WEST COAST PAPER MILLS LIMITED VS BIJAY MAMURIA

An appeal to appellate tribunal has been preferred by the west coast paper mills limited under section 61(3)
of insolvency and bankruptcy code 2016 challenging the impugned order dated 27 .09.2019 passed by the
Ld. Adjudicating authority Kolkata bench in CA (IB)no.736/kb/2019 in CP (IB)no.61/kb/2018

BACKGROUND : The corporate debtor entered into an agreement with WCPM employees co-op credit
society limited and on assurance of corporate debtor the appellant executed a corporate
guarantee bond to indemnify the bank. And in counter the corporate debtor executed a
counter-guarantee and indemnify agreement
FACTS :

The facility was due roll over by the KDCC bank on 19.06.2004, however the society failed to submit the
bills against material produced on behalf of corporate debtor consequently, KDCC bank did not roll over the
facility and instead called upon the corporate debtor to make the payment.

There is no response from the corporate debtor hence the bank invoked the corporate guarantee bond executed
by the appellant and insisted to make a payment of 7 crores with 12%intrest a total of 7,15,41,918 and
appellant made the payment by drawing cheque no 301537 from state bank of Mysore.

The appellant issued a demand notice to corporate debtor to make the payment of 7,15,41,918 with 18%
interest in pursuance of counter guarantee and indemnity agreement. However, the corporate debtor was not
in a position to make the said amount it was transferred into short term inter corporate deposit.

There after corporate insolvency resolution commenced against corporate debtor and public announcement
for invitation of claims by creditors was given. In accordance the appellant submitted his claim of
89,20,02,003 and kept on inquiry on his claim but no response from the claim from resolution professional.
And one day the appellant was informed the resolution was submitted and there is no information on the
status of his claim
The appellant preferred an application under 60(5) of IBC 2016 before the Kolkata bench and pleaded the
court to admit his claim in resolution plan as financial creditor ,however the Kolkata bench relied upon order
given by Allahabad bench in CP (IB) 13/ALD/2017 and failed to admit the claims of appellant .and failed to
appreciate the order which is relied upon by the bench was modified by appellant tribunal .

ISSUES

a) Whether the Ld. adjudicating authority erred in fact and wrongly relied upon an interim order passed by
the Ld. Adjudicating authority, Allahabad bench in CP.NO.(IB)13/ALD/2017 without appreciating the
fact that the said order was modified by this honorable appellant tribunal in company appeal (insolvency)
no.408 of 2018?
b) Whether the Ld adjudicating authority erred in fact and failed to appreciate that vide final order dated
13.02.2019. in CP.No.(IB)13/ALD/2017 the resolution plan was modified to treat all financial creditors
equally?

