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Judgment
O R D E R
Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial):
Brief facts of the case:
Which engages consideration in the instant Company Appeal (AT) (CH) (INS) No. 346 / 2024, which has been preferred by the Appellant, the Personal Guarantor, by invoking the Provisions contained under Section 61 of the Insolvency and Bankruptcy Code, 2016, is to the Impugned Order dated 23.08.2024, which was passed by the learned National Company Law Tribunal, Chennai in IA No.1437/2024 in CP(IB)/57/2024. As a consequence flowing from the judgment impugned, the aforesaid IA No.1437/2024, in which the Appellant has questioned the aspect of ``territorial jurisdiction’’ of the learned Adjudicating Authority, to deal with the proceedings, had been rejected.
The question, as it was involved in the said case, it was to the effect that the Corporate Debtor who is said to have obtained a cash credit facility, from the members of the Consortium Banks i.e. Respondent No.1, of which the Respondent No. 1 was the Lead Banker of the Consortium, and in the said loan, admittedly the Appellant had extended his Personal Guarantee. Consequently, he contends that, in the capacity of being the Personal Guarantor he happens to be the Promoter and a whole time Director of the Corporate Debtor. Owing to the subsequent development, which took place later on, it was found that the loan advances, which were extended on 29th June 2017, it was declared has to be a non-performing assets by Respondent No.1, because of the implications of Para 2.2.1 of the RBI Master Circular on Income Recognition Asset Classification, provisioning and other related matters.
It was based upon the aforesaid classification of the loan account of the Corporate Debtor, whereby the loan account was declared as NPA on 28.09.2022, as a consequence thereto, a Demand Notice was issued under Section 13(2) of the SARFAESI Act, 2002, on 20.09.2023.
There was a corresponding demand, which was raised under (Sub Section 4) of Section 95 of the I & B Code, 2016, for the purposes of initiation of the IRP Proceedings, by invoking provisions contained under Section 95 of the Insolvency and Bankruptcy Code and the said demand notice, which was thus issued on 30.11.2023, wherein it was observed that, the loan advances, which has been taken by the Corporate Debtor on 29.06.2017, from the Consortium of the Banks, it was illegal. Because the Corporate Debtor’s Loan Account, was already declared as NPA on 28.09.2022 by Respondent No.1, and when subsequently on 02.12.2023, a notice of possession under Section 13(4) of the SARFAESI Act of 2002 was issued to the Appellant.
In the aforesaid backdrop the Respondent No.1, since having being determined that there was an admitted due, which was payable by the Corporate Debtor, its based on that, on 16.02.2024, the Respondents had filed an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016, praying for initiation of CIRP Proceedings as against the Corporate Debtor, which was numbered as Company Petition (IB) 99/2024. It would be apt to clarify at this stage, that by the date of filing of this Appeal, the Corporate Debtor has not yet been admitted into, to face the CIRP proceedings and also the application for initiation of the proceedings under Section 95, was filed by the Respondent No. 1, which was pending adjudication before the learned National Company Law Tribunal, after being registered as CP (IB) No. 57 / 2024 for initiation of CIRP proceedings.
In these proceedings, the plea has been taken by the Appellant for the purposes to justify the attempted stand taken by the Appellant, to question the jurisdiction of the National Company Law Tribunal, Chennai, for the purposes of territorial jurisdiction for initiation of proceedings under Section 7, contending thereof that, since the Personal Guarantor was the resident of New Delhi, all the proceedings ought to have been initiated before the National Company Law Tribunal, New Delhi and thus, it was argued that the National Company Law Tribunal, Chennai, would lack territorial jurisdiction to deal with the proceedings.
The Respondent No. 1 had also filed an application, being CP (IB) 57/2024 under Section 95 of the I & B Code, 2016, before the National Company Law Tribunal, Chennai on 06.03.2024. It is these proceedings under Section 95 of the I & B Code, 2016, which is in dispute on the issues as it was raised by the Appellant on the ground that, these Proceedings would not be maintainable before the National Company Law Tribunal, Chennai, due to lack of territorial jurisdiction and on the premise, that the Appellant, the Personal Guarantor, since being a resident of New Delhi, the proceedings should have been drawn before the competent National Company Law Tribunal, New Delhi, as the National Company Law Tribunal, Chennai, as it will have no jurisdiction.
