AI Structured Summary
Not yet generated for this judgment
Judgment
ORDER
Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):
The Appellant ICICI Bank Ltd. in the capacity of being the Financial Creditor had instituted the proceedings of Company Petition (IB) No. 145 / 7 / HDB / 2021, being the proceedings drawn under Section 7 of I & B Code, 2016, to be read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against the Respondent (the Corporate Guarantor).
The said Company Petition has been rejected by the Ld. Adjudicating Authority vide Para Nos. 13 to 16 with the following observations:
``13. Thus, it quite clear that the valuation of the share given as security, the true value of which is the bone of contention in the present proceedings is in now sub judice, having been directed by the Hon’ble High Court of Telangana to revalue them by the Debt Recovery Tribunal, Hyderabad.
14.Needless to say, that until and unless proper valuation of the shares is ascertained, whether or not the liability of the respondent to pay the ``debt’’ claimed as due and defaulted cannot be ascertained. Therefore, it is in appropriate at this stage to conclude ``default’’ in payment of the debt by the respondent.
15.That apart, if this Company Petition is disposed of in favour of the Financial Creditor, then moratorium will come into operation, consequently, the proceedings before the Debt Recovery Tribunal, Hyderabad will come to stand still pending moratorium, thus renders the order passed by the Hon’ble High Court of Telangana, in Writ Petition referred, supra infructuous.
16.Therefore, in the light of peculiar facts and circumstances of the case and in the interest of justice we pass the following order: We hereby reject the Company Petition. However, giving liberty to the Financial Creditor to approach this Tribunal upon ascertainment of the value of the shares in terms of the order of Hon’ble High Court of Telangana in Writ Petition Nos. 28497 and batch, as per law. With these observations the petition is disposed of.’’
Primarily, the ground, taken by the Ld. Tribunal for closing the Company Petition while reserving the rights of the Appellant to revive back the proceedings of the Company Petition, was that it is necessary to ascertain the issue of valuation of shares, the true value of the shares of Karvy Data Management Services Limited (KDMSL) which were held by the FC as Security against the Loan and have since been invoked and adjusted against the Loan by them, that adjudication on value of such shares will be against the orders of Hon’ble High Court of Telangana which in Writ Petition Nos. 28497, 28509, 28510, 28514, 28515, 28517, 28519, 28521, 28533, 28548 and 28557 of 2019 had directed DRT to decide on the same issue and that, until and unless the issue of valuation of shares is decided by the Debt Recovery Tribunal as directed, by the Hon’ble High Court of Telangana, the exact liability of Respondent (Corporate Guarantor), to pay the debt defaulted by CD cannot be determined. Accordingly, Ld. Tribunal directed to close the Company Petition, subject to the aforesaid liberty, to revive the proceedings of the Company Petition, upon determination of the value of the aforesaid shares in terms of the Orders of Hon’ble High Court.
Accordingly the issue, which falls for consideration before this Appellate Tribunal is, as to whether at all, the issue of valuation of shares, was the subject matter of consideration before the Hon’ble High Court of Telangana in the aforesaid Writ Petitions and whether the Order of Hon’ble High Court dated 10.03.2021 contained any such directions pertaining to the valuation of shares to be done by DRT. It has been observed in the impugned order that valuation of the said was directed to be decided by the Debt Recovery Tribunal before whom various Interlocutory Applications were pending for consideration. However, the directions issued by Hon’ble High Court as recorded in Para 6 of the Judgment are to the effect that, all Interlocutory Applications, which are pending before the DRT in O.A. No. 833 / 2019, are remitted back to be considered in the light of the directions issued by the Hon’ble High Court of Telangana, in its order of 10.03.2021.
There are only two issues which are required to be considered by this Appellate Tribunal; Viz.
Whether the Ld. Adjudicating Authority closed the Company Petition proceedings on the ground, that the issue of valuation of shares was the subject matter of consideration in a Writ Petition.
