Memorial Submission Respondent

MEMORIAL for RESPONDENT
TEAM CODE: TC38
VIth SURANA & SURANA UPES NATIONAL INSOLVENCY MOOT COURT

COMPETITION, 2023
IN THE SUPREME COURT OF JUDICATURE AT MALTA
CASE FILED UNDER SECTION 62 OF THE INSOLVENCY & BANKRUPTCY CODE OF

MALTA
WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

Appeal No. ____of 2023
MR. PIPARA Petitioner
v.
SINGHANIA GROUP OF COMPANNIES Respondent
Mr. SHROFF Petitioner
v.
LIQUIDATOR TO, FU-SAM POWER SYSTEMS LTD. Respondent
AXIS TELECOM PRIVATE LTD. Petitioner
v.
DANOBE INFO TECHONOLOGY LTD. Respondent
VRS MALTA FINANCIAL LTD. & ORS. Petitioner
v.
LIQUIDATOR To, VNTEKAUTO LTD. Respondent
Most respectfully submitted before the Hon’ble Supreme Court of Judicature at Malta
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MEMORIAL ON BEHALF OF THE RESPONDENT
TABLE OF CONTENT
LIST OF ABBREVIATION………………………………………………………………………..……...3
INDEX OF AUTHORIES…………………………………………………………………………..……..5
STATEMENT OF JURISDICTION…………………………………………………………………..…..8
SUMMARY OF FACTS……………………………………………………………………………….....9
ISSUES RAISED………………………………………………………………………………………….11
SUMMARY OF ARGUMENTS………………………………………………………………………….12
ARGUMENTS ADVANCED…………………………………………………………………………….14
PRAYER………………………………………………………………………………………………….26
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LIST OF ABBREVIATIONS
ABBREVIATIO EXPANSION
N
& And
§ Section
§§ Sections
¶ Paragraph
AA Adjudicating authority
AAEC Appreciable adverse effect on competition
AIR All India reporter
Anr. Another
AT Appellate reporter
BLRC Bankruptcy law reforms committee
CA Company appeal
CCI Competition commission of India
CIRP Corporate insolvency resolution process
CLA Corporate law advisor
Co. Company
CoC Committee of creditors
CompCas Company cases
CompLJ Company law journal
CP Company petition
IBBI Insolvency and bankruptcy code of India
ILR Indian law reporter
INR Indian rupee
IRP Insolvency resolution professional
KB Kolkata bench
Ltd. Limited
MCA Ministry of corporate affairs
NCLAT National company law appellate tribunal
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NCLT National company law tribunal

ND New Delhi
No. Number
& And
§ Section
§§ Sections
¶ Paragraph
AA Adjudicating authority
AAEC Appreciable adverse effect on competition
AIR All India reporter
Anr. Another
AT Appellate reporter
BLRC Bankruptcy law reforms committee
CA Company appeal
CCI Competition commission of India
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LIST OF AUTHORITIES
 STATUTES/RULES REFERRED
SR.NO. STATUE YEAR

1. Companies Act 2013
2. Insolvency & Bankruptcy Code 2016
 WEBSITES REFERRED
1. https://www.manupatrafast.com/ (last browsed on 06/08/2023)
2. https://www.scconline.com/ (last browsed on 04/08/2023)
3. http://www.lexusnexus.com/in/legal (last browsed on 07/08/2023)
4. https://ndma.gov.in/Reference_Material/DMAct2005 (last browsed on 06/08/2023)
 DICTIONARIES & COMMENTARIES
1. Black’s Law Dictionary (9th Edition,2009)
2. Commentary on the Constitution of India 689 (8th ed. 2007)
3. Interpretation of Statutes by Peter Benson Maxwell 12th Edn. 2010
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TABLE OF CASES
CASE CITATION
Bankey Bihari Infrahomes Pvt. Ltd Vs Alok Company Appeal (AT) (Insolvency) No.
Kumar Kuchchal 718 of 2022
12. (2018) 18 SCC 575
Chitra Sharma v. Union of India
Arcelor mittal India Private Limited v.