On the aforesaid Application as preferred by the Appellant, which was numbered as IA/1437/2024, the 1st Respondent, when they had initiated the proceedings under Section 95 of I & B Code, 2016, on 20th March 2024, an IRP was appointed in respect of the Appellant, it was proposed by the 1st Respondent to complete the process contemplated under Section 97 of the Code, which since being mandatory in nature for the purposes of prior to initiation of the proceedings under Section 95 of I & B Code. The said Application stood decided by an order of 20.03.2024 appointing an RP as against which, the Appellant has filed the Comp. App. (AT) (CH) No.143 / 2024, before this Tribunal challenging the aforesaid order as rendered in CP (IB) No.57/2024.
At the initial stage, when the Appellant has questioned the order of appointment of the IRP, in a proceedings under Section 95 of I & B Code it was at the stage when the proceedings under Section 95 of I & B Code, has already reached too, the stage of Section 97 of I & B Code, at that stage, admittedly at first available opportunity, the question of territorial jurisdiction was not agitated, till Appellant, had initiated the instant proceedings by filing IA No.1437/2024. It is the case of the Appellant that, the 2nd Respondent at a much belated stage is said to have filed IA No.1189/2024 in the aforesaid Company Petition, preferred under Section 95 of Insolvency and Bankruptcy Code, to bring on record the report which was filed under Section 99 of the Insolvency and Bankruptcy Code, for making recommendations for a direction for initiation of the CIRP Proceedings.
For reasons best known, though admittedly not maintainable, yet as against the Order, passed in the proceedings under Section 95 of I & B Code, a Writ Petition was preferred by the Appellant before the Hon’ble High Court of Judicature at Madras, being Writ Petition No.14792 of 2024, under Article 226 of the Constitution of India, whereby challenging the validity of the Insolvency and Bankruptcy Board of India, Circular No. IBBI/II/62/2023 dated 21.12.2023, contending thereof that the said Circular dated 21.12.2023, happens to be in violation of the provisions contained under Sections 97(3), 97(4) and 97(5) of I & B Code, 2016. The challenge given to the validity of the said Circular of 21.12.2023 is still pending consideration, before the Hon’ble High Court of Judicature at Madras.
The Appellant has been maliciously to delay the proceeding had been engaging himself in multifarious litigations as under:
At first stage, he filed a Writ Petition challenging the validity of the Circular of 21.12.2023, as issued under the IBBI Regulations.
The Appellant has simultaneously challenged the Notice issued under Section 13(2) of the SARFAESI Act, before Debts Recovery Tribunal, and the consequential Notice of possession too under Section 13(4) of the SARFAESI Act, by initiating the proceedings under Section 17 of the SARFAESI Act on 16.01.2024, which was numbered as SA No.2/2024. The Debts Recovery Tribunal in the aforesaid Proceedings of SA No.2/2024, had granted an interim order on 19.08.2024, in the nature of status quo, which is still in operation. But, however, later on, when the proceedings of SA No.2/2024, was carried further, the Judgment on the same has been reserved on 17.09.2024.
As far as the controversy at hand in the instant Appeal is concerned, we may not be much concerned with the proceedings of the Writ Petition No.14792/2024 or with the proceedings SA No.2/2024, preferred under the SARFAESI Act, because here in the instant Company Appeal under Section 61 of I & B Code, 2016, there is a limited question, which has been agitated by the Appellant and his counsel by filing IA No.1437/2024, before the learned NCLT, contending thereof that, the National Company Law Tribunal, Chennai, suffered from the bar of Territorial Jurisdiction and that bar of Territorial Jurisdiction, was being attracted simpliciter on the ground that, the Appellant who happened to be the Personal Guarantor, since was the Resident of New Delhi and hence the Jurisdiction of the National Company Law Tribunal, Chennai, would be barred, owing to his place of residence exclusively. This Application of the Appellant, which was considered by the Learned National Company Law Tribunal, Chennai, it stood rejected by the Impugned Order of 23.08.2024, which is impugned order under challenge in the instant Company Appeal. As far as the question of the jurisdiction is concerned, the statute is quite in its clear terms under Section 60(1) of the Insolvency and Bankruptcy Code, as provided, that the jurisdiction to sue in relation to the proceedings contemplated under Insolvency and Bankruptcy Code, would be the place where the Registered Office of the Corporate Debtor is located. Relevant Provision of Section 60(1) and (2) of I & B Code, 2016, are extracted hereunder:-
``(1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located.
(2)Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or 1 [liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal.’’
More important, for the instant Appeal, would be the substitution as made to Sub Section 2 of Section 60, by way of substitution by Act No. 26 of 2018, which elaborates the aspect of territorial jurisdiction aspect.
