Dr. Aveena Gudapati vs Katepalli Venkateswara Rao & Ors.

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

The Appellant has preferred this Company Appeal, under Section 61 of the Insolvency and Bankruptcy Code, 2016, and has expressed his grievances being aggrieved as against the Impugned Order dated 28.05.2024, which has been rendered by the National Company Law Tribunal, Hyderabad, whereby the IA which was preferred under Section 65 of I & B Code, 2016, bearing e-filing No.1414/2024 in CP(IB) No.97/7/HDB/2022 has been dismissed.

The facts which have come on record are that the Appellant claims himself to be a 3^rd Party/Share Holder of the 2^nd Respondent Company. By the Impugned Order, the Interlocutory Application (IA) thus preferred by the Appellant, praying for setting aside the Order dated 30.05.2023 as it was passed in the aforesaid Company Petition, by virtue of which the 2^nd Respondent Company was directed to be admitted to the CIRP Proceedings under Section 7 of the Insolvency and Bankruptcy Code was dismissed. By the same Impugned Order which is a common order in respect of a number of IAs the Resolution Plan of the Corporate Debtor / 2^nd Respondent has also been approved as prayed for in IA (IBC) (Plan) No.7/2024. The ground of challenge to the Impugned Order dated 28.05.2024, has been made on the ground that no valid financial debt has been made out by Respondent No.1, which could be said to be due to be paid by Respondent No.2 or could at all be established on the basis of any other supporting records.

The Learned Counsel for the Appellant contends, that the petitioner to the Company Petition i.e., M. Katepalli Venkateswara Rao / Respondent No.1 herein and the Corporate Debtor, Respondent No.2 herein had entered into a Memorandum of Understanding on 02.04.2018, for allotment of shares in the form of a convertible / redeemable shares, within the period of a maximum of one year from the date of payment. As far as the Order passed on 30.05.2023 in the aforesaid Company Petition admitting the Corporate Debtor to the CIRP Proceedings under Section 7 is concerned, the same has attained finality and even consequent to this the order of the approval of the Resolution Plan has been passed in IA(Plan) No.7/2024 and the same has become final. Thus, the same would be deemed to have attained finality. At this juncture, an IA as preferred by the Appellant bearing e-filing No.1414/2024, seeking to challenge the order admitting the Corporate Debtor / Respondent No.2, into CIRP has been rejected by the Learned Adjudicating Authority, holding it as to be not maintainable on the grounds that the allegation pertaining to, Sub-section(3) of Section 65 of I & B Code, was held not to be made out; for the reason being that the Appellant herein in the capacity of being the Share Holder has already filed a Company Petition being CP (IB) No.337/7/HDB/21, seeking initiation of the CIRP Proceedings against the Corporate Debtor by invoking Section 7 of the I & B Code. The same was rejected on 10.10.2022 and being aggrieved against the said order, the Appellant preferred Comp App (AT) (CH) (Ins) No.25/2023, which has been dismissed by this Tribunal vide its order dated 09.09.2024.

Thus, it is seen that the Appellant himself in the capacity of being a Share Holder, had attempted to draw the CIRP Proceeding against the Corporate Debtor under Section 7 of the I & B Code, which stood rejected and against which he has filed Appeal before this Tribunal in CA (AT) (CH) (Ins) No.25/2023. In that situation, the Appellant challenging the order of admission of the Corporate Debtor into CIRP based on an application by Respondent No.1 as rendered in Company Petition No.97/7/HDB/2022 would amount to that Appellant was pursuing a self-contradictory remedy that is, he wants to pursue CIRP proceedings against the Corporate Debtor and opposes the same when Corporate Debtor is admitted into CIRP based on application by another person.

