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II UPES School of Law National Insolvency law Moot Court Competition, 2019.
TC - 02

II SURANA AND SURANA AND UPES SCHOOL OF LAW

NATIONAL INSOLVENCY LAW MOOT COURT COMPETITION, 2019

IN THE MATTER INVOLVING-

TRADE UNION…………………………………………………………………..PETITIONER

V.

THE WEEKND AIRLINES’ PVT. LTD…………………………………………..RESPONDENT

CLUBBED WITH

KAILASH BANK AND BANK OF DEHRADUN AND ORS…………………………APPLICANTS

V.

RESOLUTION PROFESSIONAL/ COMMITTEE OF CREDITORS………………....RESPONDENT

CLUBBED WITH

INDIAN CREDITORS……………………………………………………………APPLICANT

V.

MS. OLIVIA…………………………………………………………………..RESPONDENT

BEFORE THE HON’BLE NATIONAL COMPANY LAW TRIBUNAL,

NEW DELHI

(IB)- 001 (ND)/2019

- MEMORIAL ON BEHALF OF THE APPLICANTS

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TABLE OF CONTENTS

TABLE OF ABBREVIATIONS......................................................................................IV

INDEX OF AUTHORITIES............................................................................................VI

STATEMENT OF JURISDICTION...............................................................................IX

STATEMENT OF FACTS................................................................................................X

STATEMENT OF ISSUES..............................................................................................XI

SUMMARY OF ARGUMENTS...................................................................................XIII

ARGUMENTS ADVANCED.............................................................................................1

I. WHETHER THE APPLICATION FILED UNDER INSOLVENCY AND

BANKRUPTCY CODE, 2016 IS ADMISSIBLE................................................................1

[A] That the Money Advanced is a Financial Debt...............................................................1

[B] That there is a default in the Financial Debt...................................................................2

[C] That the Trade Union can file an application for CIRP..................................................3

II. WHETHER THE CLAIMS OF KAILASH BANK AND BANK OF DEHRADUN

CAN BE ADMITTED BY THE RP/COC...........................................................................3

III. WHETHER THE RP/COC IS RIGHTFUL IN DENYING FINANCIAL DEBT OF

RSJ BANK..............................................................................................................................4

[A] That The Claim of RSJ Bank is Admissible Even Without a Default............................4

[B] A debt is owed to RSJ Bank............................................................................................5

IV. WHETHER THE DIRECTORS MUST BE HELD PERSONALLY LIABLE FOR

FURNISHING CURRENT ASSETS OF WEEKND AS SECURITY..............................5

[A] That the Directors are not Liable for the Company’s Default........................................5

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[B] That the moratorium applies on the directors of the company.....................................6

V. WHETHER MR. VIKAS CAN ENFORCE HIS CONTRACTUAL RIGHT............7

[A] That Mr. Vikas is a Financial Creditor...........................................................................7

[B] That the Principle of Subrogation is not only Subject to the Contract of Guarantee but

also the Principle of Natural Justice......................................................................................8

VI. WHETHER MS. OLIVIA’S APPLICATION FOR RECOGNITION OF US

VOLUNTARY BANKRUPTCY PROCEEDING BE ACCEPTED.................................8

[A] That the proceeding concerned is not a main proceeding...............................................8

[B] That the proceeding concerned is Not a non-main proceeding.......................................9

VII. WHETHER THERE CAN BE TWO CONCURRENT INSOLVENCY

PROCEEDINGS IN DIFFERENT JURISDICTION......................................................10

VIII. WHETHER UPON ADMISSION OF CIRP THE INVOCATION OF

PERSONAL GUARANTEE BY BANK OF DEHRADUN IS LIABLE TO BE SET

ASIDE……………………………………………………………………………………..11

[A] That the Bank of Dehradun is a financial creditor and has A Right to a claim............11

[B] That same amount cannot be claimed simultaneously..................................................12

IX. WHETHER MR. NARESH SINGHVI CAN BE ALLOWED TO PRESENT THE

PLAN AS A SCHEME, IN CASE THE CORPORATE DEBTOR GOES INTO

LIQUIDATION....................................................................................................................12

[A] That the company can withdraw the CIRP application................................................13

[B] That liquidation can take place after the failure of the resolution plan.........................13

[C] That a compromise or arrangement could be made in case of liquidation....................14

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PRAYER.........................................................................................................................XIV

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TABLE OF ABBREVIATIONS

¶ Paragraph

& And

§ Section

A.I.R All India Reporter

AHSB Air Hotel SDN BHD

Anr. Another

AT Appellate Tribunal

BLRC Banking Law Reforms Committee

Ch. Chapter

CIRP Commercial Insolvency Resolution Process

CoC Committee of Creditors

COMI Centre of Main Interest

CP Company Petition

EC European Commission

Hon’ble Honourable

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IBBI Insolvency and Bankruptcy Board of India

IBC Insolvency and Bankruptcy Code, 2016

INR Indian Rupee

Ltd. Limited

NCLAT National Company Law Appellate Tribunal

NCLT National Company Law Tribunal

Ors. Others

Pvt. Private

RP Resolution Professional

S.C.C Supreme Court Cases

United Nations Commission on International

UNCITRAL
Trade Law

UOI Union of India

US United States of America

v. Versus

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INDEX OF AUTHORITIES

CASES

Amrit v. SBT, 1968 A.I.R. 1432................................................................................................7

