VI SURANA & SURANA AND UPES SCHOOL OF LAW, NATIONAL INSOLVENCY

IM -18
LAW MOOT COURT COMPETITION, 2023

VI SURANA & SURANA AND UPES SCHOOL OF LAW, NATIONAL

INSOLVENCY LAW MOOT COURT COMPETITION, 2023

BEFORE

HON’BLE SUPREME COURT OF MALTA

u/s. 62 of Insolvency and Bankruptcy Code, 2016

Civil Appeal No. _____ of 2023

Mr. Pipara and ors. ……………………………………………………………………..APPELLANT

v.

Singhania Group of Companies and ors…………………………………………….RESPONDENT

Civil Appeal No. _____ of 2023

Mr. Shroff … ……………………………………………………………………………APPELLANT

v.

Fu-Sam Power Systems Ltd. through Udit Kumar Ralhan, Liquidator…………….. RESPONDENT

Civil Appeal No. _____ of 2023

Axis Telecom Pvt. Ltd. (ATPL) ………………………………………………………… APPELLANT

v.

Danobe Info. Tech. Ltd……………………………………………………………….. RESPONDENT

Civil Appeal No. _____ of 2023

Tipsra MSCL and ors…………………………………………………………………. APPELLANT’S

v.

Vntek Auto Limited through Kasi Nayinar Pararacacekaran, Resolution Professional………

RESPONDENT

MEMORIAL ON BEHALF OF RESPONDENT

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TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................... 2

TABLE OF ABBREVIATION ................................................................................................ 4

INDEX OF AUTHORITIES ................................................................................................... 6

STATEMENT OF JURISDICTION....................................................................................... 7

STATEMENT OF FACTS ....................................................................................................... 8

STATEMENT OF ISSUES ...................................................................................................... 9

SUMMARY OF ARGUMENTS ........................................................................................... 10

ARGUMENTS ADVANCED ................................................................................................ 12

ISSUE A: WHETHER IN A LIQUIDATION PROCEEDING UNDER THE

INSOLVENCY AND BANKRUPTCY CODE, 2016, THE SCHEME FOR
COMPROMISE AND ARRANGEMENT CAN BE MADE IN TERMS OF SECTIONS
230 TO 232 OF THE COMPANIES ACT;....................................................................... 12

ISSUE B: IF SO PERMISSIBLE, WHETHER THE PROMOTER IS ELIGIBLE TO

FILE AN APPLICATION FOR COMPROMISE AND ARRANGEMENT, WHILE HE
IS INELIGIBLE UNDER SECTION 29A OF THE IBC TO SUBMIT A
‘RESOLUTION PLAN’. ................................................................................................... 12

2.1. (A) U/S. 29A OF IBC OF 2016, THE APPELLANT IS INELIGIBLE AB INITIO
………………………………………………………………………………….13

2.2. (B) INELIGIBLE APPLICANTS U/S. 230 OF THE COMPANIES ACT, 2013 . 15

2.3. (C) CONFLATION OF SEC. 29A OF THE IBC OF 2016 AND SEC. 230 OF THE
COMPANIES ACT OF 2013 AND SETTLED LAW. ..................................................... 15

2.4. (D) THE LIQUIDATOR IS WELL WITHIN HIS POWERS AND DUTIES TO
DEEM THE APPELLANT INELIGIBLE TO PROPOSE A SCHEME OF
COMPROMISE AND ARRANGEMENT ...................................................................... 18

2.5. (E) THE APPEAL IS NOT MAINTAINABLE AS IT DEFEATS THE PURPOSE

OF INSOLVENCY AND BANKRUPTCY CODE ......................................................... 21

ISSUE C: WHETHER SECURITY INTEREST CREATED ON THE ASSETS OF

THE CORPORATE DEBTOR BE EXTINGUISHED EVEN IF THAT INTEREST

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HAS BEEN CREATED FOR THE LOAN AVAILED BY THE THIRD PARTY, NOT
NECESSARILY BY THE CORPORATE DEBTOR. ..................................................... 23

3.1. (A) APPELLANT IS NOT A SECURED FINANCIAL CREDITOR .................. 23

3.2. (B) THERE EXISTS NO FINANCIAL DEBT AND APPEAL IS BARRED BY

LACHES .......................................................................................................................... 25

3.3. (C) THERE IS NO PRIVITY OF CONTRACT BETWEEN THE APPELLANT

AND THE CORPORATE DEBTOR ............................................................................... 27

3.4. (D) THE CORPORATE DEBTOR IS NOT LIABLE TO REPAY THE

APPELLANT AS THE LOAN IS EXTENDED TO A THIRD PARTY ......................... 31

ISSUE D: WHETHER INSOLVENCY PROCEEDING CAN BE RESTORED IN

CASE OF DEFAULT WHEN CONSENT TERM IS ENTERED BETWEEN
PARTIES?........................................................................................................................... 31

4.1. (A) THE RESTORATION OF THE COMPANY PETITION IS ULTRA VIRES 32

4.2. (B) NO REVIVAL CLAUSE IN THE SETTLEMENT AGREEMENT BETWEEN

THE PARTIES AND THE ORDER BY THE ADJUDICATING AUTHORITY ........... 32

4.3. (C) APPELLATE TRIBUNAL DECISION CONONDRUM ............................... 34

PRAYER ADVANCED .......................................................................................................... 36

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TABLE OF ABBREVIATION

CIRP
Corporate Insolvency Resolution Process ......................................... 7, 13, 14, 15, 16, 32, 34

Hon’ble
Honourable6, 9, 10, 11, 12, 14, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31,
32, 33, 35

IBC
Insolvency and Bankruptcy Code ................................................................................ 8, 9, 35
Insolvency and Bankruptcy Code of India, 2016................................................................... 7
Insolvency and Bankruptcy Code, 20162, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 20, 21, 22,
24, 25, 26, 30, 31, 32, 33, 34

NCLAT
National CompanLaw Tribunal.................................................................... 17, 31, 32, 33, 35
National Company Law Tribunal........................................................................................... 7
NCLT
National Compan Law Tribunal............................................................................... 19, 31, 33
NPA
Non-performing assets ................................................................................................. 7, 9, 12

sec.
section .................................................................................................................................. 35
Sec.
Section.............................................................................................................................. 6, 13

u/s.

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under section .......................................................................................................................... 6
under Section ......................................................................................................................... 7
Under Section................................................................... 9, 11, 13, 14, 17, 22, 24, 25, 33, 34

v.
versus ......................................... 13, 15, 16, 17, 19, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 35

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INDEX OF AUTHORITIES
Judicial Precedent

Anuj Jain v. Axis Bank Ltd. And ors ....................................................................................... 24

Arun Kumar Jagatramka v. Jindal Steel and Power Ltd. and ors ...................................... 14, 16
Chitra Sharma v. Union of India .............................................................................................. 16
Hemant & Co. v. Rasi Travels and Cargo Private Limited ...................................................... 33
Industries (Unit-II) LLP v. H.R. Commercials Private Limited and Others ............................ 20
Krishna Garg & Anr. v. Pioneer Fabricators Pvt. Ltd .............................................................. 33
Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel...................................... 26, 27, 28, 29, 30
Sauria Corporation vs. Kohinoor Pulp & Paper Private Limited............................................. 20
SRLK Enterprises LLP v. JALAN Transolutions (India) Ltd. ................................................. 32
Swiss Ribbons Pvt. Ltd. and Ors. v. Union of India and Ors ................................................... 17
The Insolvency and Bankruptcy Code (Amendment) Act, 2017 ............................................. 13
Vistara ITCL (India) Ltd. and Ors. V. Dinkar Venkatasubramanian and ors ..................... 11, 23

Statutes

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 .................................................................................................. 34
Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations,
2020...................................................................................................................................... 14
Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations...................... 14
Insolvency and Bankruptcy Code of India, 2016..................................................... 7, 13, 14, 19
The Companies Act, 2013 .................................................................................................. 10, 12
The Indian Contract Act, 1872................................................................................................. 28

Articles

Revanth Ashok, The Liquidator – A Demigod Under the Insolvency and Bankruptcy Code,
2016?, Foxmandal ................................................................................................................ 20

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STATEMENT OF JURISDICTION
The Hon’ble Court has the jurisdiction to try the instant matter u/s. 62 of the Insolvency and
Bankruptcy Code of India, 2016.