2019) 2 SCC 1
Satish Kumar Gupta & Ors.
Anuj Jain Interim Resolution Professional
for Jaypee Infratech Limited vs. Axis Bank (2020) 8 SCC 401
Limited
Phoenix ARC Private Limited vs.
(2021) 2 SCC 799.
Ketulbhai Ramubhai Patel
in PTC India Financial Services Limited v. Company Appeal (AT) (Insolvency) No.
Venkateswarlu Kari and Another 450 of 2018
Vistra ITCL (India) Limited and Others v.
Mr. Dinkar Venkatasubramanian and Civil Appeal No. 3606 of 2020
Another
M/s ICICI Bank Ltd. v. OPTO Circuits
Company appeal (AT) (Ins.) 146 of 2021
(India) Ltd.
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STATEMENT OF JURISDICTION
THE RESPONDENT NAMED ABOVE STANDS BEFORE THE HON’BLE SUPREME COURT OF
JUDICATURE AT MALTA IN RESPONSE TO THE PETITION FILED UNDER:
SECTION 621 OF THE INSOLVENCY & BANKRUPTCY CODE, 2016
THE RESPONDENT WOULD LIKE TO HUMBLY SUBMIT THAT THIS APPEAL IS NOT
MAINTAINABLE.
THE PRESENT MEMORANDUM SETS FORTH THE FACTS, CONTENTION AND ARGUMENTS IN
THE PRESENT CASE.
1
Section 62, Insolvency & Bankruptcy Code, 2016
62. Appeals 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
Malta, a growing economy, faces challenges due to Non-Performing Assets (NPAs) hindering
growth. Insolvency and bankruptcy pose financial distress, job loss, and instability globally.
Malta's inefficient insolvency resolution framework was exacerbated by Deora NRE Coke Ltd, a
major metallurgical coke manufacturer and wind power generator. Mr. Pipara, a DNCL
promoter, submitted a resolution plan but was disqualified due to his ineligibility under Section
29A of the IBC. He challenged this ineligibility under Section 230 of the Companies Act, 2013,
leading to the NCLAT's decision to disqualify him and the order for liquidation.
During his appeal before NCLAT, Mr. Pipara filed an application under Sections 230 to 232 of
the Companies Act proposing a compromise scheme. NCLT approved it in April 2021,
scheduling a meeting for approval. Singhania Group, an operational creditor, appealed this
decision to NCLAT, which ruled that ineligible promoters can't propose a compromise under
Sections 230 to 232 of the Companies Act, 2013.
Fu-Sam Power Systems specializes in eco-friendly power backup solutions, globally recognized.
The appeal contests NCLAT's reliance on a judgment stating ineligible individuals under IBC's
Section 29A can't propose a compromise under Section 230 of the Companies Act. Appellant
Mr. Shroff, Fu-Sam's promoter, submitted a resolution plan but was deemed ineligible under
Section 29A. Fu-Sam went into liquidation after no other plan emerged. Shroff's attempts to
propose a scheme were thwarted due to his ineligibility. His appeals against these decisions were
dismissed by NCLAT.
Axis Telecom Pvt. Ltd. (ATPL) is a prominent player in the Telecom Sector with a strong
customer focus. Danobe Info Technology Limited is a global IT services company. ATPL filed a
Company Petition under IBC Section 7, citing a default by Danobe. A consent term was agreed
upon, but the petition was withdrawn after it. Later, Danobe defaulted again, and ATPL's
attempts to revive the petition were rejected due to lack of specific IBC provision for reopening
withdrawn petitions.
Appellants extended loans to Vntek Auto Ltd. with pledged shares. Corporate Insolvency Resolution
Process (CIRP) initiated, with a resolution plan from Som House Group (SHG) initially approved.
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SHG failed to fulfill commitments, and PVI's plan reconsidered. Appellants' claims rejected, leading
to appeals. The Appellate Authority denied claims due to non-challenge of rejection. The Supreme
Court established a larger bench to address these appeals concerning pledged shares and CIRP.
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ISSUE RAISED
-I-
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
-II-
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'.
-III-
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 PARTY, NOT NECESSARILY BY THE CORPORATE DEBTOR.
-IV-
WHETHER INSOLVENCY PROCEEDING CAN BE RESTORED IN CASE OF DEFAULT

