Baskaran Sathya Prakash, Rathinamala vs CS Vasudevan Gopu

(Hybrid Mode)

Per : Justice Sharad Kumar Sharma, Member (Judicial):

The definition of word ``Tribunal’’ as given under sub-section 90 of Section (2) of the Companies Act, 2013, being that the Tribunal, which has been constituted under Section 408 of the Companies Act, 2013.

The Tribunal thus, constituted under the Companies Act, it discharges an adjudicatory function, which exercises and discharge such powers conferred on it, by or under the act or rules and regulations framed under it and for the time being in force.

The Tribunal(s) constituted under Section 408 of the Companies Act, 2013, they perform a judicial function determining the rights and liabilities of the parties to the proceedings depending upon the facts and circumstances of each case, and are judicial proceedings as per sub-section (4) of Section 424 of the Companies Act.

Any Body, which has been constituted under a Statute and discharges an adjudicatory functions, its procedure is required to be governed by specific law, in order to attach a principle of fairness and adherence of principle of natural justice, so as to remove any iota of bias which may or even if there is possibility of bias to creep in, in the functioning of the body which discharges these adjudicatory functions and since Tribunal being a Judicial Body, having been conferred with the powers to draw contempt, its functions and duties are to be performed in the light of the provisions and procedures contained under Section 424 of the Companies Act, 2013. Section 424 of the Companies Act is extracted hereunder:-

``Section 424. Procedure before Tribunal and Appellate Tribunal.

The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice, and, subject to the other provisions of this Act ¹[or of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)] and of any rules made hereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.

The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act ¹[or under the Insolvency and Bankruptcy Code, 2016 (31 of 2016)], the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:--

Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send for execution of its orders to the Court within the local limits of whose jurisdiction,--

All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (45 of 1860), and the Tribunal and the Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)’’.

If Section 424 which extracted above is taken into consideration, in its sub-section (2) it provides for that the Tribunal(s) thus constituted under the Act has the same powers as they are vested with the Civil Court and any orders, which are passed by Tribunal shall have the same force as a decree, made by the Court in a Suit, which would be enforceable, in the similar manner as that of a decree by invocation of the provisions contained under Order XXI of the C.P.C.

If sub-section (1) of Section 424 of the Companies Act, is taken into consideration, it lays down that the basic principles of adjudication would be governed by the principles of natural justice and would be bound by the procedure those had been widely laid down under the provisions of Code of Civil Procedure, initially prior to the amendment by Act No. 31 of 2016, the said principles of adjudication based upon the principles of natural justice and under the procedure that are contemplated under the Code of Civil Procedure, was limited to be read exclusively with regards to the proceedings, which were conducted and as provided under the provisions of Companies Act. But however, by virtue of the insertion made by the Amending Act No. 31 of 2016, the provisions of Section 424 of the Companies Act, in its entirety has been made applicable over any of the proceedings contemplated under I & B Code, 2016.

If that be so, any proceedings before Learned NCLT, would be governed too by the subordinate legislation, i.e. the rules called as National Company Law Tribunal, Rules 2016, having notified by the Central Government while exercising its powers under Section 469 of the Companies Act. In accordance with the said rules, particularly, that as contained under the Rule 44, with which we are concerned in the instant case. Rule 44 of NCLT Rules, 2016, contemplates that, Tribunal(s) shall notify to the parties the date and place of ``hearing’’. Rule 44 takes the shape of mandatory provision.

Rule 44 of NCLT Rules, 2016, is extracted hereunder:-``44. Hearing of petition or applications.-(1) The Tribunal shall notify to the parties the date and place of hearing of the petition or application in such manner as the President or a Member may, by general or special order, direct.

Where at any stage prior to the hearing of the petition or application, the applicant desires to withdraw his petition or application, he shall make an application to that effect to the Tribunal, and the Tribunal on hearing the applicant and if necessary, such other party arrayed as opposite parties in the petition or the application or otherwise, may permit such withdrawal upon imposing such costs as it may deem fit and proper for the Tribunal in the interests of the justice.’’

