Sew Lsy Highways Limited vs Punjab National Bank

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

These are two connected company appeals as preferred by the common Appellant by invoking the appellate provisions as contained under Section 61 of the I & B Code, 2016.

The Company Appeal (AT) (CH) (Ins)No.08/2025 puts a challenge to the order passed on 29.11.2024 on IA(IBC)/2308/2024, as preferred in CP (IB) No.812/7/HDB/2019, which stood dismissed on the ground of non-compliance of the order, which is said to have been passed by the Hon’ble High Court of Telangana in CRP No. 815/2022, where the Hon’ble High Court while passing the judgment on 19.02.2024 had directed the Respondent herein, Punjab National Bank (PNB) to comply with Rule 4 (3) of the Rules requiring for supplying the copy of the application. The nature of the order, which has been passed by the Ld. Tribunal on 29.11.2024, in IA(IBC)/2308/2024, it takes the shape of being procedural and an interlocutory order, where only the intentions contemplated, was for compliance of Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. In fact, these rules provide for a mandate to supply the copy of the application before filing the same before the Ld. Adjudicating Authority, by way of the modes as subscribed i.e., by a registered post or by way of a speed post. Since, it was observed that it has not been complied with, the Hon’ble High Court issued a direction as contained in Para 11 of the judgment, that since the Financial Creditor has to serve the copy of the petition signed by the authorized signatory and also the documents, to the petitioner/Corporate Debtor as per Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, according to the impugned judgment of the Ld. Tribunal, those were directed to be handed over, which was to be duly signed by the Financial Creditor. These were the one of the proceedings, which was closed by the impugned order of 29.11.2024, and as observed that it is an interlocutory order, since being procedural in nature, and at least at this stage it cannot be perceived that copy of the application was not served, nor it is the case too. Thus, issue left to be considered by this Appellate Tribunal would be academic only.

In the connected company appeal, being Company Appeal (AT) (CH) (Ins) No. 09/2025, the challenge given by the Appellant is to the impugned judgment, of 29.11.2024 as it was passed in IA No. 1679/2024 as preferred in CP (IB) No. 812/7/HDB/2019, whereby, by virtue of the impugned order passed by the Ld. Tribunal, the Ld. Tribunal has proceeded to allow the application preferred by the National Assets Reconstruction Company Limited, (NARCL) who was an Applicant therein, who has sought to be substituted as the petitioner in the proceedings in place of the Financial Creditor, i.e., the Punjab National Bank (PNB).

There was a certain controversy raised by the Appellant before the Ld. NCLT while the substitution application was being considered qua, the basis of substitution, regarding the sustainability of Assignment Agreement of 21.03.2024, about its modalities, mode of execution, and various other allied factors concerning to the Assignment Agreement contending that it was not in consonance to the rules based on which the NARCL could have at all been permitted to be substituted. But be that as it may, after considering the rival contention, Ld. NCLT allowed the substitution application with an observation that, the production of the trust deed on scrutiny of Assignment Agreement, will not change the status of the Applicant, as a duly authorized company to be substituted in place of Punjab National Bank in the company petition. And it went on further to hold that the present Appellant, who was the Respondent to the proceeding before Ld. NCLT, had no locus to ask for production of the trust deed or to question the propriety of the trust deeds and its conferment of rights, which was linked with the Assignment Deed.

This order, too, also held that permitting the substitution of NARCL, to whom the debt was assigned, in place of Punjab National Bank (PNB) as the petitioner in the company petition becomes necessary for the company petition to be proceeded to be heard on merits and decided, because in the absence of the Financial Creditor, to whom the rights have been allowed, the proceedings will become a non-est proceedings. Similarly, Punjab National Bank (PNB) was held as ‘not a necessary party’ after the substitution on grounds that henceforth NARCL will have to comply with all statutory requirements and this will not charge civil & Criminal liabilities of the parties.

When the matter was taken up today, a statement came forward from the Ld. Counsel for the Respondent that, the proceedings of the company petition were taken up today before the Ld. NCLT, Hyderabad, and the judgment on the same has been reserved. If that be the situation, under the basic legal norms, all interlocutory orders, like the one that is under challenge in the instant two company Appeals, under the principle of merger, will stand merged in the culmination of the final proceedings, where the arguments have been concluded today and the judgment has been reserved. In the absence of there being any interim order granted in the above two company appeals by this Appellate Tribunal, there will be no bar for the Ld. Tribunal to proceed to decide the company petitions on merits. Hence, for all practical purposes, these appeals have been rendered infructuous.

But the Ld. Counsel for the Appellant submits that as a matter of fact the appeal will not become infructuous because the implication of Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, as well qua the effect of the substitution, is still required to be adjudicated on merits. We are of the view that keeping these issues open to be argued at this stage in the instant company appeal, will amount to an ultimate dilution of the proceedings of the company petition, which has been finally argued today and on which the judgment has been reserved. Even otherwise, both the decisions of Ld. NCLT which is being challenged here, appear to have been taken in order to have an effective adjudication of the main issue under, consideration in the company petitions therein.

In these eventualities, in order to balance the equities, though for all practical purposes, the company appeals do not require to be ventured on merits, but still, what bearing will Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, have as regards to the implications of substitution of (NARCL) remains to be decided. It is hoped and trusted that these two aspects must have been argued by the Appellant and would be considered by the Ld. Tribunal, while deciding the appeal on merits. Even if these aspects are prejudicing the rights of the Appellant, as the hearing of the proceedings of the company petition, has already been closed, it cannot be permitted to be reopened at this stage by passing any orders in the instant company appeal on the two questions.

If the aforesaid two questions with regards to the effect of Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, or with regards to the effect of impleadment of the, National Asset Reconstruction Company Limited, on the basis of the alleged Assignment dated 21.03.2024 has not been raised before the Ld. NCLT and if raised by the Appellant and not been considered by the Ld. NCLT in its final order, the same would be left open to be argued before this Tribunal by way of an appeal if at all, such appeal is required to be preferred by the Appellant.

Owing to the above and because of the consequence of the conclusion of the proceedings of the CP (IB) No. 812/7/HDB/2019, we are refraining ourselves from adjudicating the two issues raised by the Appellants on merits. It is expected that the aforesaid issues have been raised by the Appellant before the Tribunal, which would be accordingly considered and if not, today's decision of this Tribunal will not preclude the Appellant to raise the same in the appeal if at all it is required to be filed at their behest.

For the aforesaid reasons the ‘two appeals’ are ‘closed’.

All pending ‘interlocutory applications’ would be treated to have been ‘closed’.