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Judgment
ORDER
The controversy stood initiated as a consequence of the registration of proceedings, under Section 7 of I & B Code,2016 praying for initiation of the CIRP proceedings as against the Corporate Debtor, M/s. Dunzo Digital Pvt. Ltd. With the initiation of the proceedings, which was registered on 07.12.2023, the notices were issued to the Respondent/the Appellant herein on 27.03.2024, which was responded by the Appellant herein by putting in appearance on 27.05.2024, the date which was fixed for the purposes of filing of a Counter Affidavit. On the said date of appearance, the Learned Counsels for the both the parties have appeared and in view of their oral submissions, the Learned Adjudicating Authority by observing, that both the parties have reached a settlement, and that they have sought time to file necessary Memorandum, directed the parties to the proceedings to file the Memorandum of Settlement, accordingly and fixed the next date of hearing on 29.05.2024.
When the proceedings resumed on 29.05.2024, it was contended by them that, the settlement could not be materialise. The Learned Tribunal, took note of the same and granted time to the Appellant/Respondent in the Company Petition to file reply to the proceedings under Section 7 of I & B Code, 2016, and also directed the applicant to file Rejoinder to the reply to be filed.
The proceedings were yet again taken up on 19.06.2024 and on that day, the Learned Adjudicating Authority proceeded to pass an order that, since the settlement proceedings have failed, and since inspite of the specific directions no reply has been filed by the Respondent, the time for filing the reply is hereby forfeited.
Seeking the recall of the order of 19.06.2024 of Learned NCLT, the appellant filed a Recall Application on 25.09.2024, which was numbered as IA No. 778/2024, which has been rejected by the Impugned Order dated 04.11.2024. It is this order which is being challenged in the instant Company Appeal by the Appellant.
There are various contentions raised by the Learned Counsels for the parties pertaining to the progress of settlement talks which has taken place thereafter in the month of July. However at this stage, this Appellate Tribunal will refrain from making any observation pertaining to the settlement talks between the parties and the extent of progress it has made because it may not be an appropriate time for this Appellate Tribunal to deal with it, and because it would still be an issue that is left open for the Learned NCLT to consider on its own merits. This Appellate Tribunal will confine itself to consider the propriety of the order passed on the recall application, which was preferred by the Appellant seeking recall of the orders dated 19.06.2024, by virtue of which his opportunity to file reply to the proceedings under Section 7 of the I & B Code, 2016, was forfeited.
The Learned Counsel for the Respondent argues the matter from his perspective and opposes the proceedings of this Appeal on the ground that there is an apparent malafide on part of the Appellant, because he stands to benefit by keeping the proceedings pending and by not permitting the proceedings under Section 7 of I & B Code, to be conducted on merits. He further submits that the appellant has to blame himself, because he was conscious of the fact that, he was supposed to file a reply in view of the order passed by the Tribunal on 29.05.2024, and despite of the same, he did not utilize that opportunity. Hence, the closure of his opportunity by the order dated 19.06.2024 was absolutely justified and it does not call for any interference by this Appellate Tribunal. Lastly, he argues that the order passed on 19.06.2024 forfeiting his opportunity to file reply was affirmed by an order of 04.11.2024, that the appellant ought to have filed the recall application within an appropriate time, but he filed the same at a much belated stage only on 25.09.2024, and therefore his recall application was, rightly, not, taken into consideration for the purposes of recalling the order dated 19.06.2024 of closing of his opportunity to file reply to the proceedings under 7 of the I & B Code, 2016.
There cannot be any doubt with regards to the contention of the Respondent that the appellant did have the knowledge when the Tribunal passed an order granting him time to file reply to the principal proceedings under Section 7 of I & B Code, 2016, but that knowledge itself cannot create an absolute restriction for him for all times to come, debarring him from filing a reply to the proceedings under Section 7 of I & B Code, 2016, for the reasons being that process of settlement talks, going on and irrespective of what destiny it would have attained, which is not a question we are required to deal with at this stage, and because of ongoing settlement talks, it cannot be said that despite of the knowledge of the direction for filing a reply, there was an intentional denial or delay on part of the Appellant to file the counter.
To answer the argument of the Learned Counsel for the Respondent pertaining to the delay chanced in filing of the recall application on 25.09.2024, seeking recall of the order of 19.06.2024, it has to be noted that, first of all, the court which grants an opportunity to do an act, can also exercise the inherent powers to grant an opportunity to the opposite party to the proceedings to file counter to the principal proceedings, in order to meet out the substantive justice to let the lis be decided on merits. Apart from that, the objections raised by the Learned Counsel for the Respondent, can be aptly answered in the light of the provisions contained in Order VIII Rule 1 of CPC. Though the provisions of CPC is not to be applied rigorously in these proceedings, but still the ratio as determined therein could be attracted for the purposes of answering the arguments extended by the Learned Counsel for the Respondent, with regards to the aspect of the delay in filing of the recall application.