Owing to the fact that, under Section 424 of the Companies Act, 2013, it is the para materia provisions of the Code of Civil Procedure, has been made applicable. The provisions of Order XLI Rule 12 of C.P.C. would be applicable, which too prescribes for, unless the Appeal is dismissed under Order XLI Rule 11 of C.P.C., the Tribunal is to fix a date for hearing the Appeal, under Rule 12 of Order XLI is extracted hereunder:

``12. Day for hearing appeal.—(1) Unless the Appellate Court dismisses the appeal under rule 11, it shall fix a day for hearing the appeal.’’

The prime question for consideration, which would be falling for consideration by us in the instant Company Appeal would be, as to whether at all, without complying with the provisions of Rule 44, which to be read with Order XLI Rule 12 of C.P.C., can the Tribunal proceed to decide a Company Petition, without notifying the date fixing date for hearing, which is necessary, in order to enable the parties to know the roaster and purpose of proceedings of the business of the Court, for deciding the case.

The short dispute in the instant case happens to that, the Appellants had preferred the instant Company Appeal being aggrieved as against the impugned order of 31.07.2025, as it was rendered by the Ld. NCLT in IA (IBC) / 743 / CHE / 2024 preferred in MA / 653 / 2018 in CP / 185 / IB / CB / 2018.

The case of the Appellants before this Appellate Tribunal is that, the Appellant No. 1, who alleges to be the former employee of M/s. Raj Internet Private Limited, the Corporate Debtor, which later on underwent a Liquidation process, as per the provisions of the I & B Code, 2016 and the Appellant No. 2 claims to be the wife of the Appellant No. 1. Since, Appellant No. 1 in the capacity of being former employee of the Corporate Debtor contended that, he was entitled to receive certain claim of payment, due towards Salary and was entitled for reimbursement for making the payments on behalf of the Corporate Debtor.

Besides that, it was the case that, the Appellant No.2, the wife of Appellant No. 1, that she had also advanced Short Term Interest Free Loan, to the Corporate Debtor and when Appellant No. 1 resigned from the services of the Corporate Debtor, his Salaries and Re-imbursements stood outstanding and similarly the Loan Advances as extended by Appellant No. 2, fell to be outstanding and payable by the Corporate Debtor, at the time of the resignation of Appellant No. 1, it was contended was under liability to pay Rs.2.48 Crores, to the Appellants.

The Corporate Debtor was admitted to the CIRP process and later on to Liquidation.

The grievance of the Appellant is that, the Liquidator without seeking any explanation or even after giving any opportunity being provided to the Appellant, had classified the above transactions of the Service benefits and the payment of the Short Term Loan, as it stood extended by the Appellant No. 2, as to be a preferential transaction under Section 43 & 44 of the I & B Code, 2016, and consequently, the Respondent / Liquidator instituted MA / 653 / 2018 in CP / 185 / IB / CB / 2018, before Ld. NCLT, Chennai.

In the proceedings those were held before the Ld. Adjudicating Authority, it has been brought to the knowledge of this Appellate Tribunal by the Appellant that, invariably all the proceedings had been in utter derogation to the principles of natural justice as no effective opportunity of hearing was provided to the Appellant to have their say in MA / 653 / 2018 that being the proceeding under Section 43 & 44 of the Code.

According to the Appellant, the proceedings of Section 43 & 44 of the Code, in the shape of MA / 653 / 2018 in CP / 185 / IB / CB / 2018 was taken up before the Tribunal on 15.02.2022.

While fixing the date of 05.04.2022, the Tribunal directed the Counsel for the Applicant to file his Statutory and Tax Audit Report for the relevant time, for all the transactions of the Corporate Debtor, that had taken place between 12.10.2017 and 06.02.2018.

When the proceedings was taken up on various other occasions and ultimately when on 23.09.2022, the Ld. Counsel for the Applicant to the MA / 653 / 2018, were directed to verify the transaction and audit report before this Tribunal regarding the veracity of the statement that were made in the counter of Respondent No. 1 therein i.e. Baskaran Sathya Prakash and Anr.

The proceedings revived on 30.10.2023. Its from this stage, the controversy will start germinating, as far as the instant Company Appeal is concerned.

In the proceedings in MA / 653 / 2018 as held on 30.10.2023, the Ld. Tribunal has observed as under:

``Ld. Counsel Mr. Badri Narayanan is present for the Applicant and Ld. Counsel Ujjwal is present for Respondent No. 1.