The provisions of Section 60(1) as aforesaid, had specifically provided that, in any Insolvency Resolution Proceedings or of Liquidation of the Corporate Debtor, the Corporate Debtor and even the Personal Guarantor for that purpose, therefore, shall have a right to sue or be sued before the National Company Law Tribunal, which has got a territorial jurisdiction, and that aspect of territorial jurisdiction, would be determined exclusively on the basis of the location of the Registered Office of the Corporate Debtor and not otherwise, nor any other parameter could be made permissible as the provision carves out no exception for that matter. The Legislature with its clear intent had chosen the place of suing, has to be the place where the Registered Office of the Corporate Debtor is situated. Because, the logic is that, invariably in all the proceedings, which are held either under Section 9, under Section 7 or even under Section 95 of the I & B Code, 2016, where CIRP proceedings could be initiated invariably, in all these proceedings, the other party to the proceedings the Corporate Debtor would be variably resident of different places of the country and even abroad, thus invariably in the sense, they would be resident of different places and as such, the logic behind it is that, wherever in a proceeding, which are drawn under Section 7, 9 or 95 of the I & B Code, 2016, in the cases where other party to the proceedings, there is always a greater possibility of them to be a resident of some other place, thus logically, the appropriate place which has been determined for suing, has to be the place of the Registered Office of the Corporate Debtor, which would be common in all cases and would provide uniformity on the issue of place of suing, and is a safer mode provided by the Legislature itself, so that the multiplicity of the proceedings and inconvenience of the litigants could be avoided. Its because of that, under Sub Section 1 of Section 60 of the Insolvency and Bankruptcy Code, the statute in its clear term has not provided any other option, to any of the parties to the proceedings, to agitate the question of jurisdiction of the proceedings of Corporate Insolvency, if it is initiated it should at the registered place of the Corporate Debtor, which is admitted in the instant case, was Chennai.
In order to carve out an exception, the Learned Counsel for the Appellant has attempted to extend his argument from the perspective of provisions contained under Section 179 of the Insolvency and Bankruptcy Code, wherein it has provided that the learned Adjudicating Authority, in relation to the insolvency matter of individual and for the recovery against the firms, it shall be the Debts Recovery Tribunal, which would be having territorial jurisdiction for the places where the individual Debtor actually and voluntarily resides, the Appellant should be conscious of the fact that, as far as the argument extended from the context of Section 179 of I & B Code, 2016 is concerned, the recognition of the territorial jurisdiction therein has been carved out in the context of the proceedings which are held under Debts Recovery Tribunal, and not with regards to the Tribunals, which are created under the Insolvency and Bankruptcy Code. Section 179 has got its independent existence and it should not be misunderstood and misplaced in its reading by making it applicable in context of the provisions contained under Section 60 of the Insolvency and Bankruptcy Code, which is altogether distinct and exclusive in its application. The learned Adjudicating Authority in the instant case, while dealing with this issue has dealt with the observations, which has been made while dealing with the definition of the `Corporate Person’’, in context of its Application to Section 60 of Insolvency and Bankruptcy Code, it has been aptly observed that the ``Corporate Person’’, for the purposes of Insolvency Proceedings, has been defined as to be a Company in its Clause 20 of Section 2 of the Companies Act and if the said definition is read in context of Section 60, the ``Resolution Process’’, as had to be initiated at the place where the Registered Office of the Corporate Debtor is situated and the said principle has already been settled by in the Judgment of State Bank of India v. Mahendra Kumar Jajodia Comp. App. (AT) (Ins) No.61 / 2022, wherein it has been observed that when a particular case is not covered under Sub Section 2 of Section 60, the Application of place of suing as referred to Section 60(1) would be the absolute field which would be governing the aspect of territorial jurisdiction and as such in the instant case, where Section 95 of I & B Code, 2016, proceedings would be drawn, it would be the jurisdiction where the Office of the Corporate Debtor is situated. This aspect is not res-integra has been settled in various judicial precedents.
As already observed that Section 179 of I & B Code, 2016, should not be misunderstood by the Appellant to be interblended to be attracted to dilute Section 60(1) of I & B Code, 2016, owing to the fact that apparently from the explicit language of the two provisions of Section 60 and Section 179 of the I & B Code, 2016, they have got a different and independent implications and have divergent applicability and object, altogether and particularly when the law stands governed by the provisions contained under Section 60(1) of I & B Code, 2016, and the Section 179, would not be attracted to be borrowed, when law itself is self-contained answer on the issue. The Learned Counsel for the Appellant had made reference to a Judgment rendered by the Hon’ble High Court of Judicature at Madras as reported in (2023) 3 MLJ 552 Rohit Nath v. K Hana Bank Ltd., Mylapore, Chennai and particularly, he has referred to Para 4 of the said Judgment which is extracted hereunder:
``4. We have heard the rival submissions made on behalf of either side and perused the material records of the case. Upon consideration of the same, the following points arise for consideration:-
(i)Whether NCLT alone has jurisdiction in matters of insolvency resolution and bankruptcy process for personal guarantors (to corporate debtors) in view of Section 60(1) of The IBC?