The section and Article invoked are reproduced hereunder:

Sec. 62 - Appeal to Supreme Court

(1) Any person aggrieved by an order of the National Company Law Appellate Tribunal may
file an appeal to the Supreme Court on a question of law arising out of such order under this
Code within forty-five days from the date of receipt of such order.

(2) The Supreme Court may, if it is satisfied that a person was prevented by sufficient cause
from filing an appeal within forty-five days, allow the appeal to be filed within a further
period not exceeding fifteen days.

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STATEMENT OF FACTS
[I]

1. Malta is the world’s largest democracy and the second fastest-growing economy in the
world. Malta also has the second-largest GDP in the world. However, the economy has
been suffering setbacks due to demonic problems caused by non-performing assets
(NPA). NPA has been the major obstacle in the growth of Malta. The Capital of Malta
is Mehli which is a metropolitan city.
2. Insolvency and Bankruptcy are significant challenges faced by individuals, businesses,
and economies worldwide. These issues can have severe consequences including
financial distress, loss of jobs, and economic instability.
3. Before the enactment of the Insolvency and Bankruptcy Code, 2016 Malta had a
fragmented and time-consuming insolvency resolution framework. Various laws and
procedures, such as the Sick Industrial Companies (Special Provisions) Act, 1985, and
the Recovery of Debts due to Banks and Financial Institutions Act 1993, were in place,
but they lacked efficiency and effectiveness.
[II]

1. In scenarios I and II, the Promoter of DNCL and Fu-Sam Power Systems Limited
proposed a scheme for compromise and arrangement u/s. 230-232 of the Companies
Act post-liquidation of their companies and were barred by the appellate tribunal and
liquidator for the same in light of their ineligibility u/s. 29A of the IBC.
2. In scenario III, ATPL (Financial Creditor) filed a company petition u/s. 7 of the IBC
against Danobe Info. Tech Ltd. (Corporate Debtor). Later, it was withdrawn u/s. 12A of
the IBC after the consent term. Due to the default in payment as per the consent term,
Financial Creditor sought the revival of the company petition but was denied by the
Adjudicating Authority.
3. In scenario IV, the corporate debtor approached Appellants 1,2, and 3 for the loan
extended to its group of companies -Kapro and MLD. Three security trustee agreements
were signed between Appellant 1, Kapro, and MLD. A Pledge agreement was signed
between the corporate debtor, MLD, Kapro, and Appellant 1. CIRP was initiated against
the corporate debtor and Appellant 1 claim was rejected by the Resolution professional
and NCLAT.

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STATEMENT OF ISSUES

ISSUE A: Whether in a liquidation proceeding under Insolvency and Bankruptcy Code, 2016,
the Scheme for Compromise and Arrangement can be made in terms of Sections 230 to 232 of
the Companies Act;

ISSUE B: If so permissible, whether the Promoter is eligible to file application for Compromise
and Arrangement, while he is ineligible under Section 29A of the IBC to submit a ‘Resolution
Plan’.

ISSUE C: Whether security interest created on the assets of corporate debtor be extinguished
even if that interest has been created for the loan availed by the third part, no necessarily by
the corporate debtor.

ISSUE D: Whether Insolvency proceedings can be restored in case of default when Consent
term is entered between parties?

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SUMMARY OF ARGUMENTS
ISSUE A: WHETHER IN A LIQUIDATION PROCEEDING UNDER INSOLVENCY
AND BANKRUPTCY CODE, 2016, THE SCHEME FOR COMPROMISE AND
ARRANGEMENT CAN BE MADE IN TERMS OF SECTIONS 230 TO 232 OF THE
COMPANIES ACT.

That it is humbly submitted before the Hon’ble Court that the Scheme for Compromise and
Arrangement can be made in terms of Sections 230 to 232 of the Companies Act, 2013 1 when
a company is undergoing liquidation proceedings under the Insolvency and Bankruptcy Code,
2016 because it has been explicitly mentioned u/s. 230 of the Companies Act, 2013 that in the
case of a company being wound up liquidator may submit an application to the Tribunal for the
scheme of compromise or arrangement.

ISSUE B: IF SO PERMISSIBLE, WHETHER THE PROMOTER IS ELIGIBLE TO

FILE APPLICATION FOR COMPROMISE AND ARRANGEMENT, WHILE HE IS
INELIGIBLE UNDER SECTION 29A OF THE IBC TO SUBMIT A ‘RESOLUTION
PLAN’.

That it is humbly submitted before the Hon’ble Court that answer to the first part of the framed
issue is positive which (if positive) is followed by the other half of the framed issue. The
counsels for the respondents argue that Promoter is totally ineligible to file an application for
Compromise and Arrangement when he is already ineligible u/s. 29A of the Insolvency and
Bankruptcy Code of 2016 (hereinafter referred to as IBC) to submit a resolution plan. The
argument of the respondent on this behalf if four-fold – Firstly, this ground deals with the
ineligibility u/s. 29A of the IBC of 2016 ab initio, Secondly, the respondent is dealing with
Ineligibility of the applicants u/s. 230 of the Companies Act, 2013, Thirdly, deals with the
judicial precedents and the settled law which affirms the arguments of the respondent before
the Hon’ble court, and Fourthly, dealing with the power and duty of the liquidator followed by
the final ground, Fifthly which highlighted the burden of Non-Performing Assets (hereinafter
referred to as NPA’s) and laws dealing with them which reflect the current scenario being
argued before the Hon’ble court.

ISSUE C: WHETHER SECURITY INTEREST CREATED ON THE ASSETS OF

CORPORATE DEBTOR BE EXTINGUISHED EVEN IF THAT INTEREST HAS

1
The Companies Act, 2013, §230-232, No. 18, Acts of Parliament, 2013 (India)

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BEEN CREATED FOR THE LOAN AVAILED BY THE THIRD PART, NO
NECESSARILY BY THE CORPORATE DEBTOR.

That it is humbly submitted before the hon’ble court that the security interest created on the
assets of the corporate debtor can be extinguished even if that interest has been created for the
loan availed by the third party, not necessarily by the corporate debtor. The counsel for the
respondent would be highlighting this issue by breaking it down into four grounds, Firstly,
would be dealing with that how the appellant before this court is not a Secured Financial
Creditor, Secondly, deals with how the appeal is barred by laches and appellant claim does not
fall within the ambit of debt, Thirdly, highlights the absence of privity of contract between the
corporate debtor and the appellant, and Fourthly, would be dealing with the findings of the
Hon’ble Supreme Court of India in the Vistara ITCL (India) Ltd. and Ors. V. Dinkar
Venkatasubramanian and ors.2 judgment.

ISSUE D: WHETHER INSOLVENCY PROCEEDINGS CAN BE RESTORED IN CASE

OF DEFAULT WHEN CONSENT TERM IS ENTERED BETWEEN PARTIES?

That it is humbly submitted before the Hon’ble Court that Insolvency proceedings cannot be
restored in case of default when a consent term is entered between the parties. The premise of
the argument is three-folded, Firstly, no provision under the IBC for the revival of the company
petition and the order by the Adjudicating Authority, Secondly, No revival clause in the
settlement agreement between the parties, and Thirdly, on the basis of the Appellate Tribunal
decision conundrum.

