Dr. Jitendra Das Maganti vs Mr. Abhilash Lal

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

The Appellant is a member of the suspended Board of Directors of the Corporate Debtor, namely M/s. SevenHills Healthcare Private Limited. The Corporate Debtor operated two hospitals owned by it, located at two different places—one in Mumbai and the other in Visakhapatnam.

The Respondent (Resolution Professional) contended that, owing to the inability of the Corporate Debtor to repay the credit facilities extended to it by the Financial Creditor, namely Axis Bank Limited, a Company Petition was filed by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The said petition was admitted by an order of the NCLT dated 13.03.2018, pursuant to which the first Respondent herein was appointed as the Resolution Professional.

The Appellant has contended that the Corporate Debtor (CD) had the facility to borrow from its Directors and their relatives and the Board Resolution dated 15.12.2011, authorised borrowing from the Directors of the Corporate Debtor and the relatives of such Directors by way of unsecured loans up to a limit of Rs.10,00,00,000/-, carrying interest at a rate not exceeding 12% per annum, that from that date onwards, the Corporate Debtor has been borrowing money from and repaying the same to the Directors & their relatives from time to time, and that in the process, the Corporate Debtor had repaid unsecured loans amounting to Rs.1.7 Crores during November 2016-January 2017. He has further stated that the said amount was borrowed during January 2016, on account of the need to pay the creditors and employees and the said borrowings were in ordinary course of business.

Meanwhile CIRP commenced as against the Corporate Debtor and the Respondent (Resolution Professional) filed an application being IA (IBC)/661/2018 under Section 43(1) read with Section 44 of the Insolvency and Bankruptcy Code, 2016, before the Learned NCLT, contending the aforesaid repayment transactions as preferential transactions and seeking a direction that such transactions be declared void, with a further direction that the amounts paid during the course of such preferential transactions be remitted by the Appellant to the Corporate Debtor.

The application IA(IBC)/661/2018, filed by the Resolution Professional was allowed and the Appellant was directed to pay an amount of Rs.1.7 Crores to the Corporate Debtor. Aggrieved by the said order, the Appellant preferred Company Appeal (AT) (CH) (Ins) No.462/2024 challenging the order dated 18.10.2024 passed in proceedings under Section 43(1) to be read with Section 44 of the Insolvency and Bankruptcy Code, 2016. The said Company Appeal was accompanied by an application for grant of interim relief, being IA No.1261/2024, seeking a stay of the impugned order directing the Appellant to refund the amount of Rs.1.7 Crores to the Corporate Debtor. Notices were issued in the appeal; however, no interim order was passed, and both the appeal and the application for stay remain pending consideration before this Appellate Tribunal, which is presently listed on 17.10.2025. Owing to the fact that the financial liability had already been fastened upon the Appellant by the order dated 18.10.2024, which takes the nature of a money decree, and since the said order was not stayed despite the filing and pressing of a stay application, the order continues to subsist in the eyes of law.

Seeking enforcement of the order dated 18.10.2024, the Respondent filed a Contempt Application (IBC)/3/2024 before the Registry of the NCLT, Amaravati Bench. By order dated 28.05.2025, notice was issued to the Appellant, directing him to enter appearance in the contempt proceedings and to file a counter affidavit. In the counter affidavit filed by the Appellant, the sole ground raised was that, since the appeal was already pending consideration, albeit without any interim order having been granted, the contempt proceedings initiated for enforcement of the order dated 18.10.2024 ought to be deferred. This plea was not accepted by the Tribunal, which held that the mere pendency of an appeal does not amount to an automatic stay of execution of an order, particularly when such order is in the nature of a money decree. Accordingly, the Learned Tribunal, after considering the rival contentions, passed the impugned order dated 01.09.2025 in Contempt Application (IBC)/3/2024 in IA (IBC)/661/2018.

While passing the impugned order, the Tribunal took into consideration the fact that, although appellate proceedings were pending consideration, no stay had been granted by the Appellate Tribunal on the first date of hearing of the Company Appeal, and the matter was listed for hearing on 17.10.2025. The Tribunal observed that since the order dated 18.10.2024 continued to subsist in the eyes of law, the same had to be executed. Consequently, the Tribunal directed the Mandal Revenue Officer of the competent jurisdiction to initiate proceedings under the provisions of the Revenue Recovery Act for recovery of the amount by attachment of the assets of the Appellant and further restrained the Appellant from alienating or creating any third-party interest in respect of his properties until the amount determined by the order dated 18.10.2024 was remitted. This order is under challenge in the present Company Appeal.

The Learned Counsel for the Appellant submitted that an important question which arises for consideration in the instant Company Appeal is whether the order dated 18.10.2024 could be enforced by taking recourse to filing of a Contempt Petition under Section 425 of the Companies Act, 2013, read with Sections 12 of the Contempt of Courts Act, 1971. It is an admitted position that orders adjudicating rights or liabilities passed by a statutory tribunal either by way of final adjudication or by an interim order continue to subsist in law until they are set aside or, stayed by a superior forum, such orders remain executable in accordance with law.