Pleadings are complete in the matter.

Arguing Counsel for the Respondent is stated to be not available.

At request, list this Application for hearing on 14.12.2023.’’

Apparently from the above order it is clear that, the Tribunal observed that the pleadings are complete between the parties. However, since the Respondent was not available on the said date, and it was at the request of the Applicant’s Counsel, the next date fixed was on 14.12.2023.

The order of 14.12.2023, which requires an interpretation. The order passed by Ld. NCLT on 14.12.2023 reads as under:

``Ld. Counsel Shri. S. Sathiyanarayanan for the RP / Applicant.

Ld. Counsel Shri. Mohammed Wasif Khan for the Respondents.

Written submissions already filed by the petitioner.

Arguing Counsel for the Respondent is stated to be not available. Even on the last date of hearing i.e. 30.10.2023, the arguing Counsel for the Respondent was not available.

List the application for orders, with liberty Ld. Counsel for the Respondent to argue on any date, giving seven day prior notice to the Counsel for the Applicant.’’

The Ld. Tribunal while recording, the earlier absence of the Appellant’s Counsel on 30.10.2023 and the absence of the Appellant’s Counsel in the proceedings held on 14.12.2023 had directed listing of the application ``with a liberty to the Counsel to argue the matter on any date’’, after giving seven days prior notice to the Counsel for the Applicant herein.

The question is;

Whether, the order dated 14.12.2023 would amount to be the conclusion of argument;

Whether, the said order dated 14.12.2023, could be read as to be an order reserving the order that it was an order reserving the order on MA / 653 / 2018;

Whether, the Tribunal while concluding the proceedings on 14.12.2023 had ever fixed the date for pronouncement of order.

Apparently, from seeing the very language used in the order, it was neither the hearing, which was held on 14.12.2023, as the hearing was directed to be scheduled, to argue the matter, on the next date with the prior notification by the Counsel and no date for pronouncement on the next date to be notified by the Counsel, no date for pronouncement of Order was fixed so that, next date of hearing was also not notified in the order of 14.12.2023.

The grievance of the Appellant is that, the order which was passed on 14.12.2023, in fact, no effective hearing was held and rather when the matter was taken up on 13.02.2024, wherein, the Tribunal had passed the following order. Relevant part of the order dated 13.02.2024 is extracted hereunder:

``This application has been filed to take on record the Board Resolution dated 14.10.2016 of the Corporate Debtor.

Ld. Counsel for the Respondent accepts notice. He seeks and is granted two weeks time to file reply after taking instructions from the Liquidator.

List the application along with MA/653/2018 on 01.03.2024.’’

In the order of 13.02.2024, the Ld. Tribunal has rather fixed a date of 01.03.2024 on the application. In the meantime, what is reflected from the order itself of 13.02.2024 that in MA / 653 / 2018 which is the application preferred by the Respondent under Section 43 & 44 of I & B Code, 2016, an IA (IBC) / 388 (CHE) / 2024 was preferred by the Appellant for taking on record the Board Resolution dated 14.10.2016 of Corporate Debtor. It is this Application, which in fact, was directed to be heard on 01.03.2024 along with MA / 653 / 2018.

The grievance of the Appellant is that, when the Tribunal had fixed on 01.03.2024 for hearing of the Application i.e. IA (IBC) / 388 (CHE) / 2024 and MA / 653 / 2018, quite obviously there was neither any hearing nor conclusion of argument nor reserving of Order nor even any date was fixed for pronouncement of the Order, that means, the Appellants’ IA (IBC) / 388 (CHE) / 2024 was yet to be considered on merits.

However, one fact which the Appellants has not brought on record and for the reasons best known that, when the matter was fixed on 19.02.2024, it was fixed for pronouncement of order and was listed in the cause list at Sl. No. 207. The cause list dated 19.02.2024 is extracted herein:

But, in the order of 13.02.2024, the next date fixed by the Tribunal was 01.03.2024. We see no reasons how the case was preponed was directed to be listed for pronouncement on 19.02.2024. Particularly when the matter was yet to be heard as per order of 13.02.2024, fixing the date to be on 01.03.2024.