2
Vistara ITCL (India) Ltd. and Ors. V. Dinkar Venkatasubramanian and ors, 2023 INSC 500

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ARGUMENTS ADVANCED
ISSUE A: WHETHER IN A LIQUIDATION PROCEEDING UNDER THE
INSOLVENCY AND BANKRUPTCY CODE, 2016, THE SCHEME FOR
COMPROMISE AND ARRANGEMENT CAN BE MADE IN TERMS OF SECTIONS
230 TO 232 OF THE COMPANIES ACT;
I. That it is humbly submitted before the Hon’ble Court that the Scheme for Compromise
and Arrangement can be made in terms of Sections 230 to 232 of the Companies Act,
20133 when a company is undergoing liquidation proceedings under the Insolvency and
Bankruptcy Code, 2016.
II. That it is humbly submitted before the Hon’ble Court that it has been explicitly
mentioned u/s. 230 of the Companies Act, 2013 that in the case of a company being
wound up liquidator may submit an application to the Tribunal for the scheme of
compromise or arrangement.4

ISSUE B: IF SO PERMISSIBLE, WHETHER THE PROMOTER IS ELIGIBLE TO

FILE AN APPLICATION FOR COMPROMISE AND ARRANGEMENT, WHILE HE
IS INELIGIBLE UNDER SECTION 29A OF THE IBC TO SUBMIT A ‘RESOLUTION
PLAN’.
I. That it is humbly submitted before the Hon’ble Court that answer to the first part of the
framed issue is positive which (if positive) is followed by the other half of the framed
issue. The counsels for the respondents argue that Promoter is totally ineligible to file
an application for Compromise and Arrangement when he is already ineligible u/s. 29A
of the Insolvency and Bankruptcy Code of 2016 (hereinafter referred to as IBC) to
submit a resolution plan.
II. That it is humbly submitted before the Hon’ble Court that the counsel for the
Respondents has subdivided the issue into five grounds for the in-depth understanding
and clarity of the arguments for the Hon’ble bench. The argument of the respondent on
this behalf if four-fold – (A) The first ground deals with the ineligibility u/s. 29A of the
IBC of 2016 ab initio, (B) The second ground of the respondent is dealing with
Ineligible Applicants u/s. 230 of the Companies Act, 2013, (C) The third ground deals
with the judicial precedents and the settled law which affirms the arguments of the
respondent before the Hon’ble court, and (D) The fourth ground of the respondents is

3
The Companies Act, 2013, §230-232, No. 18, Acts of Parliament, 2013 (India)
4
id

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dealing with the power and duty of the liquidator followed by the final ground which
highlighted the burden of Non-Performing Assets (hereinafter referred to as NPA’s) and
laws dealing with them which reflect the current scenario being argued before the
Hon’ble court.

2.1. (A) U/S. 29A OF IBC OF 2016, THE APPELLANT IS INELIGIBLE AB INITIO
2.1.1. That it is humbly submitted before the hon’ble court that the appellant in the
present case is ineligible ab initio because of the insertion of the sec. 29A in
IBC, 20165 by the IBC (Amendment) Act of 2018.6
2.1.2. That it is humbly submitted before the hon’ble court that the reasoning
behind the insertion of sec. 29A in IBC of 2016 is reflected in the statement
of objects and reasons of the IBC (Amendment) Act of 20187 as follows:
2. The provisions for insolvency resolution and liquidation of a corporate
person in the Code did not restrict or bar any person from submitting a
resolution plan or participating in the acquisition process of the assets of a
company at the time of liquidation. Concerns have been raised that persons
who, with their misconduct contributed to defaults of companies or are
otherwise undesirable, may misuse this situation due to lack of prohibition
or restrictions to participate in the resolution or liquidation process, and
gain or regain control of the corporate debtor. This may undermine the
processes laid down in the Code as the unscrupulous person would be seen
to be rewarded at the expense of creditors. In addition, in order to check that
the undesirable persons who may have submitted their resolution plans in the
absence of such a provision, responsibility is also being entrusted on the
committee of creditors to give a reasonable period to repay overdue amounts
and become eligible.
5.[ ..](c)enable the resolution professional, with the approval of the
committee of creditors, to specify the eligibility conditions (including such
conditions as may be specified by the Board) while inviting resolution plans
from prospective resolution applicants keeping in view the scale and

5
Insolvency and Bankruptcy Code of India, 2016, § 29A, 2016, No. 31 Acts of Parliament, 2016 (India)
6
The Insolvency and Bankruptcy Code (Amendment) Act, 2017, No. Acts of Parliament, 2018 (India)
7
id

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complexity of operations of business of the corporate debtor to avoid
frivolous applicants;
2.1.3. That it is humbly submitted before the hon’ble court that the said provision
was applied retrospectively in the IBC of 2016 for the very reasons stated
above and to achieve the objective of concluding a successful corporate
insolvency resolution process (CIRP) and liquidation.8 The appellant before
this hon’ble court is ineligible under the provision of sec. 29A (g), 29A (h),
29A(j) of the IBC, 2016.9
2.1.4. That it is respectfully submitted before the hon’ble court that Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations, 2016 under
Regulation 2B10 highlights the ineligibility of certain parties to participate in
a compromise or arrangement under Section 230 of the Companies Act,
2013.11 Regulation 2B was inserted through the Insolvency and Bankruptcy
Board of India (Liquidation Process) (Amendment) Regulations, 2020.12 It
states that individuals or entities who are not eligible under the Insolvency
and Bankruptcy Code (Code) to submit a resolution plan for the insolvency
resolution of the corporate debtor cannot be involved in any manner in such
a compromise or arrangement. This provision ensures that only eligible
parties with the right qualifications and standing are allowed to participate in
the process, promoting fairness and transparency in insolvency proceedings.
2.1.5. In the present case, Sec. 29A is already applicable to the appellant and not
merely via insertion by a company appeal.13 The section was inserted back
in 2018 and that too by the retrospective effect. On the other hand, the issue
in the present case arose around 2020-22 containing the whole litigation and
insolvency process.
2.1.6. That it is respectfully submitted before the hon’ble court that because of the
aforementioned reasoning, the appellant stands ineligible the very moment
the company went under CIRP followed by the liquidation hence ineligible

8
Arun Kumar Jagatramka v. Jindal Steel and Power Ltd. and ors Judgement AIR 2021 SC 1563 ¶5
9
Insolvency and Bankruptcy Code of India, 2016, § 29A (g), (h), and (j) 2016, No. 31 Acts of Parliament, 2016
(India)
10
Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, Regulation 2B, 2016 (India)
11
Companies Act, 2013, §230, No. 18 Acts of Parliament, 2013 (India)
12
Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020
13
Annex. 1 of the Moot Proposition, ¶2

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as promoter ab initio to submit scheme u/s. 230 of the Companies Act of
2013 by virtue of sec. 29A of the IBC of 2016.

2.2. (B) INELIGIBLE APPLICANTS U/S. 230 OF THE COMPANIES ACT, 2013
2.2.1. That it is humbly submitted before the Hon’ble court that the appellant in the
present case are ineligible u/s. 230 of the Companies Act, 2013 because under
the said provision the eligible applicants have been crystally clearly defined
along with the eligible applicants under a specific circumstance.
2.2.2. It is pertinent to produce the relevant portion of the Sec. 230 of the
Companies Act, 2013 before the Hon’ble Court for better clarification and
understanding of the intention behind the provision:
230. Power to compromise and make arrangements with creditors and
members:
(1) Where a compromise or arrangement is proposed—
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them, the Tribunal
may, on the application of the company or of any creditor or member of the
company, or in the case of a company which is being wound up, of the
liquidator, order a meeting of the creditors or class of creditors, or of the
members or class of members, as the case may be, to be called, held and
conducted in such manner as the Tribunal directs.
2.3.3. That it is respectfully submitted before the Hon’ble court that in the present
case, the company is already under liquidation after the failure of the CIRP
process under the IBC of 2016. Therefore, the only eligible persons who can
initiate compromise and arrangements with creditors and members are the
company itself, the creditor, the member of the company or in the case of
winding up, the liquidator. Hence, negativing the role of the promoter under
the said provision.