Whether the Writ Petition filed before Hon’ble High Court, in the subject matter arising out of an attachment prior to the decree as rendered in the proceedings under Section (25) & 22 of Recovery of Debts & Bankruptcy Act, 1993, in O.A. No. 833 / 2019, also contained valuation of the said shares as a subject for adjudication. The first issue answers itself Para 16 of impugned order shows that the Section 7 Application has not been examined on merits and have been closed only on account of fresh valuation of shares to be done by DRT. As far as the second issue is concerned, in reading of the Judgment of Hon’ble High Court makes it clear that the Writ Petitions never dealt with any of the issues pertaining to the valuation of shares. The directions given by the Hon’ble High Court of Telangana in Para 8 of the Judgment dated 10.03.2021, is extracted hereunder:-
``8. Learned Standing Counsel for the 2nd respondent-Bank has complained that the petitioner may dispose of the properties, as the order in I.A. No. 5810 of 2019 is set aside. As such, the order in I.A. No. 5810 of 2019 shall continue to be in force till the said application is decided on merits . In view of the facts and circumstances and over all view of the case, we deem it appropriate to direct the parties to maintain status quo as on today in all respects with regard to A to E schedule properties till the disposal of all the I.As by the Tribunal.’’
Ld. Counsel for the Appellant contends that the aforesaid judgment of 10.03.2021 did not contain any such direction with regards to the assessment of valuation of shares to be made by the DRT before whom the Interlocutory Application was directed to be decided in the light of the directions issued by the Hon’ble High Court in the batch of Writ Petitions decided on 10.03.2021. He has further contends that closure of the Company Petition without adjudicating the same on merits, was rather a misnomer and contrary to the directions given by the Judgment of 10.03.2021, because, that was not even intended by the Hon’ble High Court which issuing the order dated 10.03.2021, because in the said order neither the valuation of shares was an issue nor there was a direction of any nature as such to go into the issue of valuation of shares, by the DRT.
In that eventuality, mere the pendency of the DRT proceedings cannot be a reason for closure of Section 7 application. First, there has to be a specific direction for determining the valuation of shares by Hon’ble High Court and further it is an issue which is to be exclusively decided by the DRT in the OA proceedings which are pending consideration before it.
The directions given therein for deciding the Interlocutory Applications as referred to in Para 6 of the Judgment of 10.03.2021, cannot be taken as to be the basis for not to proceed with the proceedings under Section 7 of the I & B Code, 2016, which was the subject matter of consideration before the Ld. Adjudicating Authority because that was to be decided independently.
In fact, a perusal of the impugned order, which is under challenge will reveal that the Company Petition has not at all been touched or decided on merits and that, it has been rejected simpliciter with the right reserved for the Appellant to re-open the issue, upon the determination of valuation of shares, which was an issue artificially culled out by the Ld. Tribunal, which was not even prevailing either in the issue before the Hon’ble High Court of Telangana or even in the Judgment rendered by the Hon’ble High Court of Telangana on 10.03.2021.
In that eventuality, the Appellant cannot be deprived of his right to proceed with the proceedings under Section 7 of the Code which has to be independently decided on its own merit. Closing of the proceedings under Section 7 of the Code, on the premise that, the valuation of shares has to be decided first by the DRT as directed by the Hon’ble High Court is not at all an issue that involved consideration in the Judgment of the Hon’ble High Court dated 10.03.2021.
In that eventuality, the proceedings of the Company Petition cannot be rejected, only on the said premise as above and it has to be decided on its own merit as per law.
In view of the aforesaid, since the Judgment of the Hon’ble High Court had got nothing to do with the issue of valuation of shares as it was not even an issue involved in the Writ Petition, the Company Appeal (AT) (CH) (INS) No. 77 / 2024 would stand allowed and the impugned order dated 04.12.2023 would stand quashed. The proceedings of the Company Petition CP (IB) / 145 / 7 / HDB / 2021 is revived back to its number, to be decided on its own merits.