Anil v. Rakesh, C.A. (A.T.) (Insolvency) No. 35 of 2019.........................................................2

Axis Bank v. Edu Smart, C.A. (A.T.) (Insolvency) No. 304 of 2017......................................12

Brilliant v. Rajagopal, Special Leave to Appeal (C) No(s). 31557/2018................................13

Davinder v. Sumit, I.B. No. (I.B.)-229 (N.D.)/2017..................................................................7

Divyansh. v. Dwarika, (I.B) - 1159 (P.B.)/2019........................................................................5

EXIM v. Resolution Professional, [2018] 146 C.L.A. 0246 [N.C.L.A.T.]................................4

Gallaghar v. Germania, (1893) 53 Minn. 214 N.W. 1115.........................................................3

In Re Ran, 607 F 3d 1017, (5th Cir, 2010)..............................................................................10

Innoventive v. ICICI, (2018) 1 S.C.C. 407..........................................................................2, 11

Interdil v Fallimento, [2012] Bus. L.R. 1582.............................................................................9

IOB v. RM Marketing, A.I.R. 2002 Del. 344............................................................................5

JK Jute Mill v. Juggilal, C.A. No.20978 of 2017.......................................................................2

LIC v. Escorts, (1986) 1 S.C.C. 264..........................................................................................3

Macaura v Northern, [1925] AC 619.........................................................................................5

Meghal v. Shree Niwas Girni, (2007) 7 S.C.C. 753.................................................................14

Morgan v. Seymore, (1638) 1 Rep. Ch. 120..............................................................................7

Nikhil v. AMR, (2017) 141 C.L.A. 281 (N.C.L.A.T.)...........................................................1, 7

Pioneer v. UOI. (2019) 5 S.C.C 658..........................................................................................1

Puneet v. Realtech, C.P. No. (IB)-769(PB)/2018......................................................................1

Rajendra v. Official Liquidator, (1978) 48 Compcas 476 (Cal)..............................................14

Re North Sea Base Investments Ltd., 121 E.W.H.C. (Ch.) (2015)............................................9

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S.C. Sekaran v. Amit, Company Appeal (AT) (Insolvency) No. 495 & 496 of 2018.............14

Salomon v. Salomon, U.K.H.L. 1 (1897) A.C. 22.................................................................3, 5

SBI v. M/s Feeders, (I.B.) 75- ALD-2019.................................................................................2

Swiss v. UOI, (2019) 4 S.C.C. 17............................................................................................13

V Hotels v. Asset Reconstruction, C.P. No. 532/ IBC/ NCLT/ MB/2018.................................3

Vasant v. Official Liquidator, (1981) 51 CompCas 20 (Bom)................................................14

STATUTES

Companies Act, 2013, No. 18, Act of Parliament......................................................................3

Draft Part [Z]..........................................................................................................................8, 9

Insolvency and Bankruptcy code (Second Amendment) Act, 2018........................................13

Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament..............................passim

Real Estate (Regulation and Development) Act, 2016, Act of Parliament................................1

Regulation (EU) 2015/848 of the European parliament and the council of 20 May 2015 on

insolvency proceedings (recast)...........................................................................................8

REGULATIONS

Insolvency Resolution Process for Corporate Persons, Third Amendment Regulations, 2018

..............................................................................................................................................12

BOOKS

Bryan A. Garner, Black law dictionary, (9th ed., 2009).....................................................1, 6, 7

Niel Hannan, Cross-Border Insolvency the Enactment and Interpretation of the UNCITRAL

Model Law, (2017 springer)................................................................................................10

REPORT

BLRC Report, Nov. 04, 2015, Vol I........................................................................................10

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United Nations Commission on International Trade Law, General Assembly, Legislative

Guide on Insolvency Law, UN Publications Sales No E.05.V.10 (United Nations, 2005). 8

United Nations Commission on International Trade Law, General Assembly, Legislative

Guide on Insolvency Law, UN Publications Sales No E.05.V.10 (United Nations, 2005)...4

United Nations Commission on International Trade Law, UNCITRAL Model Law on Cross

Border Insolvency with Guide to Enactment and Interpretation (United Nations, 2014).....8

Veil of Corporate Personality, (1962) 78 LQR 315...................................................................3

Virgos & Schmit, Report on convention on Insolvency proceedings (1996)............................9

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STATEMENT OF JURISDICTION

Part I: Filing and Acceptance of CIRP Application

With reference to the circumstances that have been presented in the instant case, the

Applicant has approached the Hon’ble National Company Law Tribunal (NCLT) under § 7 of

the Insolvency & Bankruptcy Code, 2016.

Part II: On the behalf Indian Creditors & Director of Weeknd

With reference to the circumstances that have been presented in the instant case, the

Applicant has approached the Hon’ble National Company Law Tribunal (NCLT) under §

60(5) (a) of the Insolvency & Bankruptcy Code, 2016.