2.3. (C) CONFLATION OF SEC. 29A OF THE IBC OF 2016 AND SEC. 230 OF THE
COMPANIES ACT OF 2013 AND SETTLED LAW.
2.3.1. That it is humbly submitted before the hon’ble court that there are judicial
precedents that have laid down the interpretation between the conflation of
sec. 29A of the IBC of 2016 and sec. 230 of the Companies Act, 2013 wherein
this Hon’ble court has held that a promoter, who is barred under section 29A

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of IBC from bidding for his company undergoing insolvency proceeding,
cannot also take control of the company back by using the provision of the
scheme of arrangement under section 230 of the Companies Act, 2013.
Therefore, the concerned judgments have a binding value before the Hon’ble
Court.
2.3.2. That it is respectfully submitted before the Hon’ble Court that the counsel
for the respondent in the present case has emphasized the argument in a two-
fold manner – Firstly, settled law and Judicial Precedents, and secondly,
interpretation and application of the judicial precedents in the present case.
2.3.3. (a) Settled law and Judicial Precedents
i. Arun Kumar Jagartramka v. Jindal Steels and Power Ltd. And ors.14
In this case, the Hon’ble court has held that the ineligibilities prescribed
under Section 29A of the IBC of 2016, which render certain persons
ineligible to be resolution applicants, also apply to schemes of
compromise and arrangement proposed under Sections 230 to 232 of the
Companies Act, 2013, when the company is undergoing liquidation
under the IBC. The court held that the prohibitions that apply during the
corporate insolvency resolution process (CIRP) and liquidation
processes must also extend to the scheme of compromise and
arrangement to ensure equal treatment of all stakeholders and safeguard
the principles of the IBC. The court also upheld the validity of
Regulation 2B of the Liquidation Process Regulations, stating that it is
clarificatory and in line with the statutory scheme of the IBC.
ii. Chitra Sharma v. Union of India15
In this case, the Hon’ble court explained the purpose of sec. 29A of the
IBC of 2016 wherein the statement of object and reason behind the
insertion of sec. 29A in IBC were reiterated and court held that:
Parliament was evidently concerned over the fact that persons whose
misconduct has contributed to defaults on the part of debtor companies
misuse the absence of a bar on their participation in the resolution
process to gain an entry. Parliament was of the view that to allow such

14
Arun Kumar Jagartramka v. Jindal Steels and Power Ltd. And ors AIR 2021 SC 1563
15
Chitra Sharma v. Union of India 2018 (18) SCC 575

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persons to participate in the resolution process would undermine the
salutary object and purpose of the Act. It was in this background that
Section 29A has now specified a list of persons who are not eligible to
be resolution applicants.
In other words, this court emphasized the importance of sec. 29A in the
larger public interest and to facilitate effective corporate governance.
iii. Swiss Ribbons Pvt. Ltd. and Ors. v. Union of India and Ors.16
In this case, the Hon’ble Court held that sec. 29A of the IBC of 2016
continues to permeate when it applies not merely to resolution applicants
under CIRP but also to liquidation also. It held that:
102. According to the learned Counsel for the Petitioners, when
immovable and movable property is sold in liquidation, it ought to be
sold to any person, including persons who are not eligible to be
resolution applicants as, often, it is the erstwhile promoter who alone
may purchase such properties piecemeal by public auction or by private
contract. The same rationale that has been provided earlier in this
judgment will apply to this proviso as well - there is no vested right in
an erstwhile promoter of a corporate debtor to bid for the immovable
and movable property of the corporate debtor in liquidation. Further,
given the categories of persons who are ineligible Under Section 29A,
which includes persons who are malfeasant, or persons who have fallen
foul of the law in some way, and persons who are unable to pay their
debts in the grace period allowed, are further, by this proviso, interdicted
from purchasing assets of the corporate debtor whose debts they have
either willfully not paid or have been unable to pay. The legislative
purpose which permeates Section 29A continues to permeate the Section
when it applies not merely to resolution applicants, but to liquidation
also. Consequently, this plea is also rejected.
2.3.4. (b) Interpretation and application of the judicial precedents to the present
case:
i. That it is humbly submitted before the hon’ble court that in the judgment
of Arun Kumar Jagartramka v. Jindal Steels and Power Ltd. And ors.

16
Swiss Ribbons Pvt. Ltd. and Ors. v. Union of India and Ors AIR 2019 SC 739 ¶102

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the court examined the statutory linkage between the Insolvency and
Bankruptcy Code (IBC) and Section 230 of the Companies Act, 2013.
The court emphasized that when a scheme of compromise or
arrangement is proposed under Section 230 for a company undergoing
liquidation under the IBC, the underlying principles of the IBC must be
considered. The court rejected the argument that ineligibilities under
Section 29A of the IBC should not apply when invoking Section 230. It
held that such ineligibilities should indeed apply to ensure consistency
and protect the integrity of the insolvency process. The facts of the Jindal
Steel are almost the same as the present case, therefore solidifying the
position of the current moot problem. The Swiss Ribbon judgment and
Chitra Sharma’s judgment have been relied upon by the court in the
judgment of Jindal Steel case.
ii. That it is respectfully submitted before the Hon’ble Court that apart from
the apex court judicial precedents, in the case of Encana v. Singhania
Group of Companies17 NCLAT has already held that:
“a person who is ineligible u/s. 29A of the IBC of 2016 to submit
resolution plan, is also barred from proposing a scheme of compromise
and arrangement u/s. 230 of the Companies Act, 2013.”
Singhania Group of Companies (SGOC) is also party to the present
litigation before the Hon’ble court and based on these judicial
precedents, the adjudicating authority and NCLAT barred the appellant
from submitting a scheme u/s. 230 of the Companies Act, 2013.

2.4. (D) THE LIQUIDATOR IS WELL WITHIN HIS POWERS AND DUTIES TO
DEEM THE APPELLANT INELIGIBLE TO PROPOSE A SCHEME OF
COMPROMISE AND ARRANGEMENT
2.4.1. That it is humbly submitted before the Hon’ble Supreme Court of Malta that
the liquidator is justified in deeming Appellant Mr. Shroff ineligible to
propose a scheme of compromise and arrangement on behalf of Fu-Sam
Power Systems Limited in light of his powers and duties as enlisted in
Section 35 of the Insolvency and Bankruptcy Code, 2016. The premise of the
argument is two-folded – (a) The liquidator enjoys discretion to shape the

17
Moot Proposition ¶7

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liquidation process under Section 35 (d), (e) and (f) of the Insolvency and
Bankruptcy Code, 2016. (b) The powers of liquidator under IBC must be
viewed in consonance with Companies Act, 2013.

2.4.2. (a) The liquidator enjoys discretion to shape the liquidation process under
sec. 35 (d), (e), and (f).
i. It is respectfully submitted before the Hon’ble Court that the
liquidator enjoys discretion to take such measures and carry on
business as he considers necessary under Section 35 (d) and (e) of
the Insolvency and Bankruptcy Code, 2016. Section 35 (d) states that
the liquidator enjoys the power and duty to take such measures to
protect and preserve the assets and properties of the corporate debtor
as he considers necessary; while Section 35(e) entrusts in the
liquidator the power and duty to carry on the business of the corporate
debtor for its beneficial liquidation as he considers necessary.
ii. The key phrase here within the ambit of the aforementioned powers
and duties entrusted with the liquidator is that of “as he considers
necessary”18. The liquidator’s role is not limited to accepting a
scheme of compromise and arrangement from parties expressing
interest, as assumed by the Appellant.19 The liquidator plays a vital
and active role in shaping the entire process of liquidation and is the
primary channel to determine its direction, as is evident from the
intention of sub-clauses (d) and (e) of Section 35 of the Insolvency
and Bankruptcy Code, 2016. Secondly, Section 35(f) allows the
liquidator to sell the immovable and movable property and actionable
claims of the corporate debtor in liquidation by public auction or
private contract, with power to transfer such property to any person
or body corporate or to sell the same in parcels in such manner as
specified, subject to Section 52, provided the buyer is an eligible
resolution applicant.
iii. The immense discretionary power of the liquidator in shaping the
liquidation process is made evident through this provision yet again.