The said cause list of 19.02.2024, showed that MA / 653 / 2018 was listed for pronouncement of Order though, there was no prior argument on the applications and there was no prior date fixed for hearing, there was no prior observation made in the order of concluding the arguments, and that there was no prior date fixed by the Tribunal, in view of the observations made in the earlier order of 14.12.2023 or there was no order thereafter at any point of time directing the matter to proceed ex-parte against the Appellant.

The Tribunal proceeded with the process of pronouncement of Order on 19.02.2024 even without, even fixing a date to proceed for an ex-parte hearing against Appellant, which was procedurally bad and in contravention to the provisions contained under the Code of Civil Procedure that, in the light of the provisions contained under Order IX Rule 7, which provides for as how matter will proceed, if a party does not appears on a particular date, then the Tribunal will have to notify a next date of hearing for matter to be heard ex-parte, but, the same was not done in the instant case and on 19.02.2024 itself, the Order in MA / 653 / 2018 was pronounced.

Being aggrieved against the order dated 19.02.2024, the Appellant had approached before this Appellate Tribunal by preferring Company Appeal (AT) (CH) (INS) No. 90 / 2024 Baskaran Sathya Prakash v. C.S. Vasudevan Gopu that was considered by this Appellate Tribunal on 04.03.2024 and wherein time was given to the Respondents to file counter and the matter was listed on 11.03.2024. The Appellate Tribunal had passed the following on 11.03.2024 and the relevant part of the Order is extracted hereunder:

`` After arguing the instant Comp. App. (AT) (CH) (INS) No. 90 of 2024, the Learned Counsel for the `Appellant’ seeks permission from this `Tribunal’ to withdraw the instant Company Appeal (AT) (CH) (INS) No. 90 of 2024. Acceding to the said request, the instant Company Appeal (AT) (CH) (INS) No. 90 of 2024 is `Dismissed as Withdrawn’. No costs.

Before parting with the case, this `Tribunal’ makes it quite clear that the `dismissal of the instant Company Appeal (AT) (CH) (INS) No. 90 of 2024 will not preclude the `Appellants’, to move before the `Adjudicating Authority’ / National Company Law Tribunal, Division Bench-I, Chennai for seeking redressal of their grievances of course, in the manner known to `Law’ and in accordance with `Law’ if they so desire advised.’’

It’s upon passing of this Judgment by this Appellate Tribunal on 11.03.2024, that the Appellant had filed an Application, being IA (IBC) / 743 / CHE / 2024, seeking recall of the order dated 19.02.2024 as passed in MA / 653 / 2018 as preferred in CP / 185 / IB / CB / 2018. This Application IA (IBC) / 743 (CHE) / 2024 seeking recall of the order dated 19.02.2024 has been dismissed by the impugned order, observing thereof that, since there is no power of review is vested with the Ld. Tribunal, the order of 19.02.2024, cannot be reviewed by filing of an Application i.e. IA (IBC) / 743 / CHE / 2024, which was preferred by the Appellant in the light of the liberty granted by the Appellate Tribunal by the Judgment of 11.03.2024.

The question which emerges is, as to whether, the Interlocutory Application, being IA (IBC) / 743 / CHE / 2024, could at all be treated as to be a Review or a Recall.

Apparently from the contents of the application IA (IBC) / 743 (CHE) / 2024, the said Interlocutory Application was not venturing into a re-scrutiny of the Judgment of 19.02.2024 on merits, the view taken would be per se bad for the reason;

Prior to 19.02.2024, there was no independent date fixed by the Ld. Tribunal for hearing.

The view taken by the Tribunal that the Application preferred by the Appellant for Recall, is a Review is the wrongful interpretation given, because as the order sheet, it does not reflects that, prior to 19.02.2024, ever the argument was heard and concluded and the order was reserved on it to be pronounced later.

If the conduct of the Appellant was bad that, he was not appearing on various previous dates as fixed by the Tribunal, it was all the more incumbent upon the Tribunal to have fixed a date for an ex-parte hearing in the light of the provisions contained under Order IX Rule 7, the entire order sheet does not reflect that, prior to 14.12.2023, at any point of time, the Tribunal had ever directed the matter to proceed ex-parte against the Appellant in the light of the provisions contained under Order IX Rule 7 of C.P.C., as made applicable in the light of the provisions contained under Section 424 of the Companies Act.