Part III: On the behalf of Mr. Naresh Singhvi

With reference to the circumstances that have been presented in the instant case, the

Applicant has approached the Hon’ble National Company Law Tribunal (NCLT) under §

30(1) of the Insolvency & Bankruptcy Code, 2016.

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STATEMENT OF FACTS

1. The Weeknd Airlines’ Pvt. Ltd. is a privately owned airlines, founded by Mr. Abel Tesfaye

Hooda. The company has two wholly owned subsidiaries, namely AHSB hotels and Weeknd

United Productions Pvt. Ltd. While Weeknd Airlines’ and Weeknd Productions have taken

loans from various Indian Banks, AHSB Hotels has taken loans from a consortium of 4 US

banks and 3 Indian banks. Moreover, AHSB hotels has its registered office in Malaysia.

2. Mr. Hooda was born and raised in India and is known for living a lavish and extravagant

life. He owns many luxury boats, cars and various flats around the world, in the name of the

company. Mr. Hooda owns 90% shares in his company while the rest is owned by his

father’s company Thikhha Masala Pvt. Ltd. Mr. Hooda was known for not compromising

his idea of quality over quantity even when the company faced tough competition and

incurred losses. Eventually it became public that Mr. Hooda had defaulted on his loans.

3. Mr. Hooda wanted to enter the markets of Europe and Russia and for that reason, Weeknd

Airlines’ took a loan of INR 100 crores from Bank of Dehradun, giving the personal

guarantee of Mr. Vikas Sharma, a friend of Mr. Hooda’s father. Further the company took

another a loan of INR 189 crores to maintain its quality of services, giving its registered

offices at New Delhi and Mumbai as security for the loan. Meanwhile Weeknd Productions

took a loan of INR 150 crores from RSJ Bank by furnishing Weeknd Airlines’ current assets

as security.

4. AHSB shifted its registered office from Malaysia to US, which provided an expedited

restructuring process. Around this time, two senior pilots got fired and Mr. Hooda offered

the pilots’ flats at 50% of the market price but on the failure of delivery of the said flats and

fearing the lack of job security, the pilots formed a registered trade union.

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5. Finally, the Trade Union initiated the CIRP proceedings and the RP invited the claims from

various creditors.

STATEMENT OF ISSUES

-I-

WHETHER THE APPLICATION FILED UNDER INSOLVENCY AND BANKRUPTCY CODE,

2016 IS ADMISSIBLE.

-II-

WHETHER THE CLAIMS OF KAILASH BANK AND BANK OF DEHRADUN CAN BE

ADMITTED BY THE RP/COC.

-III-

WHETHER THE RP/COC IS RIGHTFUL IN DENYING FINANCIAL DEBT OF RSJ BANK.

-IV-

WHETHER THE DIRECTORS MUST BE HELD PERSONALLY LIABLE FOR FURNISHING

CURRENT ASSETS OF WEEKND AS SECURITY.

-V-

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WHETHER MR. VIKAS CAN ENFORCE HIS CONTRACTUAL RIGHT.

-VI-

WHETHER MS. OLIVIA’S APPLICATION FOR RECOGNITION OF US VOLUNTARY

BANKRUPTCY PROCEEDING BE ACCEPTED.

-VII-

WHETHER THERE CAN BE TWO CONCURRENT INSOLVENCY PROCEEDINGS IN

DIFFERENT JURISDICTION.

-VIII-

WHETHER UPON ADMISSION OF CIRP THE INVOCATION OF PERSONAL GUARANTEE

BY BANK OF DEHRADUN IS LIABLE TO BE SET ASIDE.

-IX-

WHETHER MR. NARESH SINGHVI CAN BE ALLOWED TO PRESENT THE PLAN AS A

SCHEME, IN CASE THE CORPORATE DEBTOR GOES INTO LIQUIDATION.

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SUMMARY OF ARGUMENTS

ARGUMENTS ON BEHALF OF FINANCIAL CREDITORS/APPELANTS

It is humbly submitted before the Hon’ble tribunal that application under IBC, 2016 is

admissible as the money advanced was a financial debt and there was a default. It is

humbly submitted before the Hon’ble tribunal that RP/COC was not rightful in denying

financial debt of RSJ Bank as Weeknd united is under control and management of

Weeknd.

ARGUMENTS ON BEHALF OF DIRECTORS OF WEEKND AND MR. VIKAS

It is humbly submitted before the Hon’ble tribunal that the directors must not be held

personally liable for furnishing current assets of Weeknd as security because directors and

company are separate legal entity. Mr.Vikas can enforce his contractual right because he

is a financial creditor. Also, upon admission of CIRP Bank of Dehradun cannot invoke

Personal guarantee as the bank is a financial creditor and cannot claim the same amount

simultaneously from the guarantor and borrower.

ARGUMENTS ON BEHALF OF INDIAN CREDITORS AND NARESH SINGHVI

It is humbly submitted before the Hon’ble tribunal that the proceeding concerned cannot

be recognized as it is neither a foreign main nor non main proceeding. Two concurrent

proceedings cannot take place under IBC as doing so will defeat the very purpose of IBC

regard being had to practical considerations and that it will jeopardize the interests of

local creditors. Mr. Naresh Singhvi can be allowed to present the plan as a Scheme, in

case the Corporate Debtor goes into liquidation under section 230 of companies act, 2013.

