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Judgment
O R D E R
Per: Justice Rakesh Kumar Jain:
01.11.2023: The Appellant has challenged the order dated 22.06.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench – II, Chennai) by which an application bearing I.A.(IBC)/303/Che/2022 filed in I.A. No. 836/2021 in IBA/579/2019 by the Appellant for setting aside the order dated 01.02.2022 by which the Appellant has been proceeded against ex-parte. Although, the order dated 01.02.2022 has been set aside by the impugned order but the Adjudicating Authority has directed the Appellant to deposit a sum of Rs. 10,00,000/- in the liquidation account of the Liquidator and further the liquidator is directed to keep the said amount in fixed deposit and not to use it for any other purpose till the disposal of the application I.A. No. 836 of 2021 and that in the event, the application I.A. No. 836 of 2021 is decided in favour of the Appellant then the entire amount with interest accrued upon be returned. The Appellant is aggrieved on account of mis-appreciation of the facts by the Adjudicating Authority in concluding that the Appellant was actually served and did not choose to appear.
In brief, the Liquidator of M/s Floram Shoes (India) Pvt. Ltd., in IBA/579/2019 filed I.A. No. 836 of 2021, claiming an amount of Rs. 16.20 Lakhs towards arrears of rent of the ATM of the Appellant situated in the property of Corporate Debtor (in liquidation). In this application, the Appellant was stated to have been served with a notice and since it did not appear despite various opportunities, therefore, order to proceed against it ex-parte was passed on 01.02.2022. The Appellant filed I.A.(IBC)/303/CHE/2022 in I.A. No. 836 of 2021 for recalling of the order dated 01.02.2022 by which the Appellant was proceeded against ex-parte which though has been allowed, the Appellant has been allowed to file reply to the Application I.A. No. 836 of 2021 but with certain conditions which are not to be liking of the Appellant and hence, the appeal has been filed.
Counsel for the Appellant has first argued that the Liquidator has committed an error in impleading the Appellant through its branch manager mentioning the following address “City Union Bank Limited, represented by its branch manager, Mr. Bhuvanesh, No. 7, Congress House Road, Pudupet, Gudiyatham, Ambur Branch, Vellore – 632 602”. As according to the Appellant, the relationship between the Corporate Debtor and the Appellant regarding the installation of ATM, within the premise of Corporate Debtor, was on account of a lease agreement dated 08.04.2011 in which the address of the Appellant has been given as “City Union Bank Limited, registered office at No. 149, TSR (Big) Street, Kumbakonam”. It is also its case that as per clause 16 of the lease agreement, it was agreed between the parties that “notices intended to be served on the lessor and lessee shall be at the same address as herein above mentioned and the said notices are deemed to have been served on the lessor or lessee as the case may be if they are sent under registered post.”
In order to substantiate her argument, she has also referred to the proof of delivery of the notice wherein the address of Gudiyatham has been given and further stated that the arrow shown on the proof of delivery towards the name of Counsel for the Liquidator perhaps indicates that the notice was returned to her. She feigned ignorance of the proceedings initiated by the Liquidator through I.A. No. 836 of 2021 and submitted that in the absence of due notice, the Court should not have proceeded against the Appellant ex-parte. She has further submitted that the Adjudicating Authority has further erred in observing that the Appellant did not appear on at least four occasions. It is submitted that I.A. No. 836 of 2021 was filed on 13.08.2021 and was listed for the first time on 16.09.2021. It was reposted on 30.09.2021 and on that date there was no representation on behalf of the Respondent (Appellant herein) and fresh notice was issued and directed to file an affidavit of service before the next date of hearing. She has also referred to Rule 34 and 37 of NCLT Rules, 2016 and more precisely Rule 34(4) to contend that the affidavit and the notice are required to be served on the prescribed form which are conspicuously absent. It has also been argued that though the Adjudicating Authority has recorded in the impugned order that after the order dated 01.02.2022 the Appellant sent an email to the Liquidator on 04.02.2022 but the said information was obtained in different circumstances which has been explained in the memo of appeal. She has further submitted that even otherwise the Appellant is not liable to pay any amount of lease which has wrongly been claimed by the Liquidator in the application bearing I.A. No. 836 of 2021 as the Appellant and the Corporate Debtor are bound by the lease agreement in which there is no reference of payment of lease amount or rent by the Appellant (Bank). As according to her, ATM facility was provided within the premises of the Corporate Debtor to facilitate its workers to use the ATM. It is therefore, submitted that the Liquidator, on his own, calculated the amount of rent and claimed a huge amount of Rs. 16.20 lakhs. She has further submitted that even though the Adjudicating Authority had set aside the order dated 01.02.2022 but the condition has been imposed upon the Appellant to deposit 10 lakhs which is onerous. She has relied upon a decision of the Hon’ble Supreme Court in the case of Vijay Kumar Madan and Ors. Vs. R.N. Gupta Techincal Education Society and Ors. (2002) 5 SCC 30 and has referred to para 7 which is as under:-
“7.Power in the Court to impose costs and to put the defendant-applicant on terms is spelled out from the expression "Upon such terms as the Court directs as to costs or otherwise". It is settled with the decision of this Court in Arjun Singh v. Mohinder Kumar and Ors., AIR (1964) SC 993, that on an adjourned hearing, in spite of the Court having proceeded ex-parte earlier the defendant is entitled to appear and participate in the subsequent proceedings as of right. An application under Rule 7 is required to be made only if the defendant wishes the proceedings to be relegated back and re-open the proceedings from the date wherefrom they became ex- parte so as to convert the ex-parte hearings into bi-parte. While exercising power of putting the defendant on terms under Rule 7 the Court cannot pass an order which would have the effect of placing the defendant in a situation more worse off than what he would have been if he had not applied under Rule 7. So also the conditions for taking benefit of the order should not be such as would have the effect of decreeing the suit itself. Similarly, the Court may not in the garb of exercising power of placing upon terms make an order which probably the Court may not have made in the suit itself. As pointed out in the case of Arjun Singh (supra), the purpose of Rule 7 in its essence is to ensure the orderly conduct of the proceedings by penalizing improper dilatoriness calculated merely to prolong the litigation.”