GROUNDS

a) Adjudicating authority erred in fact and wrongly relied upon an interim order as passed by the ld.
Adjudicating authority. Allahabad bench in C.P. No. (IB) 13/ALD/2017 without appreciating the fact that
the said order was modified by this hon'ble appellate tribunal in company appeal (at) (insolvency) no. 408
of 2018.
b) Adjudicating authority erred in fact and failed to appreciate that vide final order dated 13.02.2019 in C.P.
No. (IB)13/ALD/2017, the resolution plan was modified to treat all financial creditors equally.
c) Adjudicating authority erred in law as well as on facts and wrongly returned incongruous conclusions
thereby discriminating amongst related party financial creditors and other financial creditors.
d) Adjudicating authority grossly erred in placing the financial debt of the appellant in parity with equity
shareholders of the corporate debtor.
REPLY AND REJOINDER OF R1
REPLY OF R1
The claim of the Appellant was admitted
By the respondent In the list of creditors in
A virtual data room and also uploaded on the
Official website of the corporate debtor
The claim was not accepted on the reason the
Appellant is a related party to corporate debtor
By s.5(24)(f) of the code
It is contended by s,5(24)(i)of the code that an The case of Swadisht Oils being a glaring
Associate company is a related party to the
Corporate debtor and by annual returns of the
Debtor the appellant described as a associate
REJOINDER BY APPELLANT
It is submitted that the nefarious discrimination amongst unsecure
financial Creditors done by respondent 3 in
Apparent from reply at para graph 5
it is pertinent to state here that in accordance with
Section 30 (4) of vency and Bankruptcy Code, 2016
(hereinafter referred to as the 'Code) the Committee
of Creditors may approve a resolution plan by saking
into account the order of priority amongst creditors as
laid down in sub-section (1) of section 53 ofthe Code.
Furthermore, neither Section 30 (4) of the Code nor
Section 53 (1) of the Code does not stipulates that a
Resolution Plan can discriminate amongst creditors
solely on the ground that the creditor is a related
party to the Corporate Debtor. It is also noteworthy to
mention here that this Hon'ble Appellate Tribunal
in Binani Industries Limited v Bank of Baroda & Anr.
Etc.2018 SCC OnLine NCLAT 521 hus elucidated
that there cannot be any discrimination amongst
similarly situated creditors such as the Appellant, who
, being an unsecured financial creditor of the
Appellant has not been provided with any payment,
while other unsecured financial creditors of the
Corporate Debtor have been provided payments in the
Resolution Plan by the Respondent No. 3
example where admittedly a related party, which is a
resolution applicant in this case, because of getting
priority over operational creditor, he is getting 22.73
 Company .and also submitted by s. 5(24)(j) Crores out of 36.66 Crores of his dues, even though
The appellant is a related party promoters of the corporate debtor and the resolution
applicant are the same, they are the related parties, but
they are not disqualified on account of ineligibility
due to clause (a) to (h) of Section 29A the Ld.
Adjudicating Authority, Allahabad Bench, in order to
give justice to the operational creditors, directed
modification of the resolution plan.
It is contended according to s.21(2) of the code The Ld. Adjudicating Authority further failed to
a financial creditor if he is a related party shall appreciate that in the present case, the conduct of
Not have voting rights in committee of creditors the Corporate Debtor in filing its reply and relentlessly
Hence the appellant was excluded from coc contending the Appellant to be a related party to the Corpora
Debtor and at the same time objecting to the claim of
the Appellant despite knowing the fact that the
Resolution Professional had already admitted the said
claims after proper collation of claims itself shows that
there is no nexus between the Corporate Debtor and
the Appellant and on the contrary, the Corporate
Debtor has been deceptively trying to dislodge the
admitted claim of the Appellant, as a consequence
of which, the Appellant would be deprived of its claim.
It is contended according to regulation 39 of the Furthermore, Regulation 38 (1A) of the Insolvency and
Code the resolution professional is bound to Bankruptcy Board of India (Insolvency Resolution
Submit the plan to coc but not to any third party Process For Corporate Persons) Regulation, 2016
As the appelant is not a member of coc the expressly stipulates that the Resolution Plan shall include
Respondent is not liable to answer him statement as to how it has dealt with the interests of all th
stakeholders, including financial creditors and operational
creditors, of the Corporate Debtor. It is most humbly
submitted that the discrimination against the
Appellant by the Respondent No. 3 is in direct
contravention with the judgment pronounced by
this Hon'ble Appellate Tribunal in Binani Cements Ltd

REPLY AND REJOINDER OF R3

Reply (main contentions)
I Ajay Kumar the manager finance and company secretary of Gloster limited duly authorized to make
affidavit behalf of respondent 3 and I am well acquainted with facts and circumstances of case

1. In paragraph 3(a) of reply : It was contended the appellant is a promoter entity holding over 33% of equityi
capital in corporate debtor and said appellant is a associate company

2. In 3(b) of reply it is contended that the appellant has not given any inter corporate loan to corporate debtor
And but had given a corporate guarantee to kdcc bank

3. In 3(c)of reply it was contended the appellant company is a listed company and books of accounts are in
public domain and in the books of accounts as 31 march 2018 nothing is payable to appellant by corporate
Debtor

4. In para graph 7(a)of reply it was contended that it is significant the appellant admitted that bank did not roll
over the facility as the society failed to submit to bills against the material procured on behalf of corporate
debtor .this absence of bills shows no goods were supplied to corporate debtor

Rejoinder (main objections)

1. Mr Ajay Kumar filing the affidavit behalf of Respondent 3 is objected as he was not Supported by any
power of attorney or The resolution of company board and Reply filed deserves rejection
2. The contents of para 3 (a) to 3 (f) of the Reply affidavit, except what are matter of record, are vehemently
denied by the Appellant. The Appellant craves leave to refer and rely upon paragraphs 3 to 3of the
preliminary submissions/ objections as part and parcel to the rejoinder to the reply and the same is not
repeated herein for the sake of brevity and to avoid prolixity.
3. It is further imperative to state here that the copies of MGT-9 attached to the Annual Report and Accounts
of the Corporate Debtor for the financial year 2017-2018 and the financial statement of the Appellant are
solely relied upon by the Respondent No. 3 to mislead and misdirect this Hon'ble Appellate Tribunal into
the issue of admission of the claim of the Appellant by the Resolution Professional of the Corporate
Debtor, which was never challenged by Respondent No. 3 in any application before the Ld. Adjudicating
Authority, Kolkata Bench. It is pertinent to state here that the claim of the Appellant was admitted by the
Resolution Professional and the same has also been observed and held by the Ld. Adjudicating Authority,
Kolkata Bench in the impugned order. It is stated that the in order to reconcile the books of the Corporate
Debtor, the Corporate Debtor itself issued the balance confirmation letters to the Appellant and the same
has also been annexed with the memorandum of appeal as Annexure A-7 and Annexure A-8.