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Judgment
Ramalingam Sudhakar, President Member
Prayer in this application reads as follows:
(a) Allow the application, allocating different bench for hearing the abovementioned matter in the interest of justice.
And/or
(b) Pass any such Order(s) as this Honble Tribunal may deem fit in the interest of justice
Mr. Shashank Deo Sudhi, Ld. Counsel for the Applicant herein/Respondent-Corporate Debtor in the main Petition appears physically. Mr. Mohit Nandwani, Ld. Counsel for the Respondent in this application appears physically.
This request of the Applicant/Respondent-CD in the main Petition under No. C.P. (IB)/903(MB)2019 was heard on several dates before the transfer application.
As a prelude to the present litigation, it was informed by the Ld. Counsel for the Respondent that this Applicant/Corporate Debtor was a stressed company and subjected itself to a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, which got rejected in 2005. The Applicant/Corporate Debtor went on appeal to the Appellate Authority, who also rejected the appeal in 2016 and further appeal to Honble High Court was dismissed in 2016 and appeal to Honble Supreme Court was dismissed in the year 2023.
In the meanwhile, the Respondent in the present application/Financial Creditor in the main Petition initiated Section 7 Proceedings and filed C.P. (IB)/903(MB)2019. In this proceeding, notice was issued to the Corporate Debtor/present transfer applicant.
The admission order was passed on 24.09.2019 which is alleged to be ex parte by the Corporate Debtor and therefore, he filed MA-522/2020 for recalling the ex parte order which was dismissed by the NCLT. Against which an appeal was preferred by the Corporate Debtor before the Honble NCLAT under Company Appeal (AT) No.879/2023. The Honble NCLAT by order dated 26.09.2023 set aside the order of admission and directed the Corporate Debtor to submit the reply within a time frame and to proceed expeditiously. On that basis of order, it is not in dispute that the Corporate Debtor/Applicant herein complied with the order of the Honble NCLAT on 07.10.2023.
In addition to filing the reply, it is the case of the Applicant/Corporate Debtor that the Section 7 Petition is barred by limitation so he filed an IA-4676/2023 to first decide on the question of limitation and thereafter pursue the petition, which was initially rejected by the NCLT in its proceedings dated 18.10.2023 as infructuous recording the order passed by the Honble NCLAT. The order dated 18.10.2023 reads as follows:
ORDER
Mr. Suyesha Kakarla, Ld. Counsel for RP present. Mr. Shashank Deosudhi, Ld. Counsel for the Respondent present.
The Honble NCLAT, vide its order dated 26.09.2023 set aside the order dated 24.09.2019 passed by this Tribunal, and directed this Tribunal to hear the CP afresh.
The Registry is directed to issue notice to the original financial creditor to appear before this Bench on the next date of hearing along with pleadings three sets of the pleadings.
Ld. Counsel for the Corporate Debtor informs that the records pertaining to the pleadings are not available and when the registry was approached, the complete set was not available there at all. The Financial Creditor is directed to serve copy of records pertaining to the pleadings, including petition, to the Corporate Debtor on e-mail, and also file two sets thereof with the Registry.
List this matter on 02.11.2023.
IA 4676/2023
MA 3891/2019
IA 1319/2023
In view of the order passed by the Hon'ble NCLAT setting aside the order dated 24.09.2019, nothing survives in these applications, accordingly, the aforesaid IAs becomes infructuous.
Since the IA-4676/2023 was closed, the Tribunal permitted the Corporate Debtor to file restoration petition, which admittedly has been filed on 07.01.2024 under Restoration Application No.06/2024 and it is pending before the NCLT, Mumbai.
Be that as it may, in the course of proceedings before the Honble NCLAT, the NCLT also passed an order for liquidation, and subsequently the Liquidation Order became ineffective pursuant to the order of Honble NCLAT setting aside the admission order and the issue was at large, to be considered on all aspects of Section 7 Admission application.
In this background, the present transfer application has been filed.
While it is the contention of the Ld. Counsel for the Applicant/Corporate Debtor that the NCLT, Mumbai is showing great prejudice and undue hurry in hearing the matter without considering all aspects of objections filed by the Corporate Debtor and by the conduct of the nature of proceedings of the NCLT, Mumbai, serious prejudice is caused and therefore the case should be transferred to another Bench.