On the other hand, Counsel appearing on behalf of the Liquidator has submitted that the Appellant is estopped from taking the plea of his ignorance about the pendency of the proceedings on account of non-service of notice at the registered office address. In this regard, she has referred to the reply dated 02.06.2021 which is purported to have been sent by Shri K. M. Boopathi, Advocate on behalf of the Appellant to the Counsel for the Liquidator in response to the notice dated 26.04.2021 sent by him. The said reply is also reproduced as under;-
It is further submitted that the argument of the Appellant is of no avail because the Liquidator has the evidence that the ATM is being used by the people other than the employees of the CD because after the Corporate Debtor went into Liquidation the employees are no more there and the people who are using its ATM other than the employees of the CD are paying commission to the Bank/Appellant. It is however submitted that this issue is subject matter of the application I.A. No. 836 of 2021 which it is yet to be decided as to whether the Liquidator is entitled to claim the amount of rent or not?.
It is further argued that the judgment relied upon by the Appellant in the case of Vijay Kumar Madan and Ors. (Supra) is not applicable to the facts of this case because no costs has been imposed by the Adjudicating Authority rather the Adjudicating Authority made an arrangement of deposit of Rs. 10 lakhs by the Appellant in the liquidation account of the Liquidator, further directing him to deposit the said amount in fixed deposit and not to use the same for any purpose till the disposal of I.A. No. 836 of 2021 and also that after the decision of I.A. No. 836 of 2021 the amount ordered to be deposited with interest shall be taken care of. It is argued that there is no error in the impugned order which requires any interference in appeal as the impugned order has been passed in favour of the Appellant which has been allowed to participate in the proceedings despite the fact that they chose not to appear earlier despite service and knowing about the proceedings.
We have heard Counsel for the parties and perused the record.
The entire case of the Appellant, set up in the appeal as well as argued before us is that the notice of the application I.A. No. 836 of 2021 should have been served at the registered office address instead of branch address. The Appellant has not denied the fact that the reply to the notice dated 26.04.2021 served by the Liquidator at the branch address was given by the branch of the Appellant. Meaning thereby, the Appellant knew about the proceedings initiated by the Liquidator which was triggered with the issuance of demand notice. Otherwise also from the perusal of the evidence on record, it is clear that service of the notice at the branch office was effected, therefore, it does not lie in the mouth of the Appellant to raise an issue that service was not effected at the registered office and in this regard it cannot take advantage of the averments made in the lease deed about the service of notice at the address given in the lease deed when it had been reacting to the notices, issued to and received at branch office of the Bank. In so far as, the contention of the Appellant that the condition of deposit of Rs. 10 Lakhs is onerous is concerned, the said contention is totally without any basis because the said amount is ordered to be kept intact by the liquidator and to be deposited in the fixed deposit, without using it for any other purpose till the disposal of the main application i.e. I.A. No. 836 of 2021 and with a further direction that if the application is decided in favour of the Appellant then the amount of Rs. 10 lakhs shall be returned to it. In our considered opinion, the Adjudicating Authority has passed a very well-considered order and there is no error in it for which the Appellant should raise a hue and cry. As regards, the issue as to whether the Appellant is really liable to pay the rental of the ATM, it is needless to mention that the said issue is subject matter of I.A. No. 836 of 2021 which is pending adjudication and therefore, we have not made any observation in this regard. Keeping in view the aforesaid facts and circumstances and looking from any angle, it is not a fit case for interference and thus, we do not find any merit in the present appeal and the same is hereby dismissed. No costs.