(ii)Whether in view of the filing of the insolvency resolution process against the corporate debtor, the pending proceedings in I.B.C. No. 1 of 2022 before the DRT is to be transferred to the NCLT in view of Section 60(3) of The IBC?
(iii)To what reliefs, the parties are entitled?’’
The Para 4 as extracted above, it was rather based upon the consideration of the submissions made by the learned counsels, that the Hon’ble High Court of Madras had framed certain questions for determination pertaining to the National Company Law Tribunal jurisdiction, in the matters of Insolvency and Bankruptcy processes under Section 60(1). Para 4 itself is not a law decidendi, it was rather only a question which was referred to be answered which according to the Appellant the same was answered by the Hon’ble High court of Madras in its Para 6.9, which is extracted hereunder:
``6.9. The Kerala High Court, in Hotel Asoka v. Commercial Tax Officer-1, Dept of Comml. Taxes (2008) 1 KLJ 419, held as follows:
"31.In Statutory interpretation by Francis Bennion, it is said, punctuation forms part of an Act, and may be used as a guide to interpretation. Punctuation is generally of little weight, however, since the sense of an Act should be the same with or without punctuation. It is further said, that punctuation is a device not for making meaning, but for making meaning plain, its purpose, as Bouvier said, is to denote the stops that ought to be made in oral reading, and to point out the sense. Drafters are instructed that they should on no account, allow the meaning to turn, on the presence or absence of a punctuation mark. The good drafter consciously drafts every clause with an eye to what its sense would be if all such marks were removed.
32.Crawford in his book on "Statutory construction" says that when a statute is careful by punctuation, there is no doubt as its meaning, weight should undoubtedly be given to punctuation. Punctuation, therefore, certainly has its uses, but tendency of courts is not to allow it to control the plain meaning of a text, this is because the draftsman very often does use punctuation marks properly.
34.The use and purpose of using a 'semi-colon' in a statute is explained by Vepa P. Sarathi in his book Interpretation of Statutes. It is said 'semi-colon' is an important and interesting mark to use. It is stronger than a comma, which is used more for a pause; but the semi colon does not imply a complete break like the full stop. It only makes a partial break and is at the same time a link between sentences appearing on the subject. It often implies that what follows at least partially explains and amplifies the sentence that comes before it. It is often used instead of a comma when it is followed by "and" or "or" or "but".
35.The Advanced Law Lexicon by P. Ramanatha Aiyer defines the punctuation semicolon as "According to well established grammatical rules, this is a point only used to separate parts of a sense more distinctly than a comma.
36.The semi-colon and the comma are both used for the same purpose in punctuation, namely to divide sentences and parts of sentences, the only difference being that the semicolon makes the division a little more prolonged than the comma.’’
The said Judgment if exclusively Para 8 is taken into consideration and the ultimate conclusion, which has been arrived at, it was that it was dealing with a distinct aspect, it was with regards an aspect of the sustainability of a Civil Revision and its consequential effect of jurisdiction in relation to the DRT Proceedings and Bankruptcy. In fact, the Hon’ble High Court of Madras has not laid down any law in relation to the question framed in the context of the provisions contained under Section 60(1) for the purposes of dealing with the aspect of territorial jurisdiction and this aspect could be well answered by us as to what was the actual subject matter under consideration before the Chennai Bench, which could be culled out by the Division Bench in the following answer given by it in Para 7.1 which is extracted hereunder:
``7.1. The arguments are advanced without even remotely touching the debt or repayment. We find that the attitude of the petitioner to wriggle out of liability is writ-large from the proceedings. Therefore, apart from dismissing the Revision Petition, we hold that the respondent bank will be entitled for a costs of Rs.1,00,000/-, We also direct the DRT-II, Chennai and the Bankruptcy Trustee to proceed with the matter as expeditiously as possible.’’
