Equipment for which CD paid only 30% sales consideration, ought not to be included in its assets: NCLT

Case Details: TLD MEAI FZE v. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. - [2023] 147 taxmann.com 235 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Kunal Mimani, Kunal Vajani, Shubhang Tandon, Malhar Zatakia, Dhiraj Kumar Totala, Ms Aditi Bhansali, Ms Tanya Chib, Madhur Arora, Parimal Kashyap, Anant Singh, Burgis Shabir, Ms Shrishty Kaul & Aashish Vats, Advs. for the Appearing Parties.

Facts of the Case

In the present case, the corporate debtor and appellant entered into contractual agreement for sale of certain equipment. The agreement clearly stated that the ownership of the assets would remain with the appellant till the full and final payment of purchase price was made. However, the corporate debtor paid only 30% of the purchase price leaving the remaining balance due.

Subsequently, the CIRP was initiated against the corporate debtor and a Resolution Professional (RP) was appointed. The appellant filed an application before the Adjudicating Authority (NCLT) seeking direction to the RP to remove the said equipment from the list of assets of the corporate debtor and return the same to the appellant.

Meanwhile, the resolution plan submitted by one Jalan Fritesch Consortium (JFC) was approved by the Committee of Creditors (CoC). The NCLT also without disposing of application of the appellant, approved the said resolution plan of JFC. Subsequently, an appeal was made to the National Company Law Appellate Tribunal (NCLAT).

NCLAT Held

The NCLAT observed that since the remaining consideration price was not paid by the corporate debtor and intention of the parties to contract of sale was to pass ownership only on the full payment of sale consideration, therefore, the appellant continued to be the owner of the equipment.

The NCLAT held that the equipment not being the assets of the corporate debtor ought not to have been included in assets of the corporate debtor and were to be handed over to the appellant.

List of Cases Reviewed

• • Ashish Chhawchharia, Resolution Professional for Jet Airways India (P.) Ltd., In re [2023] 147 taxmann.com 234 (NCLT – Mum.) (para 49) partly affirmed [See annex]
  • Municipal Corporation of Greater Mumbai v. Abhilash Lal [2019] 111 taxmann.com 405 (SC) (para 39) followed.

List of Cases Referred to

• • Vijay Kumar Jain v. Standard Chartered Bank [2019] 102 taxmann.com 14/152 SCL 56 (SC)/[2019] 20 SCC 455 (para 23)
  • Hurbut John Amies v. Jal P. Virji 1923 SCC Online Bom 97/AIR 1924 Bom 41 (para 25)
  • Pawan Hans Helicopters Ltd. v. Aes Aerospace Ltd. 2008 (103) DRJ 174 (para 25)
  • Sagar Warehousing Corporations & etc. v. Pawan Hans Helicopters Ltd. 2008 SCC Online Delhi 927 (para 25)
  • Suchetan Exports (P.) Ltd. v. Gupta Coal India Ltd. [2011] 13 SCC 83 (para 25)
  • CIT v. Mysore Chromite Ltd. [1955] 27 ITR 128/1 SCR 849 (SC) (para 25)
  • Kahn and Kahn of Delhi v. Premsukh Das Rup Narain 1931 SCC Online Lahore 46 (para 25)
  • Weather Makers (P.) Ltd. v. Parabolic Drugs Ltd. [2018] 97 taxmann.com 183/149 SCL 546 (NCLT – Chd.) (para 25)
  • Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56/[2020] 157 SCL 445 (SC)/[2020] 13 SCC 308 (para 25)
  • Municipal Corporation of Greater Mumbai v. Abhilash Lal [2019] 111 taxmann.com 405/[2020] 157 SCL 477 (SC)/[2020] 13 SCC 234 (para 25)
  • J.V. Gokal & Co. (P.) Ltd. v. Assistant Collector of Sales Tax (Inspection) AIR 1960 SC 595 (para 26)
  • State Bank of India v. ARGL Ltd. [2018] 98 taxmann.com 287 (NCLT – New Delhi) (para 26)
  • Chairman Board of Trustee, Cochin Port Trust v. Arebee Star Maritime Agencies (P.) Ltd. [2021] 11 SCC 641 (para 26)
  • Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta [2021] 125 taxmann.com 150/167 SCL 241/226 Comp Case 432 (SC)/[2021] 7 SCC 209 (para 6)
  • Sanders Bros. v. Maclean & Co. [1883] 11 QBD 327 (CA) (para 39)
  • Lickbarrow v. Manson 1775-1802 All England Report – 1(Kings Bench) (para 41).