On the contrary, Ld. Counsel for the Respondent refers to following orders passed by the Honble NCLT on dated 04.01.2024 and
11.01.2024, which read as follows:
Order dated 04.01.2024 passed by Court-I, Mumbai Bench, NCLT in C.P. (IB)/903(MB)2019:
ORDER
IA 5639/2023 in C.P. (IB)/903(MB)2019
1) Ld. Counsel for the Financial Creditor and Mr. Shashank Deosudhi, Ld. Counsel for the Corporate Debtor are present.
2) The present Interlocutory Application has been filed by the Corporate Debtor challenging the tenability of the Affidavit in Rejoinder filed by the Financial Creditor contending that the Financial Creditor subsequently introduced financial statements of the Corporate Debtor and OTS related documents through the said Rejoinder, and such Rejoinder in Reply to the Reply of Applicant/ Corporate Debtor cannot be permitted in a routine manner. This Bench finds that the NCL T Rules permit submission of Rejoinder with the leave of this Court and it does not postulate that such leave has to be prior in time. Further, these documents are in nature of Financial statements and OTS related documents, which belongs to the Corporate Debtor and in complete knowledge of the Corporate Debtor. Hence, these documents do not prejudice the Corporate Debtor, even if the same are taken on record. Accordingly, this Bench grants the leave of this Tribunal and takes on record the Rejoinder filed by the Applicant.
3) In view of the decision of the Hon'ble Apex Court in the case of Dena Bank wherein it has been stated that pleadings placed on record by any of the Parties prior to passing of the order has to be taken into consideration in that view of the matter, we are of the considered view that the present Interlocutory. Application sans merit; accordingly, the same is disposed of as dismissed. The Affidavit in Rejoinder filed by the Financial Creditor is taken on record.
4) Heard both sides extensively for a considerable time. However, Ld. Counsel for the Corporate Debtor submits that earlier he had filed an Applicant bearing lA No. 4676 of 2023 , challenging th ~ tenability of the Company Petition on Limitation Ground, and further submits that this Bench inadvertently, dismissed the same on 18.1 0.2023 ; thus, the Counsel orally prays for restoration of that Application. However, this Bench finds that the said application was disposed of in concurrence of both the parties on the proposition that the Limitation aspect can be argued in the reply to the main Application itself by the Corporate Debtor and its right to contest the main Application on ground of Limitation does not get prejudiced. Accordingly, this Bench persuaded the Ld. Counsel for the Corporate Debtor to argue on Limitation as well as Merits, however he remained adamant that he would press for restoration of the IA 4676 and shall argue on Limitation ground under that only. This Bench cannot comprehend the intent behind this insistence. However, Both the Counsel argued the matter on limitation also and on its merit.
5) Nonetheless, considering the insistence of Ld. Counsel for the Corporate Debtor, this Bench considers it appropriate to adjourn this matter to 11th January, 2024 so that he can move appropriate application for restoration of IA No. 4676 of2023, thereby mentioning all the facts. No further time shall be granted.
6) Counsel for the Corporate Debtor shall be granted Ten (1 0) minutes again on the next date of hearing to argue their submissions on the Limitation and the Counsel for Corporate Debtor has undertaken to have the said application on board by next date of hearing.
7) Ld. Counsel for the Financial Creditor seeks leave of this Bench to appear through video conferencing. Leave as prayed is allowed. Company Petition Stand over to 11.01.2024, for further consideration and hearing. This will be treated as last opportunity.
Order dated 11.01.2024 passed by Court-I, Mumbai Bench, NCLT in
C.P. (IB)/903(MB)2019:
ORDER
Mr. Mohit Nandwani, Advocate appeared for the Petitioner.
Mr. Shashank, Advocate appeared for the Respondent.
Learned Counsel for the Corporate Debtor was heard for 20 minutes in the previous hearing and today also he was argued for another 10 minutes. Thereafter, the Ld. Counsel informed this Bench that an application has been filed before Principal Bench for transfer of present petition from this Bench.
Considering the strategy of the Corporate Debtor to delay the matter, this Bench considers it appropriate to place on record the facts pertaining to developments in this case. The Learned Counsel started his arguments on 4 legal point part of those points were already deliberated and argued in the earlier hearing itself. Thereafter in the middle of his arguments learned Counsel informs this bench that they have filed application before Principal Bench seeking the change of the Bench. It may be noted that the account of the Corporate Debtor is overdue since 2002, and the Resolution of stress of the Corporate Debtor is already delayed for so long for one reason or another on account of persistent litigation in the matter. The Corporate Debtor was already under Liquidation, when the Order to set aside Admission Order on ground of non-service of initial notice, came to be passed by Hon'ble NCLAT. This is second round of attempt by the Petitioner to seek resolution in terms of provisions of IBC. The intent and object of the Court is to cure the stress and it's not a recovery proceeding which by someway or other being avoided by the Corporate Debtor.