18
Insolvency and Bankruptcy Code of India, 2016, §35, 2016, No. 31 Acts of Parliament, 2016 (India)
19
Moot Proposition, ¶20

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It is well within the ambit of powers and duties of the liquidator to
determine the course of sale of property and actionable claims of the
corporate debtor. Moreover, it would not be wrong to interpret this
sub-clause to mean that the liquidator actually directs the liquidation
process to the best of his knowledge and choice. This wide
discretionary power of the liquidator has been solidified through a
judgement of the Supreme Court in R.K. Industries (Unit-II) LLP v.
H.R. Commercials Private Limited and Others20 followed by
National Company Law Appellate Tribunal in Sauria Corporation v.
Kohinoor Pulp & Paper Private Limited21.
iv. In R.K. Industries (Unit-II) LLP v. H.R. Commercials Private Limited
and Others, “the wide amplitude of the liquidator’s power to
determine the mode of sale was fortified.”22
v. In R.K. Industries (Unit-II) LLP v. H.R. Commercials Private Limited
and Others, the apex Court held that the liquidator is authorised to
sell the immovable and movable property of the corporate debtor as
expounded upon in Section 35 (f). Further, it held that the liquidator’s
powers in this regard supersede opinion given by stakeholders on
liquidator’s consultation for the same to determine who is entitled to
a distribution of the sale proceeds. This judgement amplified the
crucial role of the liquidator and made clear that the interpretation of
his powers and duties with respect to an element of discretion is good
in law. In Sauria Corporation v. Kohinoor Pulp & Paper Private
Limited, the NCLT followed the preceding judgement of the Supreme
Court and stated that “it is the Liquidator who has to take a call on
what mode of sale is in the best interest of maximization of the value
of the assets. He may not be bound by the recommendations or advice

20
Industries (Unit-II) LLP v. H.R. Commercials Private Limited and Others, 2022 SCC OnLine SC 1124
21
Sauria Corporation vs. Kohinoor Pulp & Paper Private Limited Order dated August 31, 2022 in I.A (IB) No.
892/KB/2022 in C.P. (IB) No. 511/KB/2018, National Company Law Tribunal – Kolkata Bench-I.
22
Revanth Ashok, The Liquidator – A Demigod Under the Insolvency and Bankruptcy Code, 2016?,
Foxmandal, (July 19, 09:00 PM), https://www.foxmandal.in/the-liquidator-a-demigod-under-the-insolvency-
and-bankruptcy-code-2016/

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of the Stakeholder’ Consultation Committee, however, in exercising
the process of consultation, if something better transpires, he can take
that into consideration.”23

2.4.3. (b) The powers of the liquidator under IBC must be viewed in consonance
with the Companies Act, 2013.
i. It is humbly submitted before the Hon’ble Court that the powers of
the liquidator under IBC must be viewed in consonance with the
Companies Act, 2013. It is a settled principle of law, as emphasised
in previous arguments, that the Insolvency and Bankruptcy Code,
2016 must be viewed with a perspective of harmonious construction
with the Companies Act, 2013, in terms of the larger intention behind
the two statutes. Therefore, it logically flows that the ambit of powers
and duties of the liquidator, which are contained in the Insolvency
and Bankruptcy Code, 2016 must also be viewed in the context of a
larger aim of harmony with the Companies Act, 2016. The
ineligibility under Section 29A of the Insolvency and Bankruptcy
Code, 2016 extends to the Companies Act with respect to proposers
qualified for presenting a scheme of compromise and arrangement.
With the lack of eligibility to propose such a scheme under Section
29A of IBC, 2016, there is also a proportionate lack of eligibility to
propose a scheme under the Companies Act during the process of
liquidation. The liquidator is merely exercising his duty to ensure this
principle is followed and ineligible parties are not able to wrongly
benefit from the process of liquidation.

2.5.(E) THE APPEAL IS NOT MAINTAINABLE AS IT DEFEATS THE PURPOSE

OF INSOLVENCY AND BANKRUPTCY CODE
2.5.1. That it is humbly submitted before the Hon’ble Supreme Court of Malta that
the appeal to overrule existing judgments in order to allow ineligible parties
to propose schemes in a liquidation process is completely contrary to the
established principles of law, as well as the welfare of the State. The premise

23
id

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of this argument is two-pronged: (a) This appeal categorically contradicts
Malta’s primary goal of development (b) This appeal strips the liquidator of
his powers and duties, making him redundant, and destroys the insolvency
resolution framework.

2.5.2. (a) This appeal categorically contradicts Malta’s primary goal of

development.
i. It is respectfully submitted before the Hon’ble Court that this appeal
categorically contradicts Malta’s primary goal of development. The
State of Malta currently stands victim to the menace of Non-
Performing Assets and increasing insolvency arresting its
development. Despite being the second fastest growing economy of
the world, Malta has constantly faced issues arising out of a growing
number of Non-Performing Assets. In light of this accruing challenge,
the Insolvency and Bankruptcy Code, 2016 was enacted to combat it
and help bring Malta out of its obstruction.24 Allowing this appeal
would contradict the provisions of IBC, which are intentionally added
to ensure a robust insolvency resolution procedure and do away with
the issue of Non-Performing Assets without benefit to undeserving
parties.

2.5.3. (b) This appeal strips the liquidator of his powers and duties, making him
redundant, and destroys the insolvency resolution framework.
ii. It is respectfully submitted before the Hon’ble Court that this appeal
strips the liquidator of his powers and duties, making him redundant,
and destroys the insolvency resolution framework. The liquidator’s
powers and duties, as enshrined in Section 35 of IBC, clearly chalk
out his integral role in determining the course of liquidation in dealing
with insolvency resolution. Allowing this appeal would exhaust the
liquidator of his most important power – that of discretion as per his
unbiased knowledge and judgement to direct liquidation benefits the
right parties. Permitting an ineligible party to propose a scheme of
compromise and arrangement to the liquidator would fundamentally

24
Moot Proposition, Pg. 1

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corrode the very purpose of a liquidator – the purpose to determine
the process of liquidation.

ISSUE C: WHETHER SECURITY INTEREST CREATED ON THE ASSETS OF THE

CORPORATE DEBTOR BE EXTINGUISHED EVEN IF THAT INTEREST HAS
BEEN CREATED FOR THE LOAN AVAILED BY THE THIRD PARTY, NOT
NECESSARILY BY THE CORPORATE DEBTOR.
I. That it is humbly submitted before the hon’ble court that the security interest created on
the assets of the corporate debtor can be extinguished even if that interest has been created
for the loan availed by the third party, not necessarily by the corporate debtor.
II. That it is humbly submitted before the hon’ble court that the counsel for the respondent
would be highlighting this issue by breaking it down into four grounds. The first ground
(A) would be dealing with that how the appellant before this court is not a Secured Financial
Creditor. The second ground (B) deals with how the appeal is barred by laches and appellant
claim does not fall within the ambit of debt. The third ground (C) highlights the absence of
privity of contract between the corporate debtor and the appellant. Lastly, the fourth ground
(D) would be dealing with the findings of the Hon’ble Supreme Court of India in the Vistara
ITCL (India) Ltd. and Ors. V. Dinkar Venkatasubramanian and ors.25 judgment.
3.1.(A) APPELLANT IS NOT A SECURED FINANCIAL CREDITOR
3.1.1. That it is humbly submitted before the hon’ble court that in order to qualify
under the terminology of ‘secured financial creditor’ the appellant must
fulfill the eligibility criteria of being a secured creditor u/s. 3 (30) of the IBC
of 201626, as per which it means a creditor in favor of whom security interest
is created and also being a financial creditor u/s 5(7) of the IBC of 2016.27
3.1.2. This invokes the definition of ‘security interest’ which has been enumerated
under sec. 3 (31) of the IBC of 2016.28
3.1.3. That it is humbly submitted before the hon’ble court that coming to the claim
of the other half of the appellant as a financial creditor, does not qualify. The
definition of financial creditor u/s. 5(7) means a person to whom a financial
debt is owed and includes a person to whom such debt has been assigned

25
Vistara ITCL (India) Ltd. and Ors. V. Dinkar Venkatasubramanian and ors, 2023 INSC 500
26
The Insolvency and Bankruptcy Code, 2016, §3(30) No.31, Acts of Parliament, 2016 (India)
27
The Insolvency and Bankruptcy Code, 2016, §5(7) No.31, Acts of Parliament, 2016 (India)
28
The Insolvency and Bankruptcy Code, 2016, §3(31) No.31, Acts of Parliament, 2016 (India)

