Aggrieved Party”, Appeal Filed U/S 61 Of IBC Not Maintainable: NCLAT

The NCLAT New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member),Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) affirmed that a shareholder of the company is not the “aggrieved party” as per the provisions of the Code therefore appeal filed by him under section 61 of the Code would not be maintainable.Brief FactsThis appeal has been filed by Clarion Health Food LLP under section 61 of the Insolvency and Bankruptcy Code, 2016. (in short 'Code') challenging the Impugned Order of Adjudicating Authority passed on 05.09.2023 filed under the provisions of the Section 9 of the Code.The Appellant M/s. Clarion Health Foods LLP is Limited Liability Partnership firm and is major shareholder holding 63.64% of paid-up share capital of Corporate Debtor M/s. Goli Vada Pav Pvt Ltd./Respondent No.1. The Vista Processed Foods Pvt. Ltd., Operational Creditor/Respondent No.2 filed a Petition before the AA under Section 9 of the Code. The petition was filed against Respondent No. 1, Goli Vada Pav Pvt Ltd, alleging a default in payment of Rs. 3,56,04,233/-.The petition was filed on 29.01.2023 and registered on 16.02.2023 after detailed hearing the AA admitted the petition and initiated the CIRP process against the CD by order dated 05.09.2023. The Appellant had filed a Company Petition on 05.01.2023 against the CD before the NCLT under Sections 166, 241, 242, 243, 244, and 447 of the Companies Act, 2013. The aforesaid petition was registered on 08.02.2023 as CP-28/2023. In the aforesaid Company matter, the Respondent no.1 submitted copy of impugned order dated 05.09.2023, by which AA admitted the application under section 9 of the code against the CD and submitted that on account of admission of CIRP proceedings against the CD the company petition of the Appellant CP-28/2023 needs to be dismissed. The Appellant was not provided an opportunity of representation in the Petition preferred by Operational creditor under section 9.ContentionsThe appellant submitted that in the hearing on 13.06.2023 the Section 9 petition hearing went unopposed, leading to its admission on 05.09.2023. On 16.10.2023, the CD informed the NCLT about the Section 9 petition's admission during the Section 241-242 proceedings. That as a majority shareholder in the CD, which is a closely held company, he has now filed this appeal before this Hon'ble Tribunal against the NCLT Mumbai's order dated 05.09.2023, which admitted the CD into the CIRP process under Section 9 of the Code. The counsel asserted that there was collusion between the Operational Creditor (OC) and the CD to secure this admission. Notably, the suspended director of the CD has not appealed the impugned order, leaving the Appellant as the party directly affected and thereby justifying its locus to appeal.That if it had been informed of the insolvency filing, it would have discharged the OC's debt to protect its substantial investment of Rs. 21 crores in the CD and that these circumstances collectively demonstrate its status as an “aggrieved person” under Section 61 of the Code entitling it to file the present appeal. That in “Ashish Gupta Vs Delagua Health India Pvt. Ltd.” 2022 the majority shareholder had sought intervention in the CIRP proceedings. The same was agitated by the opposite party. The contention of the majority shareholder was that the aforesaid petition was collusive in nature. The Application filed by the majority shareholder was allowed. The Appeal filed against the said order was challenged before this Appellate Tribunal. The Appeal was dismissed with the observation that the interest of the majority shareholders should be protected in CIRP proceedings.Per contra, the respondents submitted that this Hon'ble Tribunal in its judgement in the matter of Chetan Sharma Vs. Jai Laxmi Solvents (P) Ltd. & Anr. 2017, has held in paragraph 15 of the judgement that it is a settled law that unilateral 'transfer' of liability does not constitute a 'dispute' within the meaning of Section 5(6) of the I&B Code. That the dispute under Section 5(6) of the Code has to be between the Corporate debtor and the Operational Creditor and an inter-se dispute between two groups of shareholders of the Corporate Debtor does not constitute a dispute in reference to Operational Creditors.That the Appellant herein has preferred the present appeal as an independent shareholder aggrieved by the admission order for the commencement of Corporate Insolvency Resolution Process, however, the Appellant has no locus to file the present Appeal as per established principles of law as decided by Hon'ble Courts.That the disputes related to shareholder oppression or mismanagement under the Companies Act, 2013 are distinct issues governed by separate statutory provisions and fall outside the purview of the Code. As a special statute, the IBC prevails over the Companies Act pursuant to Section 238, as affirmed by the Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank...

Since Shareholders Of Corporate Debtor Do Not Fall Within Definition Of “Aggrieved Party”, Appeal Filed U/S 61 Of IBC Not Maintainable: NCLAT

Mohd Malik Chauhan

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