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 ARGUMENTS ADVANCED

I. WHETHER THE APPLICATION FILED UNDER INSOLVENCY AND

BANKRUPTCY CODE, 2016 IS ADMISSIBLE.

It is humbly submitted before the Hon’ble Tribunal that the application for Corporate

Insolvency Resolution Process (CIRP) is admissible under § 7 of the Insolvency and

Bankruptcy Code, 2016. The veracity of the above claim can be substantiated by the

following contentions; [A] That the money advanced is a financial debt. [B] That there is a

default in the financial debt. [C] That a trade Union can file an application for CIRP.

[A] THAT THE MONEY ADVANCED IS A FINANCIAL DEBT.

A financial debt means any debt given against the consideration for a time value of money. 1It

includes any amount raised by any transaction of sale or purchase, including any amount

raised from the allottee2 of a real estate project and it is deemed to be having a commercial

effect of a borrowing3, and is thus covered under the definition of financial debt. 4 Moreover,

in the case of Pioneer Urban Land and Infrastructure Limited and Anr. v. Union of India &

Ors5 the Hon’ble Supreme Court held allottees of real estate projects to be financial creditors

so that they may trigger the Code, under § 7.

In the Present case, the pilots advanced a certain sum of money to corporate debtor with a

view to obtain the possession of flats. The amount advanced was in the form of debt and not

equity.6 The transaction being a contract for sale and purchase of flats gives it a consideration
1
Bryan A. Garner, Black law dictionary, (9th ed., 2009).

2
Real Estate (Regulation and Development) Act, 2016, Act of Parliament, § 2(d), (India).

3
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 5(8 (f) (India).

4
Puneet v. Realtech, C.P. No. (IB)-769(PB)/2018.

5
Pioneer v. UOI. (2019) 5 S.C.C 658.

6
Nikhil v. AMR, (2017) 141 C.L.A. 281 (N.C.L.A.T.).
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for time value of money. Therefore it is humbly submitted that the money advanced by the

pilots falls under the definition of financial debt under § 5(8) (f) and therefore the petitioners

are financial creditors.

[B] THAT THERE IS A DEFAULT IN THE FINANCIAL DEBT

Default means non-payment of debt when either wholly or any part or instalment of the

amount of debt has become due and paid by the corporate debtor.7 A financial creditor can

trigger the code, the moment the default is over rupees one lakh or more. 8 If the ‘Corporate

Debtor’ does not complete the work within time and the ‘allottee’ has paid the total amount

then only the ‘allottee’ can allege default9. In the present case the pilots advanced money to

the corporate debtor to obtain the possession of flats till 15 th March 2018, but despite several

notices there was no delivery of the flats. 10 Further, the money advanced by the pilots

amounts to rupees 105 crores.11 Thus, the corporate debtor has defaulted in the delivery of the

flats and the amount of default also values at INR 105 crores. Therefore it is humbly

submitted that there is a default in the payment of the financial debt the application shall be

admitted under § 7(5) (a).12

[C] THAT THE TRADE UNION CAN FILE AN APPLICATION FOR CIRP.

A registered union has the right to initiate a CIRP13 and such a step is not coercive in nature.14

In the present case the pilots advanced a certain sum of money to corporate debtor with a
7
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 4 (India).

8
Innoventive v. ICICI, (2018) 1 S.C.C. 407.

9
Anil v. Rakesh, C.A. (A.T.) (Insolvency) No. 35 of 2019.

10
Moot proposition ¶ 19.

11
Moot proposition ¶ 22.

12
SBI v. M/s Feeders, (I.B.) 75- ALD-2019.

13
JK Jute Mill v. Juggilal, C.A. No.20978 of 2017.

14
V Hotels v. Asset Reconstruction, C.P. No. 532/ IBC/ NCLT/ MB/2018.

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view to obtain the possession of flats but no flats were given to them. Hence the trade union

initiated the CIRP on the behalf of the pilots.

II. WHETHER THE CLAIMS OF KAILASH BANK AND BANK OF

DEHRADUN CAN BE ADMITTED BY THE RP/COC.

The concept of lifting of the corporate veil emerged in the case of Salomon v. Salomon15. A

corporation is a distinct entity, yet in reality it is an association of persons who are in fact the

beneficial owners of all the corporate property.16 The corporate veil is said to be lifted when

the court ignores the company and concerns itself directly with the members or managers. 17

The corporate veil may be lifted in cases where the statute itself requires so or in cases of

fraud or in cases of tax evasion.18 Fraudulent trading as described as any business of the

company which is carried on with the intent to defraud the creditors of the company, or for

any fraudulent purpose. In such a situation a person can be made personally liable for all or

any debts of the company.19In the present case Mr. Hooda had taken a loan in his personal

capacity and used it to buy luxury items for his own personal benefit in the name of Weeknd

Airlines,20 even after knowing that the company had defaulted in several payments.21 Mr.