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legally. Financial Creditor consists of the main element called ‘financial debt’
of which the major ingredients are consideration for the time value of money
and includes further ingredients in the sub-clauses.
3.1.4. That it is humbly submitted before the hon’ble court that the appellant’s claim
on the pledged share as a financial creditor also is untenable because the shares
pledged by the appellant have no consideration for the time value of money and
therefore the whole claim stands defeated. In the case of Anuj Jain v. Axis Bank
Ltd. And ors.29 it was held that:
43. […] The requirement of existence of a debt, which is disbursed against the
consideration for the time value of money, in our view, remains an essential part
even in respect of any of the transactions/dealings stated in Sub-clauses (a) to
(i) of Section 5(8), even if it is not necessarily stated therein. In any case, the
definition, by its very frame, cannot be read so expansive, rather infinitely wide,
that the root requirements of 'disbursement' against 'the consideration for the
time value of money' could be forsaken in the manner that any transaction could
stand alone to become a financial debt. […] In yet other words, the essential
element of disbursal, and that too against the consideration for time value of
money, needs to be found in the genesis of any debt before it may be treated as
'financial debt' within the meaning of Section 5(8) of the Code. This debt may
be of any nature but a part of it is always required to be carrying, or
corresponding to, or at least having some traces of disbursal against
consideration for the time value of money.
3.1.5. That it is respectfully submitted before the hon’ble court that in Anuj Jain v. Axis
Bank Ltd. And ors30 Hon’ble Court also held that:
45. It is also evident that what is being dealt with and described in Section 5(7)
and in Section 5(8) is the transaction vis-a-vis the corporate debtor. Therefore,
for a person to be designated as a financial creditor of the corporate debtor, it
has to be shown that the corporate debtor owes a financial debt to such person.
Understood this way, it becomes clear that a third party to whom the corporate
debtor does not owe a financial debt cannot become its financial creditor for
the purpose of Part II of the Code.

29
Anuj Jain v. Axis Bank Ltd. And ors 2020 INSC 227
30
id

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3.1.6. That it is humbly submitted before the hon’ble court that neither the appellant
is the secured creditor nor the financial creditor in the present case and the
appellant cannot claim dues as a secured financial creditor because secured
creditor and financial creditor are two separate terminologies dealt in different
chapters of the IBC. Either the appellant can be financial creditor or a secured
creditor. The hon’ble court in Anuj Jain v. Axis Bank31 held that:
46.1. […] However, when all the defining clauses are read together and
harmoniously, it is clear that the legislature has maintained a distinction
amongst the expressions 'financial creditor', 'operational creditor', 'secured
creditor' and 'unsecured creditor'. Every secured creditor would be a creditor;
and every financial creditor would also be a creditor but every secured creditor
may not be a financial creditor. As noticed, the expressions "financial debt" and
"financial creditor", having their specific and distinct connotations and roles in
insolvency and liquidation process of corporate persons, have only been defined
in Part II whereas the expressions "secured creditor" and "security interest" are
defined in Part I.
3.1.7. That it is humbly submitted before the hon’ble court that even if the appellant
is considered as a creditor in either of the provisions i.e., sec. 3(30) or 5(7), the
appellant’s claim based on pledge shares does not qualify for the requirements
of financial debt u/s. 5(8) of the IBC of 2016.
3.1.8. That it is respectfully submitted before the hon’ble court that the appellant’s
claim as a secured financial creditor is untenable before the appellate tribunal
and before the Hon’ble Supreme Court by the very reasoning that the appellant
does not qualify the terminologies under the IBC of 2016.

3.2.(B) THERE EXISTS NO FINANCIAL DEBT AND APPEAL IS BARRED BY

LACHES
3.2.4. That it is respectfully submitted before the hon’ble court that the appellant’s
claim does not fall within the ambit of ‘debt’ and is barred by laches the
arguments is in two folds: firstly, the meaning of debt under the IBC of 2016
and secondly, how it is barred by laches.
3.2.5. That is humbly submitted before the hon’ble court that the argument as to how
the appellant’s claim is untenable under the definition of financial debt can be

31
id

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made out from the definition of ‘financial debt’ u/s. 5(8) of the IBC. As far as,
operational debt is concerned, it has been explained u/s. 5 (21) as follow:32
“operational debt” means a claim in respect of the provision of goods or
services including employment or a debt in respect of the 3[payment] of dues
arising under any law for the time being in force and payable to the Central
Government, any State Government or any local authority;
3.2.6. That it is humbly submitted before the hon’ble court that the neither appellant
claim can fall under financial debt nor under operational debt because
operational debt is claimed by the operational debtor and not the secured
financial creditor.
3.2.7. That it is respectfully submitted before the hon’ble court that in Phoenix ARC
Pvt. Ltd. v. Ketulbhai Ramubhai Patel33 which was delivered by the three-judge
bench of the Hon’ble Supreme Court of India held that:
30. This Court held that a person having only security interest over the assets
of the corporate debtor, even if falling within the description of 'secured
creditor' by virtue of collateral security extended by the corporate debtor, would
not be covered by the financial creditors as per definitions contained in Sub-
section (7) and (8) of Section 5. […]
31. […] The present is also a case where only security was created by the
corporate debtor in 40,160 shares of GEL, there was no liability to repay the
loan taken by the borrower on the corporate debtor in the present case. At best
the Pledge Agreement and Agreement of undertaking executed on 10.01.2012,
that is, subsequent to Facility Agreement, is security in favour of Lender-
Assignor who at best will be secured creditor qua corporate debtor and not the
financial creditor qua corporate debtor.
3.2.8. That it is humbly submitted before the hon’ble court that same view was
reiterated by the hon’ble court in Anuj Jain v. Axis Bank Limited34 which was
delivered by the division bench.
3.2.9. That it is respectfully submitted before the Hon’ble Court that such
interpretation by the court and diverting from the reasoning of a larger bench

32
The Insolvency and Bankruptcy Code, 2016, §5(21), No.31, Acts of Parliament, 2016 (India)
33
Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel, AIR 2021 SC 875
34
Supra note 26

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has established a bad precedent and is highly detrimental to the objectives and
proceedings of the IBC.
3.2.10. That it is respectfully submitted before the hon’ble court that because of the
aforementioned reasons and the judicial precedents of Anuj Jain v. Axis Bank
Limited35 and Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel36 have
already answered on the issue and is a settled principle which was distorted in
the Vistara ITCL (India) Ltd. And Ors. v. Dinkar Venkatasubramanian and Ors37
3.2.11. That it is humbly submitted before the Hon’ble Court even if hypothetically
Vistara ITCL (India) Ltd. And Ors. v. Dinkar Venkatasubramanian and Ors38
ratio is applied in the present case, appellant before this court would be barred
by the laches and acquiesce. It is because of the reasoning that in the Vistara
judgement, it is clearly visible that Appellant 1 of that case was in constant touch
with the Resolution Applicant and there were negotiations between them, unlike
the present case where there is no sight of engagement by the appellant except
for the claim when company is under insolvency proceedings and committee of
creditors is considering the resolution application.

3.3. (C) THERE IS NO PRIVITY OF CONTRACT BETWEEN THE APPELLANT AND

THE CORPORATE DEBTOR
3.3.1. That it is humbly submitted before the Hon’ble Court that there is no privity
of contract between the appellant and the respondent. The Appellant has
entered into a contract with third parties wherein the liability to pay the
Appellant lies with those third parties, who are extended this loan. The
contractual relationship between the Appellant and the third parties is crucial
as by virtue of its definition, it excludes the Respondent as a non-party to the
contractual relationship with respect to the loan.
3.3.2. That it is humbly submitted before the Hon’ble Court that the Respondent is
a non-party to the contract of loan advanced to third parties, namely Kapro
Engineering Limited and M.L.D. Investments Private Limited39, in light of
the contract being silent on any liabilities on the Respondent in this regard.

