Nagarjuna Fertilizers & Chemicals Ltd. vs IDBI Bank Limited & Anr.

[Per; Shreesha Merla, Member (T)

Aggrieved by the Impugned Order dated 05.12.2022 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench -II) in CP(IB)348/7/HDB/2020, the Appellant preferred this Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘The Code’). By the impugned order, the Adjudicating Authority has observed as follows:

Mr. P.H. Arvindh Pandian, Learned Senior Counsel appearing for the Appellant has vehemently argued that since the pleadings have not been completed and no ‘Counter’ was filed on merits, the Adjudicating Authority was not justified in treating the matter as ‘part heard’ and clubbing it with the other matters. It is submitted that the Adjudicating Authority issued notice in Section 7 of the ‘Insolvency and Bankruptcy Code, 2016’ (hereinafter referred as to ‘The Code’) Application and directed completion of pleadings with the order dated 12.02.2021 and during pendency of the proceedings, in one of the matters under Section 9 of the Code filed against the Appellant, the same Bench with the order dated 27.08.2021 admitted the Application seeking initiation of ‘Corporate Insolvency Resolution Process’ (CIRP) against the Appellant. Subsequently, with the order dated 14.09.2021 a ‘Stay’ was granted on the implementation of the order dated 27.08.2021. Subsequently, the Adjudicating Authority deferred the proceedings from time to time in the Application in view of the operating ‘Stay’. Thereafter, when the ‘Stay’ was still pending, the Application came up for hearing on 01.08.2022 and the Adjudicating Authority observed that the ‘Counter’ has not been filed and directed the same to be filed within a week. Learned Senior Counsel drew our attention that the adjournment order dated 31.10.2022 and the order dated 01.08.2022 together with the memo filed by the Appellant on 04.12.2022, whereunder it is submitted that the Appellant has not filed their counter and hence pleading are not completed. It is submitted that the Adjudicating Authority has not adhered to the ‘Principles of Natural Justice’ and that an opportunity ought to have been given to file ‘Counter’ on merits before treating the matter as ‘Part Heard’ and, therefore, sought for setting aside the impugned order dated 05.12.2022 on the ground that the proceedings were conducted in an arbitrary manner on account of which rights of the Appellant are irreparably affected.

Ms. Fatema Kachwalla, Learned Counsel appearing for the Financial Creditor opposed the Appeal on the ground that the Appellant had filed their reply to the Section 7 Application after being given multiple opportunities; that the Section 7 Application was listed for the first time before the Adjudicating Authority on 15.10.2020 and the counsel for the Corporate Debtor has been appearing since 29.10.2020 and despite repeated directions from the Adjudicating Authority, the Corporate Debtor had failed to file their ‘Reply’ within the specified time. In the hearing dated 17.12.2020, the Adjudicating Authority called upon the Corporate Debtor to file the ‘Reply’ by the next date i.e., 18.12.2020, but the Corporate Debtor failed to do so and the Adjudicating Authority had even imposed a cost of Rs. 50,000/- which was paid by the Corporate Debtor to the Respondent. Subsequently, on 26.12.2020 since the Corporate Debtor failed to file their ‘Reply’, the Adjudicating Authority granted one final opportunity to file ‘Reply’ by 18.01.2021, pursuant to which, the right of the Corporate Debtor to file ‘Reply’ would be forfeited. Thereafter, the matter was listed on 17.08.2022, the Adjudicating Authority observed that despite giving several opportunities and sufficient time to file ‘Counter’, the same was not filed and once again a last chance was given to file their ‘Counter’ within a week. In August, 2022, a ‘Preliminary Counter’ was filed by the Corporate Debtor and therefore, it cannot be said that the Corporate Debtor was not given any opportunity to file their ‘Counter’ or that the pleadings are ‘incomplete’. It is submitted that the pleadings are indeed complete and the Section 7 Application was taken up for hearing on 16.11.2022 and the counsel for the Respondent had already completed their arguments but the Senior Counsel appearing for the Appellant had time and again sought adjournments on 16.11.2022, 22.11.2022, 25.11.2022, 05.12.2022 & on 20.12.2022. It is submitted that the impugned order is a technical one and the matter is partly heard and, therefore, ought not be interfered with as there is ‘Stay’ on the implementation of the CIRP vide order dated 27.08.2021, it is essential that the Section 7 Application and other Applications filed against the Corporate Debtor under Section 7 & 9 of the Code are heard and disposed of.