Hooda kept on taking loans and using them to fulfil his own extravagant wants, without

worrying about the consequences. Considering these facts, the corporate veil can be lifted

here. Therefore, claims of Kailash Bank and Bank of Dehradun can be admitted by the RP/

15
Salomon v. Salomon, U.K.H.L. 1 (1897), A.C. 22.

16
Gallaghar v. Germania, (1893) 53 Minn. 214 N.W. 1115.

17
Veil of Corporate Personality, (1962) 78 LQR 315.

18
LIC v. Escorts, (1986) 1 S.C.C. 264.

19
Companies Act, 2013, No. 18, Act of Parliament, 2013, § 339.

20
Moot Proposition ¶ 13.

21
Moot Proposition ¶ 11

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CoC. Therefore Mr. Hooda is liable to the banks for wrongful trading and must contribute to

the assets of the corporate debtor.

III. WHETHER THE RP/COC IS RIGHTFUL IN DENYING FINANCIAL DEBT

OF RSJ BANK.

It is humbly submitted that the RP/COC is wrongful in denying the financial debt of RSJ

Bank because of the following contentions. [A]That the claim of RSJ Bank is admissible

even without default. [B] A debt is owed to RSJ Bank.

[A] THAT THE CLAIM OF RSJ BANK IS ADMISSIBLE EVEN WITHOUT A DEFAULT

A claim is defined as a right to payment, irrespective of the fact if the claim is mature, fixed,

disputed, secured or unsecured.22The maturity of claim or default of claim or invocation of

guarantee for claiming the amount has no nexus with filing of claim. 23Therefore, even

creditors holding unmatured claims also have a legitimate interest in the commencement of

insolvency proceedings especially in cases where they are holders of long term debts.24In the

present case, even though no default has occurred on the loan given by RSJ bank, it still has a

right to claim for that loan.

[B] A DEBT IS OWED TO RSJ BANK

A debt means any liability or obligation that arises out of a claim. 25 The debt includes either a

financial debt or an operational debt. Moreover, for any amount to be treated as a financial

debt there must be an interest in the money and a consideration for time value of money. 26 In

22
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 3(6), (India).

23
EXIM v. Resolution Professional, [2018] 146 C.L.A. 0246 [N.C.L.A.T.].

24
United Nations Commission on International Trade Law, General Assembly, Legislative Guide on Insolvency
Law, UN Publications Sales No E.05.V.10 (United Nations, 2005).

25
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 3(11), (India).

26
Divyansh. v. Dwarika, (I.B) - 1159 (P.B.)/2019.

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the present case, even though there has been no default in the payment of the debt, the money

that was given by RSJ bank, was given against a consideration for time value of money.

Therefore it qualifies as a financial debt.

IV. WHETHER THE DIRECTORS MUST BE HELD PERSONALLY LIABLE

FOR FURNISHING CURRENT ASSETS OF WEEKND AS SECURITY.

It is humbly submitted before the Hon’ble Tribunal that the directors of Weeknd cannot be

personally held liable for furnishing the current assets of Weeknd as security because of the

following contentions: [A] That the directors are not liable for the company’s default. [B]

That the moratorium applies on the directors of the company.

[A] THAT THE DIRECTORS ARE NOT LIABLE FOR THE COMPANY’S DEFAULT

The debts of the corporation are different from the debts of the director because they are two

separate legal entities.27 Further, once an artificial person has been created, it must be treated

like any other independent person having its own rights and liabilities. 28Only the company as

the separate legal owner of the property has an interest in the property and not the

director.29Liability cannot be imposed on the directors, for any loan taken by the company,

unless the directors had provided a personal guarantee for the same.30

In the present case, Weeknd Productions is a wholly owned subsidiary of Weeknd Airlines’

and was incorporated with the objective of aircraft manufacturing as per the desire of

Weeknd. RSJ Bank had provided a loan of INR 150 crores to the company. 31The said loan

was given after being furnished with Weeknd’s current assets as security and not any

27
Salomon v. Salomon, U.K.H.L. 1 (1897) A.C. 22.

28
Salomon v. Salomon, U.K.H.L. 1 (1897) A.C. 22.

29
Macaura v Northern, [1925] AC 619.

30
IOB v. RM Marketing, A.I.R. 2002 Del. 344.

31
Moot proposition, ¶ 14.

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personal guarantee from the side of the directors. 32Therefore, the directors cannot be held

liable for the company’s defaults.

[B] THAT THE MORATORIUM APPLIES ON THE DIRECTORS OF THE COMPANY.

Moratorium means delay in performing an obligation or taking an action legally authorized or

simply agreed to be temporary.33The Adjudicating Authority shall by an order declare a

moratorium for prohibiting proceedings against the corporate debtor 34 including the directors

of the company. In the present case, the directors cannot be held liable as the CIRP was

initiated and moratorium was declared would be applicable on the directors as well. The

directors were prohibited to transfer or dispose of any of its assets or any legal right or

beneficial interest therein.35 Hence, the directors cannot be held personally liable for the

default of the company.