WHEN CONSENT TERM IS ENTERED BETWEEN PARTIES?
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SUMMARY OF ARGUMENT
CONTENTION 1: A LIQUIDATION PROCEEDING UNDER INSOLVENCY AND BANKRUPTCY
CODE, 2016, THE SCHEME FOR COMPROMISE AND ARRANGEMENT CANNOT BE MADE IN
TERMS OF SECTIONS 230 TO 232 OF THE COMPANIES ACT.
Initiating a Compromise and Arrangement Scheme during the liquidation phase is often deemed unnecessary
due to the inherent circumstances at this stage. Liquidation is resorted to when company revival is unfeasible,
emphasizing efficient closure of affairs and creditor settlement. Developing a scheme at this juncture could
impede swift resolution, conflicting with timely asset distribution and the essence of Liquidation's time-bound
process. Complexities could arise, driven by creditors' self-interests in scheme formulation, potentially
compromising equitable asset distribution. Notably, liquidation might offer creditor advantages,
safeguarding interests and ensuring transparent assessment in cases of suspected malafide intent.
CONTENTION 2: THE PROMOTER IS NOT ELIGIBLE TO FILE APPLICATION FOR

COMPROMISE AND ARRANGEMENT, WHILE HE IS INELIGIBLE UNDER SECTION 29A OF
THE IBC TO SUBMIT A 'RESOLUTION PLAN'.
In the context of proceedings initiated under the Insolvency and Bankruptcy Code (IBC) leading to a
subsequent liquidation order, it is respectfully presented before this Hon'ble Court that Section 230 of the
Companies Act, 2013, explicitly allows the liquidator designated under the IBC to approach the NCLT when
a compromise or arrangement is proposed. Consequently, when a company is undergoing liquidation within
the ambit of the IBC, a compromise or arrangement proposal under Section 230 effectively extends the
ongoing liquidation process. Therefore, individuals disqualified under Section 29A are barred from
proposing revival schemes under Section 230. Moreover, Regulation 2B of the IBBI (Liquidation Process)
Regulations aligns with the principles of Sections 29A and 35(1)(f), positing that individuals responsible for
the underlying issues, whether intentionally or through negligence, should not participate in the solution
process.
CONTENTION 3: 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 PARTY, NOT NECESSARILY BY THE CORPORATE
DEBTOR.
The appellant's claim was rejected by the Resolution Professional of the Corporate Debtor in 2020, and they
didn't challenge this decision. They later applied to the NCLT not to challenge the rejection, but to assert
rights over pledged shares. This application was dismissed due to its untimeliness and was upheld by the
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NCLAT. The appellant's claim to be a financial creditor was rejected as they only held third-party security in
the form of pledged shares, not meeting the criteria. This issue has been addressed in previous cases (Anuj
Jain vs. Axis Bank Limited and Phoenix ARC Private Limited vs. Ketulbhai Ramubhai Patel). A person
with only security interest but not qualifying as a financial creditor would be excluded from the CoC. The
concept of 'pledge' and ownership rights were discussed, indicating that ownership remains with the
Corporate Debtor. This is supported by the case Vistra ITCL (India) Limited vs. Mr. Dinkar
Venkatasubramanian.
CONTENTION 4: TO NOT RESTORE INSOLVENCY PROCEEDINGS IN CASE OF DEFAULT

WHEN CONSENT TERM IS BETWEEN THE PARTIES.
It is pertinent to mention that the consent term outlined in the company petition does not include any
provisions related to revival. As a result, the absence of any revival clause within this consent term
significantly weakens the basis of the appellant's application, which seeks revival. This absence renders the
application untenable and lacking the necessary foundation for its filing. It's well-established that the
Insolvency and Bankruptcy Code (IBC) does not function as a recovery mechanism where parties can
repeatedly approach the Adjudicating Authority for recovering unpaid sums.
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ARGUMENT ADVANCE
CONTENTION 1: 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.
1. It is submitted that the initiation of a Compromise and Arrangement Scheme during the
liquidation stage is generally considered unnecessary due to the underlying circumstances
surrounding this stage. Liquidation is resorted to when the prospects of reviving the company
are deemed unfeasible.
2. It is crucial to recognize that the liquidation stage embodies the culmination of insolvency
proceedings, where the emphasis lies on swiftly winding up the company's affairs and
conclusively settling creditor claims. The intricacies and time-intensive nature of developing
a scheme of this nature might impede the expeditious resolution of the liquidation process,
thereby defeating the overarching objective of timely and efficient asset distribution and the
time bound process of Liquidation.
3. Moreover, the formulation of a Compromise and Arrangement Scheme could introduce

