No Fetter, Embargo Or Legal Impediment For A Trust To Be A Resolution Applicant: NCLAT Chennai

Background Facts

PVS Memorial Hospital Private Limited ("Corporate Debtor") runs a hospital and was admitted into Corporate Insolvency Resolution Process ("CIRP") by the Adjudicating Authority. M/s. Lissie Medical Institutions ("Successful Resolution Applicant/SRA") is a medical institution and a Registered Charitable Trust under the Indian Trust Act, 1882. The Successful Resolution Applicant had submitted a resolution plan for the Corporate Debtor which was approved by the Committee of Creditors. Subsequently, the Plan was approved by the Adjudicating Authority on 16.03.2021.

M/s Awasthi Agencies ("Operational Creditor/Appellant") is an Operational Creditor of the Corporate Debtor who regularly supplied medicines to the Corporate Debtor. The payments of the Operational Creditor were withheld by the Corporate Debtor for the period of June 2017 to April 2019 and GST was paid by the Operational Creditor to the tune of Rs. 12 Lakhs. The Resolution Plan did not provide for return of GST sum to the Operational Creditor at least. Hence, the Operational Creditor challenged the Order dated 16.03.2021 before the NCLAT, opposing the approved plan.

Contentions Of Appellant

The Operational Creditor argued that the Resolution Professional had not taken into account Exact Value of the land and properties of the Corporate Debtor. The valuation of the item wise Land, Property, Hospital Equipments and Machineries and the Hospital Facilities held by the Corporate Debtor were intentionally not disclosed by the Resolution Professional.

Further, the Successful Resolution Applicant through its Resolution Plan was only vying to purchase another Hospital for a meagre price. The Successful Resolution Applicant being a Charitable Public Trust, created by a registered Deed under the Indian Trust Act, 1882 cannot be a Charitable Public Trust. The act of acquiring the Corporate Debtor under the Resolution Plan, cannot be placed under any of the purview of Charitable Purpose. Hence, the Successful Resolution Applicant was not eligible to be a Resolution Applicant.

Deision Of NCLAT

The Bench observed that under Section 3(23)(d) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), a 'Person' is defined and it includes a Trust. Therefore, there is no Fetter/Embargo or a Legal Impediment, for a Trust to be a Resolution Applicant.

"To put it precisely, the word `Person', is defined as per Section 3 (23) (d) of the I & B Code, 2016, which includes a `Trust', therefore, there is no `Fetter' / `Embargo' or a `Legal Impediment', for a `Trust', to be a `Resolution Applicant', in submitting a `Resolution Plan' (in the present case), the candid fact, is that the `Successful Resolution Applicant' / `Lessie Medical Institutions', being a `Registered Charitable Trust', under the `Indian Trust Act, 1882'), in `Corporate Insolvency Resolution Process', in the cocksure earnest opinion of this `Tribunal'. Looking at from that perspective, the contra plea taken on behalf of the `Appellant' is not acceded to by this `Tribunal'."

The appeal was dismissed.

Case Title: M/s. Aswathi Agencies v Bijoy Prabhakaran Pulipra & Ors.

Case No.: Company Appeal (AT) (CH) (Ins.) No. 179 of 2021

Counsel For Appellant: Mr. M.G. Pranava Charan

Counsel For Respondents: Mr. Bijoy P. Pulipra and Mr. Pradeep Joy.

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