The question, which was placed for consideration before the Chennai Bench, was to the effect “as to whether the Bankruptcy proceedings, pending on file of the DRT against the Petitioner/Personal Guarantor has to be transferred to the file of Company Law Tribunal in view of the subsequent institution and pendency of the Insolvency Resolution Process. It was absolutely an issue alien and a distinct question altogether to the one involved in the instant Appeal, then that which was subject matter of consideration in a Civil Revision Petition under Article 227 of the Constitution of India and not even that if the ultimate conclusion, which was arrived at by the Chennai Bench is taken into consideration, the Civil Revision Petition was dismissed and the Debts Recovery Tribunal, Chennai and Bankruptcy Trustee Proceedings, were directed to be decided, expeditiously. In fact, there was no ratio decided by the said Judgment on the question, which has been referred to in Para 4 in the context of the territorial jurisdiction for the purposes of initiation of the CIRP proceedings, based upon the residence of the Personal Guarantor.
Another Judgment which has been referred to by the learned counsel for the Appellant is that, as reported in AIR 2021 Madras Page 241 Rohit Nath v. Keb Hana Bank Ltd. Once again, the Division Bench of Hon’ble High Court of Madras in the said Judgment in Paras 11 to 13, has ultimately come to the conclusion, that the jurisdiction of the Debts Recovery Tribunal, for initiating a CIRP proceedings against the appropriate person, under Section 95 of the Code, which is included in Part-2 thereof identifies the learned Adjudicating Authority as defined under Section 79 to be the learned Adjudicating Authority and thus, the conclusion was drawn that the jurisdiction would be the place where the Registered Office of the Corporate Debtor is situated. The relevant paragraph Nos. 11, 12 and 13 are extracted hereunder:
``11. The statutory source of authority for carrying such application to the Debts Recovery Tribunal is found in Section 95 of the Code of 2016. Section 95 is included in Chapter III of Part III of the Code. Part III of the Code is intituled "Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms". The first Chapter in such Part contains the preliminary provisions including the definitions section. The second Chapter of such Part carries the heading "Fresh Start Process’’ and begins with Section 80, the first sub-section whereof envisages that a debtor, who is unable to pay his debt and fulfils the conditions specified in the provision, would be entitled to make an application for a fresh start for discharge of his qualifying debt under such Chapter. Chapter III of Part III of the said Code begins with Section 94. Section 94(1) permits a debtor who commits a default to apply personally or through a resolution professional to the adjudicating authority for initiating an insolvency resolution process. Section 95 of the Code pertains to applications by creditors to initiate the insolvency resolution process. Indeed, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) has been rechristened as Recovery of Debts and Bankruptcy Act possibly because the Debts Recovery Tribunal now also takes up insolvency and bankruptcy matters.
12.Section 79(1) of the Code defines the expression ``Adjudicating Authority’’ wherever such expression appears in Part III of the Code:
``79. Definitions.
In this Part, unless the context otherwise requires,-
(1)``Adjudicating Authority’’ means the Debt Recovery Tribunal constituted under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);
(2)…’’
13.Thus, a creditor may apply to the jurisdictional Debts Recovery Tribunal for initiating an insolvency resolution process against appropriate persons under Section 95 of the Code. Section 60 of the Code, which is included in Part II thereof, identifies the adjudicatory authority in relation to insolvency resolution and liquidation for corporate persons. Section 60(1) of the Code mandates that insolvency resolution and liquidation for corporate persons, including corporate debtors and personal guarantors, may be brought before the National Company Law Tribunal having territorial jurisdiction over the places where the registered office of the corporate person is located. However, a "corporate debtor’’ is defined in Section 3(8) of the Code to mean a corporate person who owes a debt to any person and a "corporate person", in turn, is defined in Section 3(7) of the Code to mean a company, a limited liability partnership firm or any person incorporated with limited liability under any law for the time being in force but not including any financial service provider.’’
We are of the view, that looking to the practical aspect for the purposes of determining the territorial jurisdiction of a Tribunal, since has been confined to be the place where the Registered Office of Corporate Debtor, is situated, it is from a wider perspective, that there cannot be any choice of jurisdiction based upon the convenience of the Parties to the Proceedings and the same will be invariably adopted, without any discrimination for the purposes of initiation of CIRP proceedings.
Hence, for the aforesaid reason, the Judgments relied by the learned Senior Counsel as rendered in the matters of Rohit Nath v. KEB Hana Bank Ltd., would not be applicable in the circumstances of the instant case.
For the aforesaid reason, we do not find any merit in the Company Appeal (AT) (CH) (INS) No. 346 / 2024 and the same, would stand dismissed. The connected pending Interlocutory Applications, if any, would stand closed.