potential complexities and concerns. One such concern revolves around the inherent
predisposition of creditors to structure the scheme in a manner that predominantly serves
their individual interests. This approach could result in the formulation of a scheme that
seeks to maximize individual gains, potentially undermining the equitable distribution of
assets envisioned by the insolvency framework.
4. Furthermore, it is imperative to mention that the liquidation process could potentially yield
advantages for creditors, especially in cases where there might be suspicions of malafide
intent. The initiation of liquidation proceedings could serve as a mechanism to safeguard
creditors' interests, ensuring a transparent and comprehensive assessment of the corporate
debtor's financial state and obligations.
5. In instances where there are concerns about unscrupulous actions or intentions, opting for
liquidation might be a strategic recourse. The liquidation process not only facilitates the
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equitable distribution of available assets among creditors but also offers an opportunity for an
independent evaluation of the debtor's financial affairs, thereby minimizing the possibility of
any wrongful actions going unnoticed.
6. That the determination of the scheme of compromise and arrangement's viability and
potential advantages has yielded favorable results, especially in relation to creditors who hold
a vested interest in the ongoing proceedings. However, it is imperative to recognize that the
scheme's utility may not uniformly extend to the corporate debtor under all circumstances. It
remains a possibility that the scheme, while catering to the interests of creditors, could
display a degree of partiality, primarily oriented towards optimizing creditor benefits at the
expense of comprehensive benefits for the corporate debtor.
7. At this juncture it is pertinent to mention that in Bankey Bihari Infrahomes Pvt. Ltd Vs
Alok Kumar Kuchchal Company Appeal (AT) (Insolvency) No. 718 of 2022 of compromise
and arrangement found to be beneficial to related creditors hence liquidation sustained. The
relevant extract of this para is:
45. In view of the above-noted detailed discussion, it is clearly established that the
Adjudicating Authority provided reasonable and sufficient opportunity to the Appellant
to submit a credible scheme of compromise and arrangement, and the fact that the
scheme so presented by the Appellant was prima-facie found to inflate the total payments
by provisioning payments to creditors who are either related to the corporate debtor or
for such creditors who had not filed legitimate claims in the liquidation process and thus,
the proposed payments were in effect not of greater value than the amount being offered
by the successful bidder in the e-auction.
Thus, this will ensure fairness and equitable treatment as enshrined within the legal
framework, preventing any undue bias in favor of creditors and upholding the broader
objectives of insolvency proceedings.
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CONTENTION 2: 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'.
1. It is humbly submitted before this Hon'ble Court that when an order of liquidation has been
passed under and in pursuance of proceedings which were initiated under the IBC, Section
230 of the Act of 2013 expressly contemplates that the liquidator appointed under the IBC
may move the NCLT where a compromise or arrangement is proposed. Hence, the proposal
for a compromise or arrangement under Section 230, where a company is in liquidation
under the IBC, is in continuation of that liquidation process. Hence, a person who is
ineligible under Section 29A cannot propose a scheme for revival under Section 230.
2. It is further submitted that where a company is in liquidation under Chapter III of the IBC, a
proposed scheme of compromise or arrangement under Section 230 of the Act of 2013 must
comply with the requirements of the IBC
3. However, the specific requirements which must be fulfilled under the aforesaid point above
are that:
a) the scheme must be for the revival of the company; and
b) it must not be proposed by a person who is ineligible under Section 29A of the IBC;
4. That further Sections 29A and 35(1)(f) of the IBC prohibit a certain category of persons from
proposing a revival of the company in the course of the CIRP, liquidation process and in
purchasing the assets in the course of liquidation. To make an exception in a plan for revival
under Section 230 of the Act of 2013 in the context of a scheme of compromise or
arrangement will defeat the object and intent of the amendment to the IBC and lead to an
absurdity. This would perpetrate the mischief which was sought to be obviated.
5. Thus, when a company is in liquidation under the IBC, a scheme proposed under Section 230
is a facet of the liquidation process and the same rationale which permeates the liquidation
process must also govern it
6. The IBC is an economic legislation and its key objectives are to ensure:
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a) good corporate governance;