V. WHETHER MR. VIKAS CAN ENFORCE HIS CONTRACTUAL RIGHT.

It is humbly submitted before the Hon’ble Tribunal that Mr. Vikas can enforce his contractual

right in the wake of following contentions. [A] That Mr. Vikas is a financial creditor. [B]That

the principle of subrogation is not only subject to the contract of guarantee but also the

principle of natural justice.

[A] THAT Mr. Vikas is a Financial Creditor.

Financial Creditor means any person to whom a financial debt is owed. 36 Financial Debt

means a debt along with interest, if any, which is disbursed against the consideration for the

32
Moot proposition, ¶ 14.

33
Bryan A. Garner, Black law dictionary, (9th ed., 2009).

34
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 14(1) (a), (India).

35
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 14(1) (b), (India).

36
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 5 (7), (India).

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time value of money37 which includes amount of any liability with respect to any guarantee.38

Time Value has been defined to mean the price associated with the length of time that an

investor must wait until an investment matures or the related income is earned. 39 The

company took a loan of INR100 crores from the bank of Dehradun 40 and Mr. Vikas Sharma

gave a personal guarantee to secure the loan amount. Mr. Vikas is a financial creditor and the

company owes a debt to him because the debt is disbursed against the consideration for time

value of money as the amount was secured for a certain period of time and interest was being

charged on it.

[B] That the Principle of Subrogation is not only Subject to the Contract of Guarantee

but also the Principle of Natural Justice.

The concept of right of subrogation emerged in the case of Morgan v. Seymore41. The

principle of subrogation is not only subject to the contract of guarantee but also to the

principle of natural justice.42 Further, in the case of Davinder Ahluwalia and Ors. v. Sumit

Aviation,43 application of principle of subrogation placed the guarantor in the shoes of the

creditor. Weeknd was not able to pay its dues to Bank of Dehradun with regard to its 100

Crore loan. The Bank invoked Personal Guarantee against Mr. Vikas. He paid the entire

amount accordingly to Bank of Dehradun, looking forward to be indemnified by Weeknd. 44

37
Nikhil v. AMR, (2017) 141 C.L.A. 281 (N.C.L.A.T.).

38
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 5 (7), (India).

39
Bryan A. Garner, Black law dictionary, (9th ed., 2009).

40
Moot proposition, ¶ 10

41
Morgan v. Seymore, (1638) 1 Rep. Ch. 120.

42
Amrit v. SBT, 1968 A.I.R. 1432.

43
Davinder v. Sumit, I.B. No. (I.B.)-229 (N.D.)/2017.

44
Moot proposition, ¶ 18.

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As a result of the above fact, right of subrogation applies in this case and Mr. Vikas can

enforce his contractual right on the principle of natural justice.

VI. WHETHER MS. OLIVIA’S APPLICATION FOR RECOGNITION OF US

VOLUNTARY BANKRUPTCY PROCEEDING BE ACCEPTED.

It is humbly submitted before the Hon’ble Tribunal that the application for recognition of US

Voluntary bankruptcy proceeding should not be recognized in wake of the following

contentions.[A] That the proceeding concerned is not a Main Proceeding. [B] That the

proceeding concerned is not a Non-Main Proceeding

[A] THAT THE PROCEEDING CONCERNED IS NOT A MAIN PROCEEDING

Since, there is no set definition of Centre of Main Interest (COMI) in the Model Law, the

UNCITRAL in its Legislative Guide recommends the EC Regulation. 45The EC Regulation

provides that for a corporate debtor COMI is the place where the debtor conducts the

administration of his interests regularly and is ascertainable by third parties. 46 The

amendments to the UNCITRAL Guide states that the COMI should be readily ascertainable

by creditors.47It is deemed to be the place of their registered office, unless there is proof to the

contrary48. If a party wishes to rebut the presumption, the elements relied upon should be

transparent and ascertainable.49The presumption may be rebutted, if from the viewpoint of

third parties, the place in which a company's central administration is located is different

from that of its registered office.50

45
United Nations Commission on International Trade Law, General Assembly, Legislative Guide on Insolvency
Law, UN Publications Sales No E.05.V.10 (United Nations, 2005), 41 [13].
46
Regulation (EU) 2015/848 of the European parliament and the council of 20 May 2015 on insolvency
proceedings (recast) [13-1].

47
United Nations Commission on International Trade Law, UNCITRAL Model Law on Cross Border
Insolvency with Guide to Enactment and Interpretation (United Nations, 2014) 71 [145–147].
48
Draft part [Z], § 14(1).

49
Re North Sea Base Investments Ltd., 121 E.W.H.C. (Ch.) (2015).

50
Interdil v Fallimento, [2012] Bus. L.R. 1582.

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In the present case, AHSB is a wholly owned subsidiary of Weeknd and the only purpose of

shifting the registered to the US is to restructure the company. The company had some assets

and an office in the US which is insufficient to form COMI, as all major decisions of the

company were taken from an Indian location. 51 Since, the US is not the principle place of

business for the company, therefore the proceeding concerned cannot be recognised as a main

proceeding.