The 2^nd Respondent i.e., the Deputy Registrar of NCLT, Hyderabad -II has filed their ‘Reply’ stating that pleadings in Company Petition No. CP(IB) No. 348/7/HDB/2020 were completed by 19.09.2022 as per the Bench order dated 19.09.2022. It is also submitted that as per the order of the Bench dated 25.11.2016, the Company Petition along with other Company Petitions namely; CP(IB) 310/7/HDB/2020, Company Petition (IB)/278/2021 and Company Petition IB / 48/2022 were heard in part which can been seen in the order dated 25.11.2022 and have been listed before the said bench on 04.01.2023.

The main issue which arises in this Appeal is whether the pleadings were complete and whether this matter could be treated as a part heard matter and clubbed with the other connecting matters listed on 05.12.2022.

It is seen from the record that the Section 7 Application was listed for the first time on 15.10.2020 and the Counsel for the Corporate Debtor has been appearing since 29.10.2020 and the matter was adjourned to 17.12.2020, for filing of ‘Reply’. It is relevant to mention that the adjournment was given to the next date i.e., 18.12.2020 to file the ‘Reply’, on which date, cost of Rs. 50,000/-was imposed on the Corporate Debtor which was duly paid but ‘Reply’ was not filed. The matter was once again adjourned to 26.12.2020 and on 08.01.2021 a final opportunity was again given to the Corporate Debtor to file their ‘Reply’. Finally vide order dated 17.08.2022, the Adjudicating Authority observed that despite giving sufficient time to file ‘Counter’, the same was not filed and once again opportunity was given to the Appellant herein to file their ‘Counter’ within a week. It is the case of the Appellant that only a ‘Preliminary Counter’ was filed in August, 2022 reserving their rights to file a final ‘Counter’ on merits.

With the order dated 19.09.2022, the Adjudicating Authority has noted that the Financial Creditor has filed their ‘Rejoinder’ and the Learned Senior Counsel for the Corporate Debtor has received the ‘Counter’ and that the pleadings were complete. At this juncture the relevant order dated 25.11.2022 passed by the Adjudicating Authority is detailed as hereunder:

In the aforenoted Order, it is clearly noted that the Learned Senior Counsel appearing for the Corporate Debtor/Appellant herein submitted that he would be filing ‘Written Submissions’ in all the connected matters and also make a brief submission which he undertook to complete by 05.12.2022. It is also recorded in the Order that there would not be any further adjournments given to the Corporate Debtor as the matter was adjourned on several occasions at the behest of the Corporate Debtor. A perusal of all the ‘Daily Orders’ relevant to this case and filed before us clearly shows that despite several opportunities given to the Appellant, from October, 2020 onwards till August, 2022 and despite imposition of Rs. 50,000/-, the Corporate Debtor failed to file the ‘Reply’ for two long years and subsequently chose to file a ‘Preliminary Counter’. The Code is a ‘Time Bound Proceeding’ which does not provide for filing a ‘Preliminary Counter’ and subsequent ‘Final Counter’, which is nothing but delaying tactic adopted by the Appellant herein, in support of their submissions that the pleadings are not ‘complete’. The Orders dated 19.09.2022 & 25.11.2022 clearly show that all the pleadings have been completed and the Appellant/ Corporate Debtor has delayed the matter seeking several adjournments. The ‘Hon’ble Supreme Court’ in a `catena of Judgments’, has time and again laid down that the ‘IBC is a time bound process’, and any such delays, is deprecated. No wonder, `Speed’ is the essence of the `Code’.

At this juncture, unhesitatingly, this `Tribunal’, holds without any simmering doubt, that the `pleadings are indeed complete’, and there is absolutely no error whatsoever in the `impugned order’, dated 05.12.2022, passed by the `Adjudicating Authority’. Accordingly, this Appeal is devoid of merits and the same is dismissed, to secure `ends of Justice’. There shall no order as to costs.

The `Adjudicating Authority’ (`National Company Law Tribunal’, Bench – II, Hyderabad), shall proceed further, in the subject matter in issue, in accordance with `Law’, and decide these cases, as expeditiously as possible, in any event, within a period five weeks, from the date of passing of this `Judgment’, ofcourse, uninfluenced with any of the observations made by this `Tribunal’, in this `Appeal’.