Whether the order would be bad, because, admittedly after the order being passed by this Appellate Tribunal on 11.03.2024, granting liberty to the Appellant to file an Application, before the Tribunal as per law which was supposed to be decided in accordance with law.

It could have been only by way of an Application to recall in the light of the provisions contained under Section 60(5) for the exercise of an inherent powers to avoid an abuse of process of law, which was to be read with Rule 11 of the NCLAT Rules, 2016, because of the fact that the order of 11.03.2024, had not proceeded in accordance with the law and procedure prescribed under law, as there was no ex-parte hearing which was ever directed to be proceeded against the Appellant nor the argument was ever shown to have been heard ex-parte and concluded nor the order sheet of 14.12.2023, reflects that the order was reserved to be pronounced on 19.02.2024. The reason could be best known to the Tribunal how the Application were preponed for 19.02.2024, when by the order dated 13.02.2024, next date fixed was for 01.03.2024.

In fact, the order even does not show that, when the Appellant has filed an Interlocutory Application being IA (IBC) / 388 (CHE) / 2024 for taking additional documents on record, none of the orders at any point of time shows that, the Tribunal has ever taken care in any of its orders of considering the Application i.e. IA (IBC) / 388 (CHE) / 2024 filed by the Appellant and decided it on merits and rather on record there happens to be no order passed by the Tribunal on the said Application for taking additional documents on record the Board Resolution dated 14.10.2016.

Failure to pass any order on it for taking additional documents i.e. Board Resolution on record, as prayed for by the Appellant will itself vitiate the proceedings as to be actuated by non-application of mind, because, it was mandatory for the Tribunal that, when the proceedings of 14.12.2023 was held, the Tribunal it ought to have complied with the provisions contained under Order IX Rule 7 of C.P.C. as well as should have directed the matter to proceed ex parte against the Appellant, if there was any dereliction on his part, of having failed to appear on the previous dates prior to 14.12.2023.

If the continuity of the proceedings that has taken from 14.12.2023 till passing of the order of 19.02.2024, the order of 19.02.2024 apparently happens to be ex-parte, without hearing the Appellant and even without considering for passing any orders on the Application preferred by the Appellant for taking additional documents i.e. Board Resolution on record, which remained undecided, that itself would render the order to be ex parte and thus, the Application preferred by the Appellant being IA (IBC) / 743 / CHE / 2024 would not amount to be a Review Application, but rather, it was a Recall, for the reason being that, an ex-parte order was being sought to be recalled, which has been proceeded because of the procedural flaw on part of the Ld. Tribunal, which was being only pointing out the apparent procedural anomaly as performed by the Tribunal while conducting its proceedings and it was not soliciting a Review of an Order on merits of the Judgment.

The Ld. Tribunal while passing the final order on 31.07.2025 had erred at law by treating the application as to be a Review Application, the same would stand quashed. The matter is remitted back to the Ld. Tribunal to re-consider and decide the Application i.e. IA (IBC) / 743 / CHE / 2024 and prior to deciding the said application, the Ld. Tribunal is also requested to take a call on the application preferred by the Appellant, being IA (IBC) / 388 (CHE) / 2024, wherein the Appellant as prayed for taking additional documents i.e. the Board Resolution on record and then decide the IA (IBC) / 743 / CHE / 2024 as preferred in MA / 653 / 2018 on its merits, owing to the fact that, the past conduct of the Appellant is of not diligently pursuing the proceedings, and rather attempting to delay the same, this Tribunal quash the order and remitted back. The Ld. Tribunal to re-decide the Applications afresh, subject to the imposition of costs of Rs.50,000/-(Rupees Fifty Thousand Only) to be deposited by the Appellant in the Prime Minister’s Relief Fund within a period of two weeks from today.

Its only upon the submission of the proof of deposit of cost, the Recall Application preferred by the Appellant under Section 60(5) of the I & B Code, 2016, to be read with Rule 11 of the NCLT Rules, 2016, to be considered on its merit.