[B] THAT THE PROCEEDING CONCERNED IS NOT A NON-MAIN PROCEEDING

Establishment means any place of operations where the corporate debtor carries out or has

carried out a non – transitory economic activity with human means and assets or

services.52The mere presence of assets is not sufficient to amount to an establishment. An

establishment is a place from where commercial, industrial or professional activities are

exercised on the market.53 Human resource essentially means for a minimum level of

organization having a certain level of stability. 54“A purely occasional place or operations

cannot be classified as an establishment.”55The English Court of Appeals held that simply

having a branch office or place where the debtor is located, is insufficient. 56In the present

case, AHSB has a registered office and certain assets in the US, while the entire decision

making body of the company is India. The sole purpose of shifting the office to the US is to

restructure and save the company. Further, the element of stability is absent as the US is just

an occasional location to restructure the company.

51
Moot proposition, ¶ 15.

52
Draft Part [Z], § 2(c).

53
Virgos & Schmit, Report on convention on Insolvency proceedings (1996), 49 [71].

54
Ibid.

55
Ibid.

56
Niel Hannan, Cross-Border Insolvency the Enactment and Interpretation of the UNCITRAL Model Law,
(2017 springer).

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In Ran, the US Court of Appeals stated that recognition as a non- main proceeding merely on

the basis of a bankruptcy proceeding and debts is problematic as it goes against the spirit of

chapter 15 of US Bankruptcy Code.57 In the present case, the company just has a bankruptcy

proceeding taking place in the US and the same is not sufficient to form a non-transitory

economic activity. Thus, the company does not have establishment in the US and so, the

proceeding cannot be recognized as a non-main proceeding.

VII. WHETHER THERE CAN BE TWO CONCURRENT INSOLVENCY

PROCEEDINGS IN DIFFERENT JURISDICTION.

Two concurrent insolvency proceedings are not possible in different jurisdictions. Speed is of

the essence for IBC because the more the delay, the more is the possibility of liquidation and

depreciation of value of assets.58 The third part of the code has not yet been brought into

force. The code has been newly enacted and so it does not have the necessary practical

mechanism and infrastructure to deal with two concurrent proceedings. Thus, if we continue

these two proceedings concurrently, it will lead to delay in the insolvency process in India as

the Indian Insolvency regime is not well equipped to deal with cross border cases and will

defeat the very purpose of the code.

In the present case, regard being had to the fact that the Indian insolvency regime is ill

equipped to handle cross border cases and that the US bankruptcy code favours the debtor. 59

Thus, the interests of the Indian creditors stand jeopardized therefore it is most humble

pleaded before this Hon’ble Tribunal that the two consecutive proceeding should not be

allowed.

57
In Re Ran, 607 F 3d 1017, (5th Cir, 2010).

58
BLRC Report, Nov. 04, 2015, Vol I.

59
Innoventive v. ICICI, (2018) 1 S.C.C. 407.

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VIII. WHETHER UPON ADMISSION OF CIRP THE INVOCATION OF

PERSONAL GUARANTEE BY BANK OF DEHRADUN IS LIABLE TO BE

SET ASIDE.

It is humbly submitted before the Hon’ble Court that the invocation of personal guarantee by

bank of Dehradun is liable to be set aside in the wake of following contentions, [A] That the

Bank of Dehradun is a financial creditor and has a Right to a claim. [B} That same amount

cannot be claimed simultaneously.

[A] THAT THE BANK OF DEHRADUN IS A FINANCIAL CREDITOR AND HAS A RIGHT TO A

CLAIM

Financial Creditor is any person to whom a financial debt is owed and includes amount of

any liability in respect of any of the guarantee or indemnity. 60 A claim is a right to payment,

whether or not such right is secured or unsecured. 61 On the date of initiation of the Resolution

Process, it is the duty of the Resolution Professional to collate all the claims and to verify the

same from the records of assets and liabilities maintained by the Corporate Debtor. 62In the

present case, Bank of Dehradun is a financial creditor and a financial debt is owed to it by the

personal guarantor and the company. So, when the application of CIRP is admitted the bank

shall claim for the amount and the same shall be verified by the Resolution Professional.

[B] THAT SAME AMOUNT CANNOT BE CLAIMED SIMULTANEOUSLY.

“The claim of the parties should be as on the date of initiation of the Corporate Insolvency

Resolution Process (date of order of admission and moratorium). Any person who has right

60
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 5(8) (i), (India).

61
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, §3(6), (India).

62
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, §18(1), (India).

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to claim payment, as defined under Section 3(6), is supposed to file the claim whether

matured or unmatured.”63

In the present case, the bank of Dehradun has the right to claim the amount 64. So, the bank

cannot claim simultaneously from the CoC and the personal guarantor. Hence, the invocation

of personal guarantee is liable to be set aside.

IX. WHETHER MR. NARESH SINGHVI CAN BE ALLOWED TO PRESENT

THE PLAN AS A SCHEME, IN CASE THE CORPORATE DEBTOR GOES

INTO LIQUIDATION.

It is humbly submitted before the Hon’ble Tribunal that the resolution plan of Mr. Naresh

Singhvi can be presented as a scheme, in case the company goes into liquidation. The basis of

the above claims are, [A] That the company can withdraw the CIRP application. [B] That

liquidation can take place after the failure of the resolution plan. [C] That a compromise or

arrangement could be made in case of liquidation.

