Pranav B Prem

The National Company Law Tribunal (NCLT), New Delhi Bench comprising Shri Bachu Venkat Balaram Das (Judicial Member) and Shri Atul Chaturvedi (Technical Member), has held that a set-off of transactions based on an arbitral award entered into prior to the commencement of the Corporate Insolvency Resolution Process (CIRP) is permissible during CIRP and not barred under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).

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The Tribunal was dealing with an application filed by Ansal Properties and Infrastructure Limited under Section 60(5) of the IBC read with Rule 11 of the NCLT Rules, 2016. The applicant sought reversal of a set-off permitted by the Resolution Professional (RP) and initiation of disciplinary proceedings by the Insolvency and Bankruptcy Board of India (IBBI) against the RP for allegedly acting at the behest of a shareholder of the Corporate Debtor, Ansal Urban Condominium Private Limited.

The Applicant, holding 15.81% shareholding in the Corporate Debtor, alleged that the RP unlawfully reduced a receivable amount of ₹34,54,53,125 from Ansal Landmark (Karnal) Township Private Limited (ALKTPL) during the moratorium period based on a letter issued by ALKTPL without verifying the arbitral award's existence and authenticity. The Applicant also raised concerns about the related party relationship between ALKTPL and Dalmia Family Office Trust (DFOT), pointing out that the arbitral award was the result of proceedings between two related entities.

On the other hand, the RP submitted that he had acted within the scope of his duties under Section 25(2) of the IBC. He relied on the forensic audit conducted by APT & Co LLP and letters dated 01.03.2022, 18.03.2022, and 21.03.2022, received from ALKTPL and DFOT. These documents established that the transaction in question dated back to 2015 and that the arbitral award dated 25.02.2022 had not been challenged by ALKTPL, thereby attaining finality. The RP contended that he was merely recording and compiling existing and historical transactions in the books of the Corporate Debtor and no new set-off had been effected during CIRP.

The Tribunal noted that although the set-off was accounted for during the moratorium, it pertained to transactions completed prior to the initiation of the CIRP on 10.03.2022. The arbitral award and the supporting documentation revealed that the transactions in question dated back to the year 2015. It was observed that “the Respondent merely discharged an administrative duty of compiling the accounts of the Corporate Debtor, strictly based on existing records pertaining to transactions finalized prior to the commencement of the CIRP.”

Further, the NCLT referred to the Supreme Court’s judgment in Bharti Airtel vs. Vijaykumar V. Iyer and Ors [Civil Appeal No. 3088 and 3089 of 2020] which permitted contractual and transactional set-offs during CIRP, provided they related to transactions finalized before commencement of CIRP. The Tribunal concluded that the RP’s action was a permissible “transactional set-off” as per the Supreme Court's reasoning. It also took note that the Applicant had earlier agitated the same issues through another entity, Katra Realtors Pvt. Ltd., in IA No. 882 of 2023, which had been dismissed by the NCLT and upheld by the NCLAT. As such, the Applicant was precluded from re-agitating the same matter in the present application.

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Importantly, the Tribunal highlighted that the forensic audit report did not raise any adverse findings regarding the transaction and that the Committee of Creditors (CoC), including around 660 homebuyers, had not objected to the statutory accounts finalised on 06.06.2023. In conclusion, the Tribunal found no illegality or irregularity in the RP’s actions. It held that the application was filed with the intent to derail the CIRP and delay its progress. Dismissing the application, the Bench directed that a copy of the order be forwarded to the IBBI for record purposes.

Appearance

For Applicant: Mr. Abhishek Anand, Mr. Sujoy Datta, Ms. Nishtha Khurana, Ms. Mahima Shekhawat, Mr. Asher Ravi Job, Advs.

For Respondent: Mr. Sameer Rohatgi, Shovanshu Kumar, Prabhas Bajaj Kartikeya, Advs. 

Cause Title: Ansal Properties and Infrastructure Limited V. Mr. Rajesh Ramani

Cas No: IA-118/2024 In (IB)-113(ND)/2021

Coram: Shri Bachu Venkat Balaram Das [Judicial Member], Shri Atul Chaturvedi [Technical Member]