b) control deviant behaviour;
c) protect the integrity of the resolution process;
d) enhance commercial morality; and
e) foster respect for the rule of law.
7. The IBC is premised on the principle that there is a significant element of public interest in
facilitating a creditor-centric regime for achieving economic growth. Ensuring that resolution
plans are submitted by credible persons is intrinsic to the scheme of the IBC. Thus, a person
responsible for the CIRP or Liquidation shall not be permitted to propose the scheme of
compromise and arrangement as the damage has already been done by him to the
Corporate Debtor
8. At this juncture, it is submitted that the basic principle is that an entity which is barred under
Section 29A and Section 35(1)(f) should not be in control of the assets of the corporate
debtor. The objective is that defaulting promoters:
a) should not be in the driver's seat; and

b) should be kept at arm's length;
9. Thus, in order to achieve the above objectives, the Parliament enacted simultaneous
amendment of both Section 29A and Section 35(1)(f) to maintain a level playing field by
comprehensively catering to all situations relating to defaulting or barred promoters.
10. Furthermore, the basis of Regulation 2B of IBBI (Liquidation Process) Regulation is the
same as Sections 29A and 35(1)(f), which is that a person who is the cause of the problem
either by a design or default cannot be a part of the process solution.
11. A regulation which is framed under a statute in exercise of the authority which is conferred
on the delegate can be challenged on the ground of being:
a) ultra vires the parent statute; or