[A] THAT THE COMPANY CAN WITHDRAW THE CIRP APPLICATION

Section 12A read with regulation 30A65 of the IBC states that the Adjudicating Authority may

allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an

application made by the applicant with the approval of ninety per cent voting share of the

committee of creditors, in such manner as may be specified.66

63
Axis Bank v. Edu Smart, C.A. (A.T.) (Insolvency) No. 304 of 2017.

64
Axis Bank v. Edu Smart, C.A. (A.T.) (Insolvency) No. 304 of 2017.

65
Insolvency Resolution Process for Corporate Persons, Third Amendment Regulations, 2018.

66
Insolvency and Bankruptcy code (Second Amendment) Act, 2018.

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[A].1 That the application can be withdrawn even after the invitation of Expression of

Interest.

In the matter of Brilliant alloys private limited v. Mr. S. Rajagopal & ors. 67, the court held

that withdrawal of CIRP u/s 12A read with regulation 30A i.e., withdrawal not to be allowed

after inviting expression of interest, is only directory depending upon the facts. 68 Hence, in

our case even after the invitation of Expression of Interest application can be withdrawn.

[B] THAT LIQUIDATION CAN TAKE PLACE AFTER THE FAILURE OF THE RESOLUTION

PLAN.

Liquidation can be initiated under section 33(1)(b)(i) 69, “Where the Adjudicating Authority

rejects the resolution plan under section 31 for the non-compliance of the requirements

specified therein pass an order requiring the corporate debtor to be liquidated in the manner

as laid down in this Chapter”. In the matter of Swiss Ribbons Pvt. Ltd. &Anr v. UOI & ors. 70,

it was laid down that liquidation can take place only in case of failure of resolution plan. So,

in our case the the resolution plan of Mr. Singhvi was rejected, who was the highest bidder.

This will result in failure of resolution process as it will infringe objective of IBC and hence,

liquidation process can be initiated.

[C] THAT A COMPROMISE OR ARRANGEMENT COULD BE MADE IN CASE OF LIQUIDATION.

Liquidator is expected to keep the companies as ‘going concern’ even during the period of

liquidation and can take steps under Section 230 of the Companies Act, 2013 after

consultation with the ‘members’ or ‘the creditors’ of the Companies for making arrangement

with the third party.71Section 391 of the Companies Act, 1956 and Section 230 of the
67
Brilliant v. Rajagopal, Special Leave to Appeal (C) No(s). 31557/2018.

68
Brilliant v. Rajagopal, Special Leave to Appeal (C) No(s). 31557/2018.

69
Insolvency and Bankruptcy Code, 2016, No. 31, Acts of Parliament, 2016, § 33, (India).

70
Swiss v. UOI, (2019) 4 S.C.C. 17.

71
S.C. Sekaran v. Amit, Company Appeal (AT) (Insolvency) No. 495 & 496 of 2018.

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Companies Act, 2013 give a right to the liquidator (resolution professional under IBC) to

propose a compromise or arrangement with creditors and members (shareholders) even in the

case of a company which is being wound up.72

When a company is being wound up a liquidator is an additional person having the right to

make an application under the section and the rights of the creditors or the members of the

company to make an application are not taken away when a company goes into liquidation.

The section does not imply that when a company is being wound up the liquidator alone will

have a right to apply.73The section clearly indicates that if any compromise or arrangement is

proposed, the company or any creditor or any member of the company will be entitled to

make the necessary application.74

In the present case, Mr. Naresh Singhvi being the director of the company75 can be considered

as the member of the company and hence, can present his resolution plan as a scheme for

compromise or rearrangement in case the Corporate Debtor goes into liquidation.

72
Meghal v. Shree Niwas Girni, (2007) 7 S.C.C. 753.

73
Vasant v. Official Liquidator, (1981) 51 CompCas 20 (Bom).

74
Rajendra v. Official Liquidator, (1978) 48 Compcas 476 (Cal).

75
Moot proposition, ¶ 26.

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 PRAYER

Wherefore, in the lights of facts stated, issues raised, arguments advanced and authorities

cited it is most humbly prayed and implored before the Hon’ble Tribunal, that it may be

graciously pleased to adjudge and declare that -

1. The application filed under IBC, 2016 is admissible and the claims of Kailash Bank and

Bank of Dehradun are admissible by the RP/CoC and the RP/CoC is not rightful in

denying the financial debt of RSJ Bank;

2. The Directors of the company must not be held personally liable and Mr. Vikas can

enforce his contractual rights during the proceeding of insolvency;

3. The application for recognition of US Bankruptcy cannot be accepted and two concurrent

insolvency proceedings are not possible in different jurisdiction.

4. The Personal Guarantee cannot be invoked upon admission of the CIRP and Mr. Naresh

Singhvi can be allowed to present his resolution plan as a scheme in case the company

goes into liquidation.

And pass any order that this Hon’ble Tribunal may deem fit in the interest of equity, justice

and good conscience.

And for this act of kindness, the counsel for the applicants shall duty bound forever pray.

FOR WHICH THE APPLICANT SHALL EVER PRAY

ALL OF WHICH IS RESPECTFULLY SUBMITTED