M/s The Kerala Chamber of Commerce and Industry vs Adv. Tom K Thomas & Ors.

This IA has been filed by the Corporate Debtor in IBA/31/KOB/2020 under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rules 11 and 32 of the NCLT Rules, 2016 for the following reliefs:

IBA/31/KOB/2020 has been filed under Section 7 of IBC by Advocate Tom K.Thomas and 7 others for recovery of an amount of Rs. 23,21,69,637/- with interest from the Corporate Debtor M/s Kerala Chamber of Commerce and Industry. On 16.9.2020 when the matter came up for admission, Shri Shivsankar R Pancker appeared and took notice for the respondent and objected to the admission of this application raising the question of maintainability. He sought time to file an application to question the maintainability of the IBA 31/KOB.2020.

Now the aforesaid IA has been filed stating that the Single Member Bench cannot hear the IBC matters. He has sated that the constitution of Division Bench is mandated under the statute. He has stated that Section 419(3) of Companies Act, 2013 provides as follows:

The word “shall” has been given in the section, to say that it is mandatory, but the court may ascertain the real intention by analysing the object of the enactment. The object of Section 419(3) is to bring forth a range of skills in the adjudication of intricate corporate insolvency proceedings. Since the Tribunal is intended to serve the complex area of insolvency, revival and restructuring of the company, which requires specialised knowledge and expertise, it is of crucial importance that the decision is made jointly by a panel of at least two members who pool legal and relevant expert knowledge respectively. Learned counsel for applicant has referred to the decision of the Constitution Bench of the Hon’ble Supreme Court in its judgment in Union of India Vs R.Gandhi, Civil Appeal No.3067 of 2004 and the decision in Madras Bar Association Vs. Union of India, WP© No.1072 of 2013 in which it has been held

I have heard the arguments advanced by the learned counsel for the applicant/corporate debtor and have gone through the decisions referred to hereinabove. The order in the case of Indison Agro Foods Ltd. (supra) reads as under:

A bare reading of the above order makes it clear that when a matter is posted on 27^th August, 2020 before a Single Bench of the NCLT, Indore Bench at Ahmedabad, the learned counsel drew attention of the order passed by the Hon‘ble Apex Court in Writ Petition No.722 of 2019, wherein the Hon’ble Apex Court has directed it to be heard by a Bench comprising of a Judicial Member and a Technical Member. That appeal was disposed of requesting the President of NCLT, New Delhi to constitute a Bench comprising of Judicial and Technical Members. That order pertains to the case before the Hon’ble NCLAT and it relates to the particular case and is not a general order applicable to all cases pending before the NCLT Benches. The circumstances therein were different.

As far as the decision in Writ Petition (C) No.722/2019 with SLP © No.13402/2019(III) is concerned, when there was no Technical Member, the matter was heard by a Single Member Bench. However, when the Ministry of Corporate Affairs stated before the Hon’ble Apex Court, they have issued orders appointing a Technical Member in the Ahmedabad Bench, the Hon’ble Apex Court disposed of the WP© with a direction that the case of the petitioners be heard by a Bench comprising of Judicial as well as Technical Members. That case arose because of non-availability of a Technical Member at Ahmedabad Bench and that too the Hon’ble Apex Court did not held that the order in W.P © No. 722/2019 will be applicable to all the cases pending before the NCLT Benches.

As far as the Judgments in Union of India Vs. R.Gandhi and Madras Bar Association Vs. Union of India (supra) is concerned, it deals with the constitution of the NCLT and NCLAT Benches in the Country and who should be appointed as President/Members etc and their qualification, age, selection criteria etc.. The constitutional validity of Chapters IB and IC of the Companies Act has been challenged in those cases. The Hon’ble Apex Court upheld the decision of the High Court that creation of National Company Law Tribunal and National Company Law Appellate Tribunal and vesting in them the powers and jurisdiction exercised by the High Court in regard to company law matters, are not unconstitutional and the Hon’ble Apex Court declared that Chapters 1B and 1C of the Act as presently structured, are unconstitutional for the reasons stated in the preceding para. However, Parts IB and IC of the Act, may be made operational by making suitable amendments, as indicated above, in addition to what the Union Government has already agreed in pursuance of the impugned order of the High Court providing for constitution of National Company Law Tribunal (`NCLT' or `Tribunal') and National Company Law Appellate Tribunal (`NCLAT' or `Appellate Tribunal'). In those cases, even though the constitution of the Bench has been referred to as Judicial and Technical, the issue raised by the applicant herein that Judicial Member alone cannot hear the case is not mentioned anywhere in the judgment. The facts and circumstances of the instant case is not similar to the facts and circumstances of the cases cited by the learned counsel for the applicant.

8.; In this connection, it may also be pointed out here that on the transfer of the then Technical Member to Hyderabad Bench of NCLT, the Hon’ble National Company Law Tribunal, Principal Bench, New Delhi issued an order dated 1^st June, 2020 with the approval of the President, which states:

Section 419(3) of the Companies Act is quoted as under:

A bare reading of the aforesaid provisions of law as well as the order of the NCLT, Principal Bench, which has been issued with the approval of Hon’ble President, makes it clear that even though the Bench of NCLT consists of two members, it shall be competent for the Members of the Tribunal authorised in this behalf to function as a Bench, by a Single Judicial Member and exercise the powers of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the President may by general or special order specify. In regard to constitution of special Bench for NCLT, Kochi the Hon’ble President has issued the order under Section 419(3) of the Companies Act, 2013 authorising the Judicial Member to function as such. It may also be mentioned that by the aforesaid order, no direction is issued that the Special Bench of Member (Judicial) is not empowered to take up cases under the I.B.Code, 2016. Hence, in my considered view, the contentions raised by the applicant herein that a Single Member Bench cannot hear the IBC matters has no foots to stand and is liable to be dismissed. Hence, I do not find any reason to entertain the present IA filed by the Corporate Debtor, as it may further delay the CIR Process. Hence the I.A. No. 159/KOB/2020 stands dismissed, however without costs.