b) being contrary to the provisions of Part III of the Constitution;
13. To suffer from unreasonableness, a regulation must be held to be manifestly arbitrary.
Regulation 2(B) is consistent with the object and purpose of the IBC; and does not suffer
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from manifest arbitrariness; and
14. Sections 29A and 35(1)(f) apply to liquidation pursuant to the IBC. The principle of Section
29A stands absorbed in the hybrid process of compromise during liquidation under the IBC,
by way of a device of incorporation by reference
15. The underlying purpose of introducing Section 29A was adverted to in a judgment of this
court in Chitra Sharma v. Union of India (2018) 18 SCC 575
38. Parliament has introduced Section 29A into IBC with a specific purpose. The
provisions of Section 29A are intended to ensure that among others, person responsible
for insolvency of the corporate debtor do not participate in the resolution process. The
Statement of Objects and Reasons appended to the Insolvency and Bankruptcy Code
(Amendment) Bill, 2017, which was ultimately enacted as Act 8 of 2018, states thus:
“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 person 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 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 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
15. Thus, the Court held that “Section 29A has been enacted in the larger public interest and to
facilitate effective corporate governance”. The Court further observed that “Parliament
rectified a loophole in the Act which allowed backdoor entry to erstwhile
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managements in the CIRP.
16. In Arcelor mittal India Private Limited v. Satish Kumar Gupta & Ors. (2019) 2 SCC 1,
Justice Rohinton F Nariman, speaking for himself and Justice Indu Malhotra, reiterated the
same principle when he underscored the need to impart a purposive interpretation to Section
29A “depending both on the text and context in which the provision was enacted:
“30. A purposive interpretation of Section 29A, depending both on the text and the
context in which the provision was enacted, must, therefore, inform our interpretation of
the same. We are concerned in the present matter with clauses (c), (f), (i)
and (j) thereof.”
2. Thus, the decision adverts to Section 29A as “a typical instance of a ‘see-through provision’
so that one is able to arrive at persons who are actually in ‘control’, whether jointly or in
concert with another person.
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CONTENTION 3: 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 PARTY, NOT NECESSARILY BY THE CORPORATE
DEBTOR.
1. It is submitted that the Resolution Professional of the Corporate Debtor has rejected the
claim filed by the Appellant in 2020. It is submitted
that the said rejection has never been challenged by the appellant.
2. That appellant had further filed an application before the NCLT that too not in challenge
to its claim rejection but for seeking rights over the pledge’s shares.
3. It is submitted that since the said application was filed belatedly the same is rightly
rejected by the NCLT and is rightly confirmed by the NCLAT.
4. That further, It is submitted that the appellants could not qualify to be financial
creditors of the Corporate Debtor. Additionally, that there is only a third party security
given in form of pledged shares with respect to the amounts advanced by the appellants
to affiliates of the Corporate Debtor. Thus, the appellants cannot be considered as
financial creditor of the Corporate Debtor.
5. That the issue involved in the present appeal is squarely covered by this Court in the case
Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited vs. Axis
Bank Limited (2020) 8 SCC 401 and Phoenix ARC Private Limited vs. Ketulbhai
Ramubhai Patel (2021) 2 SCC 799.
6. It is submitted that the appellants could not qualify to be financial creditors of the
Corporate Debtor. It is submitted that there is only a third-party security given in form
of pledged shares with respect to the amounts advanced by the appellants to
affiliates of the Corporate Debtor. Thus, the appellants cannot be considered as financial
creditor of the Corporate Debtor.
7. Therefore, a person only having a security interest in the assets of the Corporate
Debtor, even if falling in the description of ‘secured creditor’ by virtue of collateral
security extended by the Corporate Debtor, would nevertheless stand outside the
sect of the ‘financial creditors’, and consequently outside the CoC as well.
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8. Phoenix ARC (supra) also refers to Chapter VIII of the Indian Contract Act, 1872 which
deals with, the definition of ‘indemnity’ and ‘guarantee’ under Sections 124 and 126
therein. It was observed:
"25. As is 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. 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\ the
borrower. The facility agreement under which the borrower was bound by the
terms and conditions and containing his
obligation to repay the loan security for performance are all contained in the
facility agreement. A contract of guarantee contains a guarantee “to perform the
promise or discharge the liability of third person in case of his default”. Thus,
key words in Section 126 are contract “to perform the promise”, or “discharge
the liability”, of a third person. Both the expressions “perform the promise” or
“discharge the liability” relate to “a third person”. Reference is made to the
expression ‘pledge’ as defined in Section 172 of the Contract Act and it has been
held:
“26. …..The pledge agreement dated 10 .10.12 does not contain any contract
that the corporate debtor has contracted to perform the promise, or discharge
the liability of the third person…….
9. The decision in Phoenix ARC (supra) has also relied upon and reproduced paragraphs
4650.2 of the decision in Anuj Jain (supra) , and thereupon observes:
"36. This Court held that a person having only security interest over the assets
of 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 clauses (7) and (8)
of Section 5. What has been held by this Court as noted above is fully attracted in the
present case where corporate debtor has only extended a security by pledging 40,160
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shares of GEL. The appellant at best will be secured debtor qua above security but shall
not be a financial creditor within the meaning of Section 5 clauses (7) and (8).
10. The concept of ‘pledge’ has been elucidated by this Bench in PTC India Financial
Services Limited v. Venkateswarlu Kari and Another, 6 with reference to the provisions
of contract of bailment and specific provisions concerning the pledge, a subset of
bailments, in the following manner:
“18. As per Section 151, a bailee is bound to take as much care of the goods
bailed to him as a man of ordinary prudence would, under similar circumstances, take
of his goods of the same bulk, quality and value as the goods bailed. Section 152 states
that a bailee, in the absence of a special contract, will not be liable for any loss,
destruction, or deterioration of the bailed goods if he acts in conformity with Section
151. As per Section 153, a contract for bailment is voidable at the option of the bailor if
the bailee does any act with regard to the goods bailed,
inconsistent with the conditions of the bailment. Section 154 lays down that the bailee
shall be liable for damage arising from unauthorised use of the bailed goods. The bailee,
with the consent of the bailor, can mix the goods bailed with his own goods, in which
event, the bailor and the bailee will have interest in
proportion to their respective shares in the mixture. [Section 155, Contract Act.]
However, if the bailee, without the bailor's consent, mixes the bailed goods with his own,
and the goods can be separated or divided, the property in the goods remain with the