35
Supra note 26
36
Supra note 30
37
Supra note 22
38
Supra note 22 ¶ 10
39
Moot Proposition ¶ 32 of the

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The Respondent, acting on behalf of the Corporate Debtor, is not mentioned
with the duty to discharge the liability of the third parties or perform the
promise, in case of default on the part of the third parties. The Corporate
Debtor has merely entered into a Pledge Agreement which is limited to
11,72,46,100 equity shares as a first ranking exclusive security40. The Pledge
Agreement between Corporate Debtor and Appellant does not allow the
assumption of liability in case of default by beneficiary parties to the contract
of loan to fall on the Corporate Debtor.
3.3.3. That it is humbly submitted before the Hon’ble Court that the Court
emphasised the same in its judgement Phoenix ARC Pvt. Ltd. v. Ketulbhai
Ramubhai Patel41. The Hon’ble Court, by distinguishing a Contract of
Guarantee from a Pledge Agreement, highlighted that the Pledge Agreement
places no liability on Corporate Debtor to discharge the liabilities of the
borrower in case of default and only tends to security to the contract between
Corporate Debtor and Appellant by way of pledged shares. The liability to
repay the Appellants lies with the borrowers and not the Corporate Debtor,
as there is no clause for such discharging of liabilities or performance of
promise by Corporate Debtor on the default of borrowers. The duty of
Corporate Debtor to discharge liabilities or perform promise of defaulting
borrower would arise from a Contract of Guarantee, not a Pledge Agreement.
The Hon’ble Court in Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel42
held that:
23. […] The present is not a case where the corporate debtor has entered
into a contract to perform the promise, or discharge the liability of borrower
in case of his default. The Pledge Agreement is limited to pledge 40,160
shares as security. The corporate debtor has never promised to discharge the
liability of borrower.
That it is humbly submitted before the Hon’ble Court that the Pledge
Agreement between the Corporate Debtor and the Appellant does not qualify
as a Contract of Guarantee under Section 12643 of the Indian Contract Act,

40
Moot Proposition ¶ 31
41
Supra note 30
42
id
43
The Indian Contract Act, 1872, §126 No. 9, Acts of Parliament, 1872 (India)

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1872, thereby making the Appellant’s claim for discharge of third parties’
liability by the Respondent untenable. The Contract of Guarantee is defined
by Section 12644 as:
A contract of guarantee is a contract to perform the promise or discharge the
liability, of a third person in case of his default.
The Hon’ble Court in Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel45
held that:
23. As clear from the definition a contract of guarantee is a contract to
perform the promise, or discharge the liability, of a third person in case of
his default. […] it was borrower who had undertaken to discharge the
liability towards lender. The Pledge Agreement dated 10.01.2012 does not
contain any contract that corporate debtor has contracted to perform the
promise, or discharge the liability of the third person.
24. The Pledge Agreement and undertaking given, entered between Assignor
and corporate debtor cannot be termed as contract of guarantee within the
meaning of Section 126.
3.3.4. That it is humbly submitted before the Hon’ble Court that the Corporate
Debtor’s role in the loan extended is limited to providing security and not to
discharging liabilities of borrowers irrespective of the real end beneficiary of
such loan. The Hon’ble Court opined on the same and held that at best, the
Appellant in such case would be a secured creditor qua corporate debtor and
not financial creditor qua corporate debtor, because the duty to discharge
liabilities towards the Appellant lies with the borrowers in contract with the
Appellant. The Hon’ble Court in Phoenix ARC Pvt. Ltd. v. Ketulbhai
Ramubhai Patel46 held that:
31. […] whereas in the present case corporate debtor has been the direct and
real beneficiary of the loan advanced by Assigner to the parent Company of
the corporate debtor. The above point as contended by the learned Counsel
does not commend us. The present is also a case where only security was
created by the corporate debtor in 40,160 shares of GEL, there was no
liability to repay the loan taken by the borrower on the corporate debtor in

44
id
45
Supra note 30 ¶ 3
46
Supra note 30 ¶ 3

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the present case. At best the Pledge Agreement and Agreement of undertaking
executed on 10.01.2012, that is, subsequent to Facility Agreement, is security
in favour of Lender-Assignor who at best will be secured creditor qua
corporate debtor and not the financial creditor qua corporate debtor.
3.3.5. The Hon’ble Court reiterated the insignificance of the Corporate Debtor
being the final beneficiary of loan to third parties in deciding the liability
arising from default of such loan in Vistara ITCL (India) Ltd. And Ors. v.
Dinkar Venkatasubramanian and Ors.47 In this judgement, the Hon’be Court
noted that distinguishing cases where Corporate Debtor is the end-use
beneficiary to the loan extended to third parties, namely Anuj Jain v. Axis
Bank48 and in Phoenix ARC Pvt. Ltd. v. Ketulbhai Ramubhai Patel49, from
cases where he is not cannot be entertained to determine the liability of such
loan. This was held because the liability to repay the loan extended to third
party companies lies with those company, not with the Corporate Debtor even
if the Corporate Debtor was the ultimate beneficiary of such loan. There
existed no separate agreement to that effect, only a Pledge Agreement with
respect to the Corporate Debtor. The Hon’ble Court in Vistara ITCL (India)
Ltd. And Ors. v. Dinkar Venkatasubramanian and Ors.50 held that:
5.6 […] The said reasoning does not appeal to us for the reason that the
liability to repay the STL Facilities advanced to Brassco and WLD is that of
the said companies, and that not of the Corporate Debtor - Amtek, even if the
latter was, as per the terms of the Facility Agreement, the ultimate
beneficiary of the amount disbursed through the STL Facilities. The
aforesaid decisions cannot be distinguished on the ground that the loans were
not for the end use and benefit of JIL or Doshion Veolia. The Corporate
Debtor - Amtek was not liable to repay the loans advanced by the
predecessor-in-interest of the Appellant - Vistra, in respect of which there
were detailed and separate agreements executed by the lenders with Brassco
and WLD.

47
Supra note 22
48
Supra note 26
49
Supra note 30 ¶ 3
50
Supra note 30 ¶ 9

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3.3.6. That it is humbly submitted before the Hon’ble Court that the Appellant’s
claim for discharge of borrowers’ liabilities by Respondent in untenable as
the Appellant and Respondent do not share a contractual obligation of
extending loan by Appellant to Respondent and subsequent repayment of
such loan by Respondent to Appellant. The Appellant has extended the loan
to third parties namely, Kapro Engineering Limited and M.L.D. Investments
Private Limited, who hold a contractual obligation to the Appellant with
respect to the short-term loan extended to them.
3.4. (D) THE CORPORATE DEBTOR IS NOT LIABLE TO REPAY THE
APPELLANT AS THE LOAN IS EXTENDED TO A THIRD PARTY
3.4.1. That it is humbly submitted before the Hon’ble Court that in the Hon’ble
Court’s judgement in Vistara ITCL (India) Ltd. And Ors. v. Dinkar
Venkatasubramanian and Ors.51, it has been held that irrespective of the
Corporate Debtor being an ultimate beneficiary of the loan extended by
Appellant to third parties, the Corporate Debtor is not liable to repay the
Appellant in case of default by third parties. This is because the Corporate
Debtor, in the present scenario, entered a Pledge Agreement only with respect
to security through pledge shares, and the third parties undertook contractual
obligation to repay the loan by borrowing from the Appellant.
3.4.2. That it is humbly submitted to the Hon’ble Court that in light of the
aforementioned reasons and judgements held, the Corporate Debtor has
merely entered a pledge agreement but is not liable to act in capacity of the
third parties to whom the loan was extended by the Appellant. Furthermore,
the security interest created on the assets can be extinguished when availed
by third parties.