The Proviso to Order VIII Rule 1 of CPC, exclusively leaves it open for the court to allow to file an application, by the party who has been deprived of filing of an opportunity to file counter and the term used therein that the court can allow to file the same, on such other day that, in itself provides an elasticity by the code itself to provide an opportunity to file a counter and that should not have been shortened in order to deprive a person or party to the proceedings to have a contest on merits.
The process of filing of the objection to the principal proceeding under Section 9 of the I & B Code, should not be placed in a time bound straight jacketed formula, and in case, if there happen one or two omissions in filing the objection to the principal proceedings, that may not be construed as to be a reason to deprive a person from participating in a proceeding on merits, because certain relaxations have been contemplated, though not exactly applicable in this case, under the law in form of the provision of Order VIII in the light of the relaxation provided by the Judgment of the Hon’ble Apex Court as rendered in 2005 (6) SCC Page 344 Salem Advocates Bar Association v/s. Union of India. The relevant para 20 and 21 are extracted hereunder:-
“20.The use of the word “shall” in Order 8 Rule 1 by itself is not conclusive to determine whether the provision is mandatory or directory. We have to ascertain the object which is required to be served by this provision and its design and context in which it is enacted. The use of the word “shall” is ordinarily indicative of mandatory nature of the provision but having regard to the context in which it is used or having regard to the intention of the legislation, the same can be construed as directory. The rule in question has to advance the cause of justice and not to defeat it. The rules of procedure are made to advance the cause of justice and not to defeat it. Construction of the rule or procedure which promotes justice and prevents miscarriage has to be preferred. The rules of procedure are the handmaid of justice and not its mistress. In the present context, the strict interpretation would defeat justice.
21.In construing this provision, support can also be had from Order 8 Rule 10 which provides that where any party from whom a written statement is required under Rule 1 or Rule 9, fails to present the same within the time permitted or fixed by the court, the court shall pronounce judgment against him, or make such other order in relation to the suit as it thinks fit. On failure to file written statement under this provision, the court has been given the discretion either to pronounce judgment against the defendant or make such other order in relation to the suit as it thinks fit. In the context of the provision, despite use of the word “shall”, the court has been given the discretion to pronounce or not to pronounce the judgment against the defendant even if the written statement is not filed and instead pass such order as it may think Company Appeal (AT) (CH) (Ins.) No.433/2024 Page 6 of 8 fit in relation to the suit. In construing the provision of Order 8 Rule 1 and Rule 10, the doctrine of harmonious construction is required to be applied. The effect would be that under Rule 10 Order 8, the court in its discretion would have the power to allow the defendant to file written statement even after expiry of the period of 90 days provided in Order 8 Rule 1. There is no restriction in Order 8 Rule 10 that after expiry of ninety days, further time cannot be granted. The court has wide power to “make such order in relation to the suit as it thinks fit”. Clearly, therefore, the provision of Order 8 Rule 1 providing for the upper limit of 90 days to file written statement is directory. Having said so, we wish to make it clear that the order extending time to file written statement cannot be made in routine. The time can be extended only in exceptionally hard cases. While extending time, it has to be borne in mind that the legislature has fixed the upper time-limit of 90 days. The discretion of the court to extend the time shall not be so frequently and routinely exercised so as to nullify the period fixed by Order 8 Rule 1. [Ed.: See also Short Notes E to J in Kailash v. Nanhku, (2005) 4 SCC 480 wherein this was the only question before the Supreme Court and wherein a three-Judge Bench has come to exactly the same conclusion. See especially Short Notes F and G therein wherein the Court has dealt with the issue of how to deal with defendants bent on abusing the process of court and delaying proceedings.]”
In light of the above, the Appellant ought to have been granted one more opportunity to file his objection to the principal proceedings under Section 9 of the I & B Code, 2016.
Thus, the argument extended by the Learned Counsel for the Respondent is answered against him. It is found that while considering the Recall Application filed by the Appellant for seeking recall of the order dated 19.06.2024, where his opportunity to file counter was forfeited, whatsoever ground was taken therein has not been elaborately considered, nor any specific findings has been recorded by the Learned Tribunal, for not accepting the grounds taken by him in the application. Besides that, in the vital interest of justice so as to have the lis decided on its merit, this Appellate Tribunal while attracting the principles of the Proviso to Order VIII Rule 1 of CPC extends the time by a period of two weeks for the appellant, to enable him file his reply in the proceedings of CP (IB) No. 63/BB/2024. If the appellant does not file his objection within the aforesaid extended period of two weeks from the date of receipt of the certified copy of this Judgment, his opportunity to file counter/objection to the Company Petition would stand closed. Subject to the aforesaid, the appeal would stand allowed. The Impugned Orders dated 19.06.2024 and 04.11.2024 would hereby stand quashed. The connected pending Interlocutory Applications, if any, would stand closed.