Madan Mohan Mishra is an Indian resident who migrated to Barnala (Punjab) from Darbhanga (Bihar) around two decades back for employment with Trident India Limited (TIL), after completion of his Master's in Business Management from IIM. During his engineering program, he studied production, operations, and quality. Mr. Mishra joined TIL as an Assistant Manager (Operations) and got numerous promotions based on his performance. A year ago, Mr. Mishra was elevated from the position of Vice President (Plant Operations) of Barnala Plant and transferred to Sehore district of Madhya Pradesh as a Plant Head of Budhni (Madhya Pradesh) Plant. Mr. Mishra is also a member of the Committee on Financial Matters at TIL, as an employee’s representative. TIL is a multi-product manufacturing company headquartered in Ludhiana (Punjab). One of its products – terry towel is in high demand abroad and around 60% of its production is exported majority in Europe followed by the United States. TIL established a branch office in central London recently and is in the process of getting its scripts listed on the LSE (London Stock Exchange). TIL made a bid for a textile plant there, the deal is expected to mature in six months’ time. It will be a whole cash deal and the funds will be arranged through ECB (External Commercial Borrowings) in Euro currency. TIL is eligible to receive FDI. Mr. Mishra after shifting to Budhni stayed at the company’s guest house for a couple of weeks and then took an apartment on rent in the nearby area. But the family of Mr. Mishra is looking for purchasing their own house and in that process, they identified the housing project ‘Nirmal Awas’ in Hoshangabad, on the bank of the Narmada River; which is just 8-10 km. away from the Budhni plant. Mr. Mishra applied to Chauhan Developers and Infrastructure Limited (CDIL), the promoter of ‘Nirmal Awas’ for a 3 BHK apartment. It is the first housing project for CDIL. The project was duly registered with the relevant State Authority under Real Estate (Regulation and Development) Act, 2016 (RERA). The price of the apartment will be calculated based upon the carpet area at a rate of ₹3,000 per square feet. There are 3 categories of apartments developed under ‘Nirmal Awas’ namely 2BHK, 3BHK floors, and independent villas respectively. 

Each category has a standard size. 3 BHK apartment is comprising with a gross area of 1200 square feet, including external walls and internal partition walls equal to 3% and 4% of the gross area of the apartment, respectively; and also including a balcony of 24 square feet and an open terrace area of 40 square feet for the exclusive use of allottee of the apartment independently. Allotments of all 140 apartments were done in the month of February 2020 to the respective allottees which included Mr. Nayak who had applied for two apartments and got the same in his own name; and Mr. Gautam who had applied for three apartments, got one in his him name, another in the name of his elder son, who is minor and another one in the name of his business firm; which will be used as a guest house for guests related to his business. Rest all had applied for a single apartment or villa. Due to nationwide lockdown, the majority of labour working at ‘Nirmal Awas’ being casual workers moved back to their villages. CDIL realised that it would be difficult to complete the project by December’ 2020 (due-date committed for possession) and after some efforts and waiting for a couple of months, the company decided to transfer the project to Jignesh Shah Estate Developers (JSED), a renowned name for developing residential projects. The allottees of 93 apartments, including Mr. Nayak and Mr. Gautam, agreed to such a transfer of the project because they already had put a huge sum for the apartments promised to them and hence the allottees of 93 apartments gave their consent by raising of hands to CDIL to transfer its rights and liabilities in Nirmal Awas to JSED. CDIL notified the said transfer to the relevant State Authority under RERA within 30 days of transferring the project. JSED is willing to re-allot the apartments after taking charge from CDIL and it also filed an application to the relevant State Authority under RERA for an extension of 3 months quoting such transfer of project as a major reason. In order to fulfill social needs, Mr. and Mrs. Mishra joined the local resident club, which is in the form of an association of persons. Individual members have contributed to the expenses of the club, and have voluntarily formed an executive committee for the management of the club of which Mr. Mishra is also a part. Such an association owns a resort where the club activities take place, members can play tennis, swim or read books in the library at the resort. 

Occasional get-to-gathers and kitty parties are also hosted there by members after prior notice to the Principal Officer of the association who is also the General Secretary of the Executive Committee. The initiating officer has reasons to believe based upon the evidence available to him that such a property is Benami in nature and hence he issued a show-cause notice, served to Mr. Mishra, by post, at his current residential address in Budhni. Mr. Mishra thought, as he is a member of the association, perhaps that’s why he got the notice. But another club member who retired from a PSU as a law officer, five years back, suggested that he needs to answer to the officer concerned that the notice is not served properly. He told him that in case of association of persons notice can be addressed and served to the Principal Officer only and that too as a ‘dasti notice’ as mentioned in Code of Civil Procedure, 1908. As mentioned earlier, TIL is planning to raise funds through ECB. TIL figures out that there will be a two-three month gap between the flotation of money and packing the deal of acquiring the textile plant in London. Considering the transaction cost involved, TIL decided to park the funds for such time abroad only. 

TIL is considering various alternatives to park such funds. The Committee on Financial Matters asked Mr. Mishra to present his views on Central Banks’ Guidelines. The Authorised Dealer Category I bank, with whom TIL is maintaining an Exchange Earners' Foreign Currency Account (EEFC), has sought more information than in previous transactions i.e. when-so-ever export proceeds realization takes place or export-related details and documents are furnished to them under Foreign Exchange Management (Export of Goods & Services) Regulations 2015. TIL finds the same bit irritating, in response to which the banker explains to TIL; that they are bound to Enhance Due Diligence, in case of specified transactions. One of the subsidiaries of TIL was pushed for the Corporate Insolvency Resolution Process by the financial creditors. The decision of the NCLT of admitting the application of financial creditors and appointing of the interim resolution professional was challenged on the grounds that the application of financial creditors under section 7 of IBC, 2016 was made after the expiry of the limitation period. The appellate authority (NCLAT) relying upon the credence that the provisions of the Limitation Act, 1963, is not applicable to the applications made under IBC, 2016, rejected the appeal that challenged the decision of NCLT of admitting the application. In the meantime, the interim resolution professional was appointed as resolution professional under section 22. But later, the committee of creditors found his performance not acceptable, and in one of its meetings passed a resolution with 73% of the voting share of the financial creditors to replace him with another insolvency professional whose consent was taken in writing prior to such meeting and a copy of the resolution along with the proposed name of the insolvency professional was furnished to NCLT With reference to admissibly of application for ongoing CIRP in case of one of the subsidiaries of TIL, state your opinion on whether the credence of NCLAT is correct?

Answer rating: 100% (QA)

No the credence of NCLAT Appellate Authority is no... View the full answer