SGK Agencies Pvt Ltd vs Bremels Rubber Industries Pvt Ltd & Anr.

(Hybrid Mode)

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

The instant Company Appeal, that has been preferred by the Appellant, who is an Operational Creditor to the Respondent No. 1 Company. The Respondent No. 1 Company had been the petitioner in CP(IB) No. 93/BB/2024, being the proceedings being carried before the Learned NCLT, Bengaluru, filing the said petition under Section 10 of I&B Code, which was to be read with Rule 7 of IBC (AAA) Rules, 2016.

Consequent to filing of the said petition on 22.02.2024, CIRP process stood initiated against M/s. Bremels Rubber Industries Pvt Ltd. In the said petition, Respondent No. 1 Company had sought initiation of CIRP under Section 10 of I&B Code on account of its inability to meet the repayment obligations of a total debt due to be paid of Rs.56,51,89,109, comprising of Rs.44,61,72,724/- owed to the Financial Creditors and Rs.11,90,61,385/-owed to the Operational Creditors as per Part III of Form 6 submitted by it. We at the moment are not required to consider the matter in detail except to note that the proceedings were drawn and the petition filed under Section 10 of the I&B Code was admitted by the impugned order dated 26.09.2025, resulting in commencement of the CIRP process and consequent imposition of the moratorium. The aforesaid order is being challenged by the Appellant in the instant Appeal.

The Appellant has challenged the impugned order on the grounds that the said petition filed under Section 10 of the I&B Code was allowed by the impugned order of 26.09.2025, without taking into account the allegations of fraud and foul play levelled by him, which will be falling within the domain of Section 65 of I&B Code and without recording any findings on the same. He has submitted that, the Respondent Company, had business dealings with the Appellant for the supply of processing chemicals to the Respondent and its sister concerns and because of non-payment of dues for supply of such goods since the financial year 2016 – 2017, a total sum that has fallen due to be paid to the Appellant by the Respondent Company stands at Rs.8,04,59,495 as on 15.02.2023 with the interest @ 12% to be payable on the same. He has further contended that, the Respondent Company while withholding the amount to be paid to him, has been disposing off its assets and siphoning its funds, on one pretext or the other, that because of the above he has instituted a Commercial Suit No. 237/2023, as against the Respondent, before the Court of District & Sessions Judge, Bangalore (Commercial Court No. 86), for seeking a direction for the remittance of a sum of Rs.8,04,59,495, which has been decreed on 15.09.2025 and that after the passing of the said decree of 15.09.2025, the proceedings under Section 10 of the Code, has been drawn by the Respondent, for reasons other than insolvency, presumably to escape complying with the decree passed by the Learned District Judge. He has contended that admission of the Section 10 petition and commencement of CIRP by virtue of the impugned order of 26.09.2025, is prejudicial to the interest of the Appellant, because he will be deprived of payment of the amount due to be paid, as decreed under the decree of 15.09.2025. Citing the grounds as above, he has prayed for setting aside of the impugned order.

When the Company Appeal was preferred after hearing the Counsel for both the parties, after the condonation of delay, looking to the interest of the Appellant / Operational Creditor, involved in the controversy, the parties were directed to exchange their pleading, after bringing on record, Mr. Hari Babu Thota, newly inducted Resolution Professional, as Respondent No. 2.

While the proceedings of the Company Appeal was pending, Mr. Nischith Bhaskar Shetty, claiming himself to be the Suspended Director of Respondent No. 1. On 07.01.2025, had filed an impleadment application, seeking himself to be impleaded in the Company Appeal, on the grounds that

He happens to be the suspended director of the Respondent Company and the outcome of the Appeal will have an impact on his interests.

Since he, as former director, represented the Corporate Debtor in Section 10 proceedings and also a shareholder holding 51% of the shares of the Respondent No. 1 Company, he becomes the necessary party.

He is fully aware of the facts and circumstances leading to passing of the impugned order, whereas the RP has not taken any steps to defend the Respondent Company (CD) and therefore he becomes a necessary party, because he can defend the CD effectively.

If the Appeal is proceeded with, without hearing him, he and other shareholders will be left remediless.

The said application is being opposed by the Respondent by filing an objection contending thereof that, he denies the contentions made in the impleadment application, that though the Applicant is a former director of the Corporate Debtor, he is no longer involved in the management of the affairs of the CD and that the RP has taken over the management of the CD consequent to the admission of section 10 application filed by the CD, that the RP is fully competent to represent the CD in any litigation including this instant Appeal and he is not bound to act under the instructions of the suspended directors, including the present applicant and that there is nothing that the applicant can bring on record or apprise this Appellate Tribunal which the RP cannot do. He has further contended that the RP has already entered appearance through his counsel in the instant Appeal on 19.01.2026 and has also filed his response to the Appeal on 29.01.2026 and therefore it cannot be said that the RP will not be able to defend the case of the respondent company effectively which the applicant claims to do. Further, the RP can always obtain information from the suspended director under section 19 of the code, and therefore there will be no need for the Suspended Director / Applicant herein to be a necessary party to the instant appeal. He has further submitted that, in the context of controversy raised by the Appellant in the instant Company Appeal, as against the impugned order, the Applicant would not be the necessary party to the appeal as none of the reliefs, which has been prayed by the Appellant directly affects any of the right of the Applicant since the Appellant only intends to safeguard his rights decided by the Commercial Court by the Judgment of 15.09.2025 in this Appeal by giving a challenge to the impugned order of admitting Section 10 application, which was drawn by the Respondent No. 1 at the behest of one Mr. Adith B Shetty.

So far as the governing principle for impleadment is concerned which is prescribed under Order 1 Rule 10 of the CPC, it prescribes for that a party seeking impleadment in a lis, will have to establish that, the lis cannot be effectively decided in his or her absence. It is seen that none of the grounds taken in the application for impleadment satisfy the said parameters, nor attempt to establish that the instant Company Appeal cannot be effectively decided in the absence of the applicant being made as a party to the proceedings. Apart from it, the grounds agitated by the applicant have not been substantiated by the supporting documents filed there to, more particularly in respect of the status of the Appellant and the necessity of his presence in an appeal being carried on the issue of commencement of CIRP under Section 10 of I&B Code. Further, the subject matter of the appeal is rather limited to the controversy qua non-consideration of the ingredients of Section 65 of I&B Code by NCLT while considering the petition of the CD filed under section 10 of the Code. In fact, it appears as if the primary intention of the applicant seeking impleadment is to somehow athwart the implication of the decree of 15.09.2025, as rendered in the Commercial Suit. Since, the impleadment does not appear to have been sought for any valid reasons and the applicant is unable to establish himself to be the necessary party, in the absence of whom the proceedings of this Appeal cannot be effectively decided, the Applicant does not become a necessary party to be impleaded. Hence, the impleadment application would stand rejected.