In the interest of proper adjudication of application for transfer of case from this Bench pending before Principal Bench, a copy of the order may be placed before the Hon 'ble Chairman to take necessary decision on the conduct of the Corporate Debtor. In view of request made by the Corporate Debtor, we are adjourning the matter to next date. In the meantime, the Corporate Debtor may seek to obtain stay of proceedings from the Principal Bench, failing which the matter shall be proceeded for further arguments and consideration.
List this matter on 01.02.2024 for further consideration.
I find that the intention of the NCLT, Mumbai Bench appears to be that while it is the grievance of the Corporate Debtor that the Admission Order should be dismissed on the ground of limitation, an opportunity should be given to the Corporate Debtor to argue on limitation as well as on merits and each IA, more particularly IA-4676/2023 on limitation alone cannot be heard and decided and that will unnecessarily delay the process. The issue for consideration at the time of admission is on all aspects of the merits of the case which can be heard including the issue of limitation. This the Corporate Debtor should be well aware. The party ought not to insist that only his application should be first decided and thereafter Section 7 Petition should be taken up for admission. This contention is not correct because limitation is one aspect of consideration for a case for admission under Section 7. The Tribunal has to proceed as per Code. Therefore, separate orders need not be passed in every application at the admission stage.
The NCLT, Mumbai Bench in Para-5 of its order dated 04.01.2024 granted permission to move an application for restoration and on the issue of limitation. Though there was no need for a separate application for limitation, the party has filed the same and numbered it and all of that has to be decided together and the time limit has been set because of the long delay that has happened. This is correct because of the fact that IBC is driven by timelines as has been again emphasised by the Honble Supreme Court in the cases of Swiss Ribbons Pvt. Ltd & Anr. Union of India & Ors WP(C) No. 99 of 2018, Innoventive Industries Ltd. Vs. ICICI Bank and Anr. (2018) 1 SC 407 and also recently in the case of Dilip B Jiwrajka v. Union of India Writ Petition (Civil) No. 1281 of 2021.
Therefore, the Court also granted the parties to make their presentation within a timeframe.
The Bench has also observed on 11.01.2024 that its intention is to cure the stress of the company and not as a recovery proceedings, which is in consonance with the Insolvency & Bankruptcy Code, 2016. NCLT, Mumbai Bench has also accommodated the Corporate Debtor when it requested for an adjournment on the ground of this transfer application being filed before the Principal Bench, NCLT.
From these proceedings, I am unable to find any good reason that the allegation of the grave prejudice that is stated by the Applicant. One other point, which is highlighted by the Ld. Counsel for the Applicant is that the Liquidation Order was passed in haste knowing fully well that the Honble NCLAT has passed an order on 26.09.2023. This contention is disproved by the Ld. Counsel for the Respondent stating that the order of the Honble NCLAT came to be passed on 07.09.2023 and it was uploaded on 10.10.2023. But that really does not make any difference today because that order becomes ineffective because of the order of the Honble NCLAT and the Section 7 Petition has been now restored back to file.
Therefore, the issue raised by the Ld. Counsel for the Applicant cannot be countenance for the purpose of transfer.
Accordingly, I find from the last proceedings of the NCLT, Mumbai Bench that there was no intention to cause any prejudice to the Applicant/Corporate Debtor but only to ensure that the case is taken up on a priority being a very old case on which several directions have been issued from the Principal Bench, NCLT to take up the old case and dispose of at an earlier date.
At this stage, Ld. Counsel for the Applicant seeks and his request should be considered by the Mumbai Bench, NCLT giving him sufficient time to argue his case so that he can present his case properly.
With this observation, the request for transfer is declined. The present Transfer Application stands disposed of with a direction to the Court-I, Mumbai Bench, NCLT to give sufficient opportunity to the parties.
Registry is directed to convey to the Court-I, Mumbai Bench, NCLT that the Transfer Application under No. TA (IBC)- 07(PB)/2024 is disposed of with a direction to the Mumbai Bench, NCLT to proceed with the matter on the next date of hearing.