parties respectively. [ Section 156, Contract Act.]
Further, the bailee is bound to bear the expense of separation or division of the goods,
as well as any damage arising from the mixture. Section 157 provides that when
the goods are so mixed without the bailor's consent and cannot be separated, the bailor
is liable to be compensated, and the bailee is liable for the loss.
11. Under Section 160, the bailee has to return or deliver, as per the bailor's directions,
the goods, without demand, as soon as the time for which they were bailed has expired
or the purpose for which they were bailed has been
accomplished. Section 161 states that if there is a default by the bailee and the goods are
not returned, delivered, or tendered at the proper time, the bailee is responsible to the
bailor for any loss, destruction, or deterioration of the goods from that time. As per
Section 163, in the absence of any contract to the
contrary, the bailee is bound to deliver to the bailor, or in accordance with his directions,
any increase or profit that may accrue from the goods bailed.
12. Thus, from the above judgement it can be infer that the ownership rights still vest with
Corporate Debtor and Appellant cannot claims ownership rights over the goods. The
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reliance for the same can be placed on Vistra ITCL (India) Limited and Others v. Mr.
Dinkar Venkatasubramanian and Another [Civil Appeal No. 3606 of 2020, wherein it
was held that:
7.2 “The law of pledge contemplates special rights for the pawnee in the goods
pledged, i.e., the right to possession of the security, and in case of default, the right to
bring a suit against the pawnor, as well as the right to sell the goods after giving
reasonable notice to the pawnor. The general rights or ownership rights in
the property remain with the pawnor, and wholly reverts to him on discharge of the
debt or performance of the promise. In other words, the right to property
vests in the pawnee only as far as it is necessary to secure the debt. We need not
refer to other portions of the said judgment which relate to right
of redemption till ‘actual sale’, etc”
PAGE | 22
COMPETITION, 2023
CONTENTION 4: 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'.
1. The Appellant initiated a Section 7 application under the IBC, 2016, citing a default of INR
7,71,32,111/- (Seven Crore Seventy-One Lakhs Thirty-Two Thousand One Hundred Eleven
only). A company petition was initiated and a consent term was agreed upon between the
Appellant and the Respondent. Subsequently, an Insolvency Resolution Professional filed a
Section 12A application, leading to the withdrawal of the Company Petition by the
Adjudicating Authority on 09.02.2022. However, the Respondent failed to meet installment
obligations post-withdrawal, prompting the Appellant to file an interim application for
revival before the Appellate authority. This application was dismissed on 22.12.2022. In
view of these circumstances, the Appellant now seeks recourse through the present
application under Section 62 of the IBC, 2016, before this Hon'ble Tribunal.
2. That the honorable NCLAT, Chennai Bench in the case of M/s ICICI Bank Ltd. v. OPTO
Circuits (India) Ltd. in company appeal (AT) (Ins.) 146 of 2021 wide judgment dated
28.04.2022 held that the applicant is entitled to revive the insolvency proceedings, in case the
corporate debtor default in paying the amount ascertained in the settlement agreement
between the corporate debtor and the committee of creditors. The relevant extract of the
judgment is herein under as
“22. However, the Adjudicating Authority committed grave error in giving liberty to
the Appellant to file fresh Company Petition instead of giving liberty to revive/resume
the CIRP Proceedings in case the Corporate Debtor failed to adhere to comply with
the terms of settlement in strict sense. Even the Adjudicating Authority failed to take
note of the decision of this Tribunal being the Appellate Authority as a precedent in a
similarly situated case.”
3. Thus, in the instant case the respondent subsequent to the withdrawal of the company petition
defaulted in making the payment towards the 4 installment as per the concerned settlement
th
terms dated 05.08.2021 which as per the decided judgment in M/s ICICI Bank Ltd. v. OPTO
PAGE | 23
COMPETITION, 2023
Circuits (India) Ltd. makes the respondent as the financial creditor for the remaining unpaid
amount as per the settlement term.
4. Moreover, the dismissal of the appellant's application raises concerns regarding the potential
infringement of legal right. As the Appellant holds the status of a financial creditor of the
Corporate Debtor, it is incumbent upon the NCLT or NCLAT to duly consider the appellant's
claims and afford them appropriate redressal. According to the provisions of the IBC, 2016,
it is imperative that the interests and rights of all stakeholders, including financial creditors,
are upheld through a fair and impartial hearing process. Therefore, the proper application of
legal principles dictates that the appellant should be granted an opportunity for remedy
before the relevant adjudicatory authority.
5. At this juncture, it is pertinent to bring into the kind attention of this honorable court, the
preamble of the IBC, 2016
”An Act to consolidate and amend the laws relating to reorganisation and insolvency
resolution of corporate persons, partnership firms and individuals in a time bound
manner for maximisation of value of assets of such persons, to promote
entrepreneurship, availability of credit and balance the interests of all the
stakeholders including alteration in the order of priority of payment of Government
dues and to establish an Insolvency and Bankruptcy Board of India, and for matters
connected therewith or incidental thereto.”
6. The preamble of the Insolvency and Bankruptcy Code (IBC), 2016, explicitly underscores its
enactment to safeguard the rights of stakeholders. As such, the IBC possesses a paramount status
that supersedes any other agreements, including consent terms, if such agreements, in any
conceivable manner, undermine the fundamental objectives of the Act. The IBC, being a
specialized legislation, is designed to ensure the equitable treatment of creditors and the
preservation of distressed entities. Thus, should any agreement, such as a consent term, run
counter to the core principles and intentions of the IBC, the latter shall unequivocally take
precedence, as it seeks to uphold the broader public interest and the rights of all stakeholders
involved. This premise reinforces the supremacy of the IBC in instances where agreements
would hinder its overarching purpose and objectives.
PAGE | 24
COMPETITION, 2023
PRAYER
In the light of the facts of the case, issues raised, arguments advanced and authorities cited, the Counsel for
the Respondent humbly prays before the Hon’ble Court to kindly adjudge and declare that:
1. A liquidation proceeding under Insolvency and Bankruptcy Code, 2016, the Scheme for
Compromise and Arrangement cannot be made in terms of Sections 230 to 232 of the
Companies Act.
2. The Promoter is not eligible to file application for Compromise and Arrangement,
while he is ineligible Under Section 29A of the IBC to submit a 'Resolution Plan'.
3. Security interest created on the assets of corporate debtor cannot be extinguished even
if that interest has been created for the loan availed by the third party, not necessarily
by the corporate debtor.
4. To restore insolvency proceedings in case of default when consent term is between the
parties.
And to further pass any order that the Hon’ble Court may deem fit.
And for this act of kindness, the Counsel on behalf of the Respondent, as duty bound shall forever pray.
ALL OF WHICH IS RESPECTFULLY SUBMITTED
_______________________________
SD/-
COUNSEL FOR THE RESPONDENT
PAGE | 25
COMPETITION, 2023
PAGE | 26
COMPETITION, 2023