ISSUE D: WHETHER INSOLVENCY PROCEEDING CAN BE RESTORED IN CASE

OF DEFAULT WHEN CONSENT TERM IS ENTERED BETWEEN PARTIES?
I. That it is humbly submitted before the Hon’ble Court that Insolvency proceedings
cannot be restored in case of default when a consent term is entered between the parties.
The premise of the argument is three-folded, (A) No provision under the IBC for the
revival of the company petition and the order by the Adjudicating Authority, (B) No

51
Supra note 22 ¶ 9

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revival clause in the settlement agreement between the parties, and lastly (C) Appellate
Tribunal decision conundrum

4.1.(A) THE RESTORATION OF THE COMPANY PETITION IS ULTRA VIRES

4.1.1. That it is humbly submitted before the Hon’ble Court that in light of no
provision contained in the IBC for the reopening of a withdrawn Company
Petition, it would be ultra vires to restore it.
4.1.2. That the Hon’ble NCLAT in SRLK Enterprises LLP. v.. JALAN Transolutions
(India) Ltd. held that Adjudicating Authority rightly refrained from
interfering in case of default by restoring Company Petition because the IBC
is not a constant remedy for recovery of money. The Hon’ble NCLT further
held that as the IBC did not prescribe any provision for the restoration of a
company petition that is already withdrawn, it would not be good in law to
allow such restoration.
4.1.3. That it is humbly submitted before the Hon’ble Court that the appeal is ex-
facie not maintainable and sans merit. The lack of statutory authority behind
the restoration of the Company Petition highlights the untenable character of
this appeal. Restoring a Company Petition which has previously been
withdrawn would not only contradict the law but also clearly demean the
intention of IBC. As stated by the Hon’ble NCLAT in SRLK Enterprises LLP.
v. JALAN Transolutions (India) Ltd. para 6, the IBC was not brought to
fruition for the purpose of allowing parties to repeatedly come to Court to
ensure recovery of money in case of default.

4.2. (B) NO REVIVAL CLAUSE IN THE SETTLEMENT AGREEMENT BETWEEN

THE PARTIES AND THE ORDER BY THE ADJUDICATING AUTHORITY
4.2.1. That it is humbly submitted before the Hon’ble court that NCLAT, New Delhi
in the case of SRLK Enterprises LLP v. JALAN Transolutions (India) Ltd.52
held that:
6. […] There is difference between withdrawal simplicitor making
statement that parties have settled. It is different when bringing the
settlement on record, and making it a part of the Order of withdrawal
liberty is taken and brought on record to restore the proceedings in case

52
SRLK Enterprises LLP v. JALAN Transolutions (India) Ltd. Company Appeal (AT) (Ins) No. 294 of 2021

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of default. IBC is not a recovery proceeding where because the money
or part of it has not come, the party may repeatedly come to the Court.
Adjudicating Authority has rightly observed that no liberty to revive was
there and so declined to interfere. The Appellant would be at liberty to
pursue other remedies in law.
4.2.2. That it is humbly submitted before the hon’ble court that the same reasoning
was quoted by the NCLAT, Chennai Bench in the case of Hemant & Co. v.
Rasi Travels and Cargo Private Limited53 wherein the court held that the
settlements not incorporated in the order of the adjudicating authority do not
entitle the parties to seek restoration or revival of insolvency proceedings in
case of default.
4.2.3. That it is humbly submitted before the Hon’ble court that NCLAT, New Delhi
in the case of Krishna Garg & Anr. v. Pioneer Fabricators Pvt. Ltd54 observed
that neither settlement terms were filed nor the same were brought on the
record with the liberty to revive/restore the CIRP in case of default of the
MoS.
2. […] It further emerges from the order that neither the settlement terms
were filed nor the same were brought on record and incorporated in the
order of the Adjudicating Authority with liberty to revive/ restore the
CIRP in the event of the Corporate Debtor not adhering to the terms of
the settlement or post-dated cheques issued to Appellants being
dishonored.
3. In view of this position, it cannot be said that the Settlement Terms not
incorporated in the order of the Adjudicating Authority assumed the
character of the decree of the Court, breach whereof would entitle the
Appellants- Financial Creditors to come back and seek restoration/
revival of CIRP.
4.2.4. Therefore, in order to revive the company petition twin conditions, have to
be satisfied firstly, settlement terms must be filed and secondly, it has to be
on record with the order of the adjudicating authority that in case the

53
Hemant & Co. v. Rasi Travels and Cargo Private Limited, MANU/NC/5651/2022
54
Krishna Garg & Anr. v. Pioneer Fabricators Pvt. Ltd Company Appeal (AT)(Insolvency) No. 92 of 2021

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corporate debtor defaults the MoS, the creditor has the liberty to file an
application for the revival of insolvency proceedings.
4.2.5. That it is humbly submitted before the Hon’ble Court that in order to revive
the company petition, it is a sine qua non to have an order of the adjudicating
authority in case of failure to comply with the settlement agreement, the
parties are free to revive the company petition along with placing it on the
record. In the present case, the consent term was placed on the record but
without any liberty by the Adjudicating Authority for revival in case of
default by the corporate debtor.

4.3. (C) APPELLATE TRIBUNAL DECISION CONONDRUM

4.3.1. That it is humbly submitted before the Hon’ble Court that the present case
suffers from the vision of legality because of two reasons. Firstly, NCLAT
order permission was given to the suspended director to withdraw the appeal
with the liberty to move NCLT for withdrawal of Company Petition u/s.
12A55, secondly, Interim Resolution Professional (IRP) filed an application
u/s. 12A based on the consent term.56
4.3.2. That it is humbly submitted before the hon’ble court that the present case
presents a contradiction between sec. 12A of the IBC of 2016 and sec. 30A
of the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.57 As per sec. 12A of the
IBC, for withdrawal of application, admitted u/s. 7,9 or 10, on an application
made by the applicant with the ninety percent voting share approval of the
committee of creditors is mandatory. On the other hand, as per sec. 30A (1)(a)
of the IBBI (Insolvency and Resolution Process for Corporate Persons)
Regulations, 2016, which is to be read with sec. 12A of the IBC, an applicant
may file the application of withdrawal u/s. 12A even before the constitution
of the Committee of Creditors through the interim resolution professional.
4.3.3. That it is respectfully submitted before the hon’ble court that the present case
suffers from two infirmities, firstly, in the present case withdrawal of
application u/s. 12A was directed to be done by the suspended director and

55
Moot Proposition ¶29
56
id
57
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, Regulation 30A

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not the petitioner itself, who has filed for insolvency u/s. 7 of the IBC. It
should be the petitioner as an applicant for the withdrawing company petition
u/s. 12A and not the suspended director, because they are the ones who filed
for the initiation of CIRP u/s. 7 of the IBC. This goes against the provision
of 12A of the IBC and 30A of the IBBI (Insolvency and Resolution Process
for Corporate Persons) Regulations, 2016.
4.3.4. Secondly, the interim resolution professional filed an application u/s. 12A
based on the consent term. Firstly, as per sec. 12A, it is to be filed by the
applicant with the ninety percent voting approval of the Committee of
Creditors since their Committee of Creditors was absent in the present and
also court refrained from constituting Committee of Creditors, sec. 30A of
IBBI (Insolvency and Resolution Process for Corporate Persons)
Regulations, 2016 comes into the picture, wherein before the constitution of
the Committee, the applicant can file through the interim resolution
professional. But in the present case, it was filed by the interim resolution
professional based on the consent term and not by the appropriate applicant.
This clearly violates the provisions of the IBC and IBBI (Insolvency and
Resolution Process for Corporate Persons) Regulations, 2016.
4.3.5. That it is respectfully submitted before the hon’ble court that when already
the withdrawal application u/s. 12A is suffering from severe infirmities, there
raises no question of revival of the company petition.

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PRAYER ADVANCED

Wherefore in the light of facts presented, issues raised, arguments advanced and
authorities cited, the Counsel on behalf of the Respondent’s humbly prays before this Hon’ble
Court to adjudge and declare that:
1. For the sake of achieving the welfare objectives by laws like IBC, dismiss these appeals.
2. To bar promoters from submitting scheme of compromise and arrangement during the
liquidation process in the light of statutory provisions of the IBC and judicial
precedents.
3. To extinguish the security interest on assets of corporate debtor when they are created
for third-party loans and scrutinize the non-status of appellant as a secured
financial creditor.
4. To upheld the non-restoration of the company petition in the light of absence of
statutory provision and revival clause.

and/or
Pass any other order, direction, or relief that it may deem fit in the interest of justice,
equity, fairness, and good conscience.
For this act of kindness of your lordship, the Respondent shall duty bound forever
pray.

Place: S/d-
Date: COUNSELS FOR RESPONDENTS

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