Hamon Research Cottrell India Pvt. Ltd. vs Hamon Research Cottrell (Shanghai) Co. Ltd.

The facts of this Company Appeal are that the Respondent had filed CP(IBC)/40(CHE)/2023 before the Learned Adjudicating Authority, on 12^th February 2023 praying for to initiate the Corporate Insolvency Process, against the present Appellant by invoking the provisions contained under Section 9 of Insolvency and Bankruptcy Code, 2016. In those proceedings, the Counter Affidavit was filed by the appellant on 8^th May 2023, challenging the proceedings on the aspect of maintainability of the Company Petition on various grounds as referred to in the preliminary Counter Affidavit. The Appellant submits that after filing of the preliminary counter he has filed his written submission on 20^th June 2023. In the Company Petition he has further elaborated the contention that the Company Petition as preferred by the Respondent under Section 9 was not maintainable.

It was after the exchange of pleadings the respondent once again had filed written arguments with the list of authorities on 7^th of December 2023. Apart from it, the respondent has also filed a memo dated 7^th December 2023 in the Company Petition, where the appellant has raised the objection pertaining to its maintainability.

The respondent had made an attempt to place on record certain additional documents and accordingly he filed an application to bring additional documents on record on 7^th December 2023. The Learned Adjudicating Authority by an order dated 21^st December 2023, after observing that since the pleadings have already been exchanged and written submissions had been filed, the additional documents cannot be taken on record to be considered as part of pleading at that stage for the purposes of deciding the Company Petition, reserved the orders on the Company Petition itself.

On 8^th of January 2024 the respondent filed a recall application being IA(IBC)/CHE(222)/2024 in the Company Petition, seeking recall of the order dated 21^st December 2023, whereby the Adjudicating Authority has denied to permit the additional documents to be taken on record. After filing of the recall application on 8^th January 2024 i.e. IA(IBC)/CHE(222)/2024 the respondent also filed an application being IA(IBC)/687(CHE)/2024 on a later date praying for taking additional documents on record. IA(IBC)/687(CHE)/2024 was filed by the respondent subsequent to the application for recall, by virtue of which, the Respondent has attempted to submit the documents in the Company Petition which were earlier denied to be taken on record by order dated 21.12.2023.

The Learned Adjudicating Authority took up both IAs, that is, IA(IBC)/CHE(222)/2024 and IA(IBC)/687(CHE)/2024 for hearing on 13.03.2024 and 03.05.2024 and by the Impugned Order dated 31.05.2024, first allowed the application IA(IBC)/687(CHE)/2024, of the Appellant for taking the additional documents on record and then it allowed the recall application as preferred by the Respondent being IA(IBC)/CHE(222)/2024 using the logic that since IA/687/2024 has been allowed, it becomes indispensable to allow IA/222/2024. Consequent to the Impugned Order which is under challenge in Comp. App (AT)(Ins) 221/2024, the recall application as preferred by the respondent was allowed, the order dated 21.12.2023 was recalled and the proceedings of the CP(IB) No.40/2023 has been directed to be revived. The grievance of the appellant is that IA(IBC)/CHE(222)/2024 filed by the respondent has been allowed on the very grounds which had been invoked to allow the Application IA(IBC)/687(CHE)/2024 as preferred by the Appellant for bringing the additional documents on record and that, consequently the proceedings in the CP(IB)No.40/2023 has been revived.

The argument of the Learned Counsel for the Appellant is that the chronology in which the pending IAs have been taken by the Learned Adjudicating Authority is not permissible under law. To support his argument, he refers to the earlier decision taken by this Tribunal in Comp. App. (AT)(CH)(Ins) No.71/2024 Hamon Research Cottrell India Pvt. Ltd. Vs Hamon Research Cottrell (Shanghai) Co. Ltd. where the Learned Appellate Tribunal had directed that the IA(IBC)222(CHE)/2024 is to be decided as per the directions given therein in the order passed on 23^rd February 2024 and particularly the reference has been made by the Learned Counsel for the Appellant to the paragraph which reads as under:

The Learned Counsel for the appellant submits that in view of the aforesaid direction issued by the Learned Appellate Tribunal, the Learned Adjudicating Authority ought to have first dealt with the recall application itself on its merit prior to passing of any orders on the IA(IBC)/687(CHE)/2024, being an application preferred by the respondent to take the additional documents on record. What he intends to argue is that in view of the Judgment dated 23^rd February 2024, by this Appellate Tribunal at that point of time, the application to take the additional documents on record was already pending consideration and the Appellate Tribunal while disposing of the Appeal by Judgment of 23^rd February 2024, was conscious of the fact that pending IA seeking recall of an order dated 21^st December 2023, has to be dealt with first by the Adjudicating Authority and that is why no observation was made pertaining to IA(IBC)/687(CHE)/2024 for taking the additional documents on record.

Even otherwise also, we are of the view that when the Tribunal are exercising inherent powers under Rule 11, they are not supposed to override the procedural law, which otherwise should have been followed while adjudicating a right of the parties in a lis and obviously the order allowing the IA(IBC)/687(CHE)/2024, as preferred by the respondent could not have been derived as to be a basis to decide the recall application which ought to have been decided first independently prior to taking a call on the application IA(IBC)/687(CHE)/2024. It is just a converse procedure which has been followed by the Learned Adjudicating Authority by taking the set of reasons which has been assigned in the order allowing IA(IBC)/687(CHE)/2024 as to the reason for allowing the recall application IA(IBC)/222(CHE)/2024.

The Learned Counsel for the respondent supports the impugned order on the ground that since the basic factual background in the two pending IAs before the Adjudicating Authority happened to be same it will have no effect, in case, if the IA(IBC)/687(CHE)/2024 is decided first and based on which the Recall Application IA(IBC)/222(CHE)/2024 is decided.

We are of the view that no set of procedural law can contemplate that prior to passing any order on a recall application seeking to recall an order rejecting an application for taking the documents on record, an order can be passed on a subsequent application for taking the same documents on record without recalling the order which denied placing of the documents on record in the first place. Factual background, whatever it may be, will not override the judicial proprietary of the Adjudicating Authority, the reason being that until and unless there happens to be an independent order passed on IA(IBC)/222(CHE)/2024, thereby reviving that the Company Petition (IB) No.40/2023, the I.A. filed by the Respondent praying for taking certain documents on record, should not be taken up for consideration, the same IA should have been independently decided only after an order is passed on the recall application, in the light of the Judgment of this Tribunal as rendered on 23^rd February 2024. Since the Learned Adjudicating Authority has adopted a reverse procedure, it follows that there is no independent adjudication based on reasoning for allowing IA(IBC)/222(CHE)/2024.

We are of the view that, the Impugned Judgment under challenge does not satisfy the test of judicial proprietary and hence it calls for an interference while exercising our appellate jurisdiction under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Heard the Learned Counsel for the parties. Both the Counsels agreed that in case the matter is decided and disposed off finally today itself, they may not have any grievances.

Owing to the aforesaid statement as made by the respective Counsels for the parties, we venture into deciding the case now itself. We are in disagreement with the pattern adopted by the learned Adjudicating Authority for deciding the IA(IBC)/222(CHE)/2024, that is, first allowing the IA(IBC)/687(CHE)/2024 for taking the documents on record and then deriving the reasoning of the same as to be the basis of consequent order on the recall application IA(IBC)/222(CHE)/2024 which is impermissible under procedural law. Hence, the Impugned Order would stand quashed. The matters would stand remitted back to the Learned Adjudicating Authority [National Company Law Tribunal, Division Bench, Chennai] for the purposes of reconsidering the respective IAs exclusively on merit and it goes without saying that in view of what has been observed IA(IBC)/222(CHE)/2024 will have to be independently decided first before taking a call on IA(IBC)/687(CHE)/2024 filed by the Respondent for taking the documents on record.

Considering the age of litigation, it is hoped and trusted that the Learned Adjudicating Authority, National Company Law Tribunal, Division Bench, Chennai will decide the aforesaid IAs, as directed above, as expeditiously as possible, but not later than two months from the date of presentation of the certified copy of this Judgment.

Subject to the above, the Appeals would stand Allowed.