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MEMORIAL for RESPONDENT

TEAM CODE: TC38

VIth SURANA & SURANA UPES NATIONAL INSOLVENCY MOOT COURT

IN THE SUPREME COURT OF JUDICATURE AT MALTA

CASE FILED UNDER SECTION 62 OF THE INSOLVENCY & BANKRUPTCY CODE OF

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

MEMORIAL ON BEHALF OF THE RESPONDENT

NCLT National company law tribunal

SR.NO. STATUE YEAR

1. https://www.manupatrafast.com/ (last browsed on 06/08/2023)

2. https://www.scconline.com/ (last browsed on 04/08/2023)

3. http://www.lexusnexus.com/in/legal (last browsed on 07/08/2023)

4. https://ndma.gov.in/Reference_Material/DMAct2005 (last browsed on 06/08/2023)

 DICTIONARIES & COMMENTARIES

1. Black’s Law Dictionary (9th Edition,2009)

2. Commentary on the Constitution of India 689 (8th ed. 2007)

3. Interpretation of Statutes by Peter Benson Maxwell 12th Edn. 2010

Arcelor mittal India Private Limited v.

SECTION 621 OF THE INSOLVENCY & BANKRUPTCY CODE, 2016

WHETHER IN A LIQUIDATION PROCEEDING UNDER INSOLVENCY AND BANKRUPTCY

IF SO PERMISSIBLE, WHETHER THE PROMOTER IS ELIGIBLE TO FILE APPLICATION FOR

WHETHER SECURITY INTEREST CREATED ON THE ASSETS OF CORPORATE DEBTOR

WHETHER INSOLVENCY PROCEEDING CAN BE RESTORED IN CASE OF DEFAULT

CONTENTION 2: THE PROMOTER IS NOT ELIGIBLE TO FILE APPLICATION FOR

CONTENTION 3: SECURITY INTEREST CREATED ON THE ASSETS OF CORPORATE

CONTENTION 4: TO NOT RESTORE INSOLVENCY PROCEEDINGS IN CASE OF DEFAULT

CONTENTION 1: A LIQUIDATION PROCEEDING UNDER INSOLVENCY AND BANKRUPTCY

3. Moreover, the formulation of a Compromise and Arrangement Scheme could introduce

CONTENTION 2: THE PROMOTER IS ELIGIBLE TO FILE APPLICATION FOR COMPROMISE

a) good corporate governance;

a) should not be in the driver's seat; and

a) ultra vires the parent statute; or

from manifest arbitrariness; and

managements in the CIRP.

CONTENTION 3: SECURITY INTEREST CREATED ON THE ASSETS OF CORPORATE

CONTENTION 4: THE PROMOTER IS ELIGIBLE TO FILE APPLICATION FOR COMPROMISE

ALL OF WHICH IS RESPECTFULLY SUBMITTED

COUNSEL FOR THE RESPONDENT

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