It is also seen that the Appellant had filed, during the course of proceedings before Learned NCLT, application being had filed the IA Nos.405/2022, 453/2022, 1113/2023 & 1419/2023, at various stages of proceedings raising objections as against the initiation of CIRP Proceedings against the Corporate Debtor by an Order dated 30.05.2023 passed in Company Petition No.97/7/HDB/2022. The orders which had been passed on the IA’s referred above, preferred by the Appellant had attained finality and it would be pertinent to mention that in one of the IAs, he has sought to challenge the Order dated 30.05.2023 in the Company Petition being CP(IB) No.97/7/HDB/2022. This decision taken on these IAs, as against the admission of the Corporate Debtor into the CIRP Proceedings under Section 7 of the I & B Code has attained finality. The Learned Adjudicating Authority has disposed of the aforesaid IAs filed by the present Appellant in capacity of being a 3^rd party at various stages of the proceedings, including the application seeking himself to be impleaded and questioning the Order, in the light of the provisions contained under Section 65, which too was dismissed while reserving the rights of the Appellant for challenging the order in an appropriate proceeding. This liberty the Appellant has not availed and instead, he has instituted the instant Appeal, being aggrieved as against the rejection of the IA e-filing No.1414/2024 has preferred in CP(IB) No.97/7/HDB/2022.

Primarily, the Appellant’s arguments were in the context, that the initiation of the present Company Petition being CP(IB) No.97/9/HDB/2022 is in violation of the provisions contained under Section 65(3), since being fraudulently initiated against the Corporate Debtor and hence the order dated 30.05.2023 deserves to be set aside not tenable, particularly in the context of the provisions contained under Section 65(3) of I & B Code, which is only an enabling provision and not a substantive provision, because at the stage when the Learned Adjudicating Authority finds that based on evidence on record, that the proceedings are malicious it can impose a cost, and also because no credible evidence has been placed before the Learned NCLT by the Appellant in the instant case.

Here the proceedings are not malicious for the reason being that the proceedings at the behest of the Respondent No.2 under Section 7, had already stood admitted on 30.05.2023, and Resolution Plan has been approved on 28.05.2024 and, those proceedings have been exclusively independent to the claim raised by the Appellant in the Company Petition preferred by him being CP(IB) No.337/7/HDB/21, which stood dismissed on 10.10.2022. Furthermore, by preferring an IA bearing e-filing No.1414/2024, the Appellant has only pressed upon the implication of Section 65(3), in relation to CP(IB) No.97/7/HDB/2022. Since the Appellant has chosen to file the present application only after the approval of the Resolution Plan in CP(IB) No.97/7/HDB/2022, coupled with the fact that the allegation made in IA bearing e-filing No.1414/2024, were not substantiated by the Appellant by any credible evidence, the same was rightly rejected by the Learned Adjudicating Authority by the Impugned Order dated 28.05.2024. Further, the decisions taken on earlier in Interlocutory Application filed by the Appellant herein which have attained finality would create an embargo against the Appellant himself to sustain the IA bearing e-filing No.1414/2024. Thus, IA bearing e-filing No.1414/2024, at the behest of the Appellant was not maintainable.

Also, it is to be borne in mind that the Appellant himself was seeking to invoke Section 7 proceedings as against the Corporate Debtor, which was dismissed and the Appellant has appealed against it before this Tribunal which has been discussed vide order dated 09.09.2024. Given this, the Appellant has no cause, as such in the instant Appeal, as against the Order dated 28.05.2024 and the dismissal of the said application does not suffer from any apparent error of law. Thus, the Appeal lacks merits and the same is accordingly dismissed.

We have already referred to the IA No.1419/2023 which was preferred by the Appellant under Section 60(5) to be read with Section 340 and Section 195(1)(b) of CrPC and Section 424(4) of the Companies Act, 2013. The said Application was decided by the Learned Adjudicating Authority by an Order dated 16.04.2024, whereby the application was disposed of by the following Order: -

For the aforesaid reason, the Appeal lacks merits, same is accordingly dismissed, as the Appellant was perusing for a relief contradictory to his Section 7 proceedings which stood dismissed.