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Judgment
O R D E R
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
The Respondent herein is the opposite party to the proceedings which were being carried under Section 7 of the I & B Code, 2016, the same has been instituted by the Appellant herein, on the basis of the default in certain, cash credit facilities, which was extended by the Appellant to the Respondent and on a default being committed, the proceedings under Section 7 of the I & B Code was drawn.
During the course of the proceedings before Ld. NCLT, the parties before Ld. NCLT have exchanged their pleadings and after exchange of pleadings, the arguments were concluded.
Before venturing further into the manner in, which the proceedings have been carried by Ld. Tribunal, we make it very clear that, it is not the case of the Respondent in arguments or pleadings, that when they have filed their counter, they had never raised any plea in their counter raising preliminary objection, with regards to the competence of authority of the Appellant, to initiate the proceedings under Section 7 of the I & B Code, 2016 nor was the issue ever discussed in the proceedings before the Ld. Adjudicating Authority.
The matter proceeded further and it was taken up by the Ld. Tribunal, on 08.01.2024 and the order was passed, which reads as under:
``Learned Counsel Ms Rithika Reddy on behalf of the Respondent present through Video Conference. Learned Counsel Mr. Srikanth Rathi, for counsel on record Mr. VVSN Raju, for petitioner present physically. Heard For orders on 13.02.2024.’’
The order speaks that, both the Counsels were heard arguments concluded and orders were reserved on 08.01.2024 for further orders on 13.02.2024. The reference of the word ``orders’’ in the order dated 13.02.2024 would mean that, it was reserved for the purposes of Judgment to be pronounced, and where the Ld. Tribunal observes that, since the Tribunal was not able to pronounce the order on 13.02.2024, as directed by the previous order on 08.01.2024, the pronouncement was deferred on 08.01.2024, the pronouncement was deferred to 16.02.2024.
The entire controversy germinates from the order which was passed on 16.02.2024, for the purposes of brevity, we feel it apt to extract the entire order which was passed on 16.02.2024 as under:
``Learned Counsel Mr Srikanth Rathi, for Financial Creditor and Learned Counsel Ms Kopal Sharraf, for Corporate Debtor present through Video Conference. Before we could pronounce the orders, learned counsel for corporate debtor craved for an opportunity of making submissions regarding the power of attorney of the signatory to the applicant and also on the record of default filed. Therefore, we direct that both sides to present at 2::30 PM post lunch and make their submissions on the above points. Matter called again at 2::00 PM. Heard learned counsel Ms Kopal Sharraf, for the Corporate Debtor and learned counsel Mr Srikanth Rathi, for Financial Creditor. At request of both sides we grant 5 days time for filing written submissions along with case laws specifying only to the above points. For orders call on 26.02.2024.’’
Matter concluded on same day. We are astonished, to observe that, a very peculiar pattern of an adjudication has been adopted by the Ld. Tribunal, not known to the recognised procedural law of adjudication, because, once the order is reserved, the Ld. Tribunal has to decide the controversy pertaining to Section 7 of I & B Code Application, based upon whatsoever the material or the pleadings, that has already been exchanged between the parties and which were before the Ld. Tribunal to be considered for the purposes of adjudicating the Section 7 of I & B Code application.
At the stage when the matter was taken on 16.02.2024, it was exclusively confined and listed for the purposes of pronouncement of the order, as observed in the previous order of 13.02.2024. Rather than venturing to deliver the order on 16.02.2024, as reserved earlier. The Ld. Tribunal by way of an unreckoned procedural process of law had accepted an oral objection that, was raised by the Respondent, qua the authority which has been vested with the deponent of the Appellant, for the purposes of institution of the proceedings under Section 7 of I & B Code, on the ground, that in the absence of there being a Board’s Resolution, the entire proceedings would be vitiated.
We feel that any objection of the nature as raised by the Respondent, particularly which goes to the very foundation of the proceedings, qua the competence of the Authority vested with the individual who was representing the cause of the Appellant and the issue of lack of its authority, it ought to have been a question, which was to be raised at the first available opportunity or at least in the written submission itself. So the Appellant will be provided with an opportunity to respond to it. But, admittedly there is nothing on record to show that, such an objection was raised at the first available instance or even in the objection that, was filed by the Respondent in the counter to proceedings under Section 7 of I & B Code, 2016.
