Corporate Debtor not fall under “Aggrieved Party”, Appeal Filed u/s 61 of IBC not Maintainable: NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) ruled  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.

Clarion Health Food LLP filed appeal under section 61 of the Insolvency and Bankruptcy Code, 2016. ( 'Code') challenging the Impugned Order of Adjudicating Authority passed on 05.09.2023 filed under the provisions of the Section 9 of the Code.

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The Appellant 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.

The Respondent no.1 submitted copy of impugned order 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.

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The counsel asserted that there was collusion between the Operational Creditor ( OC ) and the CD to secure the 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. 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 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 Courts.

The tribunal, at the outset, noted 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, which has been affirmed by the Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank (2018), which held that the resolution process under the IBC takes precedence over any conflicting laws.

The NCLT has passed the order after hearing both the parties and it's an order complying with relevant provisions of the code. The debt and default are on record and there was no pleading of pre-existing dispute in this case,the tribunal noted.

The three member bench of Justice Rakesh Kumar Jain ( Judicial Member ), Mr. Naresh Salecha ( Technical Member ) and Mr. Indevar Pandey ( Technical Member ) noted that the dispute under Section 5(6) of Code has to be between the Corporate Debtor and Operational Creditor not a dispute between two groups of shareholders. The Tribunal has further held that even in case of any fraud played by one of the shareholders against one or other shareholders or ex-shareholders of Corporate Debtor, while the aggrieved may take appropriate steps against the shareholder, the same does not absolve Corporate Debtor of its payment to Operational Creditors.

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The Tribunal viewed that the contention of Appellant about pre-existing dispute between Appellant and CD has no effect on CIRP proceedings which has been admitted in compliance with provisions of the Code. Further observed that equity shareholders are investors in the company and they are owners of the company to the extent of their proportionate shareholding. They provide risk capital to the company, accordingly when a company is liquidated, they have the last priority in the liquidation state after all other stakeholders are paid.

The tribunal held that the appellant being a shareholder of the company is not the “aggrieved party” as per the provisions of the Code. The appeal was dismissed as the appellant has no locus to file this appeal and the same is not maintainable.

To Read the full text of the Order CLICK HERE

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