Learned Counsel for the Appellant further submitted that contempt proceedings under Section 425 of the Companies Act, 2013, would not lie in such situation in view of the provisions contained under Section 424(3) of the Companies Act, 2013, which provides that any order passed by the Tribunal or the Appellate Tribunal may be enforced in the same manner as if it were a decree passed by a civil court in a suit pending therein. Sub-section (3) of Section 424 of the Companies Act, 2013, reads as under:

For the time being, even if it is presumed that the order dated 18.10.2024, which according to the Appellant himself, takes the shape of a decree, amounts to a decree within the ambit of the definition of “decree” as provided under the Code of Civil Procedure, 1908, in such an eventuality, execution of the order passed by the Tribunal will have to be executed in accordance with the provisions contemplated under Rule 56 of the NCLT Rules, 2016. Rule 56 of the NCLT Rules reads as under: –

The aforesaid provision contemplates initiation of proceedings for execution of an order passed by the Learned Tribunal, namely the order dated 18.10.2024, which is required to be submitted in the form prescribed as Form No.NCLT-8. Even if the argument advanced by the Learned Counsel for the Appellant is accepted for the time being, reference must necessarily be made to Form NCLT-8, which is to be adopted for the purpose of execution of an order deriving its source from sub-section (3) of Section 424 of the Companies Act, 2013. What is material is that execution of a decree under civil law is governed by Order XXI of the Code of Civil Procedure. However, if sub-section (3) of Section 424 of the Companies Act, 2013, is read along with Rule 56 of the NCLT Rules, 2016, then the legislature has consciously avoided borrowing the provisions of Order XXI of the CPC in their entirety, for the purpose of executing the orders passed by NCLT and NCLAT.

Learned Senior Counsel for the Appellant, insists that contempt proceedings would not lie, and instead Form NCLT-8 ought to have been filed by the Respondent (RP) for execution of the order dated 18.10.2024, which the Appellant treats as a decree executable through the said process. However, this argument may not hold good if Form NCLT-8 scrutinised to understand how execution is contemplated under Companies Act. The first para of Form NCLT-8 reads as under: -

It is thus evident that it attracts only the provisions contained under Order XXI Rule 11 of the CPC. It is well settled that when a particular statutory process for execution is selectively incorporated, and such incorporation is expressly limited to a specific provision, namely Order XXI Rule 11 of the CPC, the scope of such execution cannot be widened so as to apply the entirety of Order XXI of the CPC, as applicable to civil court decrees. The rationale is that although orders passed by the NCLT or NCLAT are deemed to be decrees under sub-section (3) of Section 424 of the Companies Act, 2013, they cannot be executed in the same manner as decrees of a civil court under the CPC in its entirety. Rule 56, read with Form NCLT-8, consciously limits the execution mechanism only to Order XXI Rule 11 of the CPC, which is extracted hereunder: –

This implies that Order XXI Rule 11 of the CPC, 1908, limits the exercise of powers by the executing court primarily to the modalities of execution of a money decree, including fixation of instalments for ensuring remittance of the decretal amount. The provisions of Order XXI Rule 11 treat the order dated 18.10.2024 as a money decree, executable in the manner prescribed therein. Thus, form NCLT-8 cannot be read as extending the scope of Order XXI Rule 11 of the CPC. The said provision itself contemplates that a money decree may even be executed on an oral application made by the decree-holder. Thus, the statutory framework provides a mechanism for execution even without the filing of a formal execution application in Form NCLT-8. Form NCLT-8, being subordinate legislation, cannot override the substantive statutory provision contained in the CPC.

Consequently, issuance of a direction to pay the amount or initiation of execution proceedings through the impugned order, even on an application styled as a contempt petition and treated as falling within the ambit of Rule 56, cannot be said to be expressly barred by law. The law must be construed and applied rationally to achieve its object. A mere incorrect reference to a statutory provision does not vitiate proceedings, particularly when the object sought to be achieved is execution of a subsisting money decree, which is otherwise executable even upon an oral request under Order XXI Rule 11 of the CPC. If that be so, the provision of Order XXI Rule 11 of the CPC, which is attracted by Form NCLT-8, could have been invoked straightaway by way of an oral request without filing Form NCLT-8. Hence, filing of a specific formal application for execution of a money decree may not, in all circumstances, be mandatory.

As we have already observed, the money decree under law has to be dealt under a different pedestal altogether. Where the money decree is to be put to execution, the law carves out a very rigid and straight-jacketed conditions under which it could be put to liquidation, and that is why the Appellate procedure contemplated under CPC particularly that as contained under Order XLI Rule 5 of the CPC does not even contemplate of granting of any Interim Order as against the money decree until or unless a security is furnished for the amount thus decreed by the order and hence Sub Section (3) of Section 424 of the Companies Act, 2013, since it uses the word decree, the implications of Order XLI Rule 5 of the CPC, 1908, will be attracted. In that eventuality, since stay has not been granted by this Appellate Tribunal in the company appeal preferred by the Appellant as against the order of 18.10.2024, a direction to attach the assets in the manner by the impugned order is not vitiated in the eyes of law. Even otherwise also, the equity does not lie in favour of the Appellant, because his conduct itself goes against him as the manner and diligence with which the Appellant has taken up proceedings, which dates back to 2018, and where the Appellant has not shown any diligence in remitting the amount which has been determined in the proceedings under Section 43(1) to be read with Section 44 of the I & B Code, 2016. Hence, the Company Appeal lacks merit and the same is accordingly dismissed. All pending interlocutory applications would stand closed.