The question that emanate would be that, when the Ld. Tribunal has reserved the orders to be pronounced on 16.02.2024, whether the Ld. Tribunal could have permitted the Respondent to raise an oral objection qua the competence of the authority vested with the representative of the Appellant, who has instituted the proceedings under Section 7 of I & B Code, 2016. There is no such concept of oral objection, being raised particularly at the stage when the trial is to be decided on merits, after ample of opportunity to contest, such an oral objection ought to have entertained when the arguments have concluded and the matter was reserved for delivery of order.
More surprisingly, apart from that the Ld. Tribunal has erred at law in entertaining an oral objection that was taken by the Respondent qua the competence of the Appellant’s authority to initiate the proceeding under Section 7 of I & B Code, 2016, had directed the parties to file their written submissions qua the question raised on 16.02.2024, that too, at the stage of proceedings when the Judgment was already reserved and matter was fixed for delivery of orders.
This Appellate Tribunal fails to understand, as to how this noble process of invitation of written submission after the matter being fixed for pronouncement of Judgment, pertaining to a question of law could be permitted to be entertained orally which goes to the genesis of the proceedings and that too after reserving of the order, which was expected to be delivered on merits on the date fixed i.e. 16.02.2024.
``Written submission’’ is not a concept which is available under the procedural law calling for an adjudication of a lis on merits and that too before the Court of the first instance, which has to foundation its adjudication of lis on merits, based upon the material, which has already been placed on record and controverted by the other side on merits of the matter.
It’s not even that, the Appellant in order to overcome the un-apprehended oral objection, that was taken by the Respondent in the proceedings that was held on 16.02.2024, had filed an application being IA No. 491 / 2024 by virtue of which the Appellant, while invoking the inherent jurisdiction under Section 60(5) of the I & B Code, 2016, had placed the Board’s Resolution on record, which was passed on 23.08.2017, thereby vesting the authority for the purposes of initiation of the proceedings at the behest of the Appellant, no orders was passed on the same before final adjudication, either accepting or rejecting the same, was kept pending till the impugned order was passed and was simultaneously rejected, without assigning any reason for not accepting the same.
The Ld. Tribunal while passing the Final Order on 05.03.2024, while rejecting Section 7 of I & B Code, 2016, application has simultaneously proceeded to reject the Application preferred by the Appellant under Section 60(5) of the I & B Code, 2016, placing the resolution of the Board on record in order to justify the authority, which has been vested with the representative of the Appellant who had initiated the proceedings under Section 7 of I & B Code, 2016.
The procedural propriety demanded, that when an oral objection has been raised by the Respondent qua the competence of the authority vested with the representative of the Appellant, who had initiated the proceedings under Section 7 of I & B Code, even if it was supposed to be entertained, at this matured stage of proceedings, then atleast the Appellant was expected to be granted an opportunity to controvert the oral plea taken and when the Appellant has availed the same by filing an Interlocutory Application being IA No. 491 / 2024, the Ld. Tribunal was expected to pass an independent order on the said application before venturing to decide the Company Petition itself on its merits.
The Ld. Tribunal while passing the Final Order on 05.03.2024 had simultaneously decided IA No. 491 / 2024 rejecting the same without reasons, declined to be taken on record for the rational, which has been assigned in Para Nos. 6 & 7 of the part of the order as passed on IA No. 491 / 2024.
The process adopted by the Ld. Tribunal, would not amount to be an adjudication of a lis on merits, as it had apparently amounted to be a deprivation to the Appellant to substantiate his case qua the very basis on, which the impugned order of 05.03.2024 has been rendered of rejecting the application under Section 7 of the I & B Code, 2016, on the ground of the authority vested with the representative of the Appellant to initiate the proceedings, based upon the Board’s Resolution, which has already placed on record subsequent to the order passed on 16.02.2024.
The logic which has been assigned by the Ld. Tribunal and the conclusion which has been arrived at is based upon a non-consideration of the material on record and it is procedurally defective.
Hence, we are inclined to quash the order dated 05.03.2024 and remit the matter back to the Ld. NCLT, Hyderabad Bench, requesting to decide the Company Petition (IB) No. 249 / 7 / HDB / 2022 on merits after providing an effective opportunity to all the parties, on the question, which was raised by the Respondent orally qua the competence of the authority vested with the representative of the Appellant to represent the cause before the Ld. Tribunal and other issues on merits, and then only to take a call on merits of the matter.
Subject to the above, the Company Appeal (AT) (CH) (INS) No. 234 / 2024 stands allowed. The impugned order would stand quashed. All pending Interlocutory Applications would stand closed.