Adjudicating Authority does not possess the powers to pass an order, which was in the nature of rule under the guise of an order- Union of India, Ministry of Corporate Affairs Vs. Oriental Bank of Commerce – NCLAT

NCLAT held that in the present case, the ‘Ministry of Corporate Affairs’ was neither arrayed as a party nor impleaded in the subject matter before the Adjudicating Authority. Also, that the ‘Registrar of Companies’ had not filed any response/ reply/ counter (in respect of the clarification sought for) prior to the passing of the impugned order. An Adjudicating Authority (National Company Law Tribunal) has a quasi-judicial one is to abide by the principles of ‘Natural Justice’. After providing a reasonable opportunity of being heard to the other side, the Tribunal can pass appropriate orders. If an order is passed by the Tribunal, without affording an opportunity of hearing to the parties, the same is unsustainable in Law as per decision Sree Metaliks Ltd. v. Union of India (2017) 203 Com Cases 442 : (2017) 140 CLA 30 (Cal).

Whether an ex-employee of the Financial Creditor having rendered services in the past, should not be permitted to act as IRP at the instance of such Financial Creditor, regard being had to the nature of duties to be performed by the IRP & RP – State Bank of India Vs. M/s. Metenere Ltd. – NCLAT

NCLAT held that the fact that the proposed ‘Resolution Professional’ Mr. Shailesh Verma had a long association of around four decades with the ‘Financial Creditor’ serving under it and currently drawing pension coupled with the fact that the ‘Interim Resolution Professional’ is supposed to collate all the claims submitted by Creditors, though not empowered to determine the claims besides other duties as embedded in Section 18 of the ‘I&B Code’ raised an apprehension in the mind of Respondent- ‘Corporate Debtor’ that Mr. Shailesh Verma as the proposed ‘Interim Resolution Professional’ was unlikely to act fairly justifying the action of the Adjudicating Authority in passing the impugned order to substitute him by another Insolvency Professional. Observations of the Adjudicating Authority in the impugned order with regard to ‘Interim Resolution Professional’ to act as an Independent Umpire must be understood in the context of the ‘Interim Resolution Professional’ acting fairly qua the discharge of his statutory duties irrespective of the fact that he is not competent to admit or reject a claim.

Whether the provisions of Section 59 of the Code can be made applicable under Voluntary Liquidation initiated pursuant to the Companies Act, 1956 and the procedure to be followed and in such case, whether the appeal under Section 42 of the Code is maintainable before the NCLT- Mr. Harrish Khurana Liquidator of M/s. TEIL Projects Limited Vs. M/s. Engineers India Limited & Anr. – NCLAT

NCLAT held that it is significant to note that Section 2 of the ‘I&B Code’ clearly provides that the ‘I&B Code’ shall apply to any company incorporated under the Companies Act, 2013 or any previous company law, special Act, LLP Act and other specified corporate bodies as also individuals other than personal guarantors, in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be. It goes without saying that under Section 238 of the ‘I&B Code, the provisions of the ‘I&B Code’ override other laws. Thus, there being specific provision in the ‘I&B Code’ dealing with admission or rejection of claim by the Liquidator with mechanism provided for questioning the same in appeal before the Adjudicating Authority and such provision being made applicable to voluntary liquidation proceedings explicitly in terms of the provisions embodied in Section 59(6) of the ‘I&B Code’, issue raised with regard to maintainability of the appeal and jurisdiction of the Adjudicating Authority are without substance and arguments raised on this score are repelled.

A decision by judicial or quasi-judicial Authority not informed of reasons provides room for arbitrariness & such decision cannot be supported. In terms of the ingredients of Sec. 40 of the Code, reasons are to be spelt out for rejecting the claims- Indian Oil Corporation Ltd. Vs. Mr. Ashish Arjun Kumar Rathi, Liquidator of SBQ Steels Pvt. Ltd.- NCLAT

NCLAT held that as per Section 40 of the Code a ‘Liquidator’ being an ‘Authority’ decides the matter in a quasi-judicial manner and his decision is open to challenge u/s 42 of the I&B Code. An unreasoned order may be just and valid from the point of view of an authority who passes the same. But to the affected, the said order is not a ‘valid one’. A ‘Reasoned order’ will have an appearance of ‘Justice’. A decision by judicial or quasi-judicial Authority not informed of reasons provides room for arbitrariness and such decision cannot be supported. In terms of the ingredients of Section 40 of the Code, reasons are to be spelt out for rejecting the claims, which in the present case was not followed by the ‘Liquidator’. An ‘Adjudicating Authority’ can interfere when a ‘Liquidator’ had not exercised its discretion in a bonafide manner or he had proposed a thing which no reasonable person would act. A ‘Liquidator’ as an Officer of the ‘Adjudicating Authority’/ Tribunal is expected to perform his duties fairly, justly and honorably in dealing with the claims of persons. It cannot be forgotten that ‘Interest’ due on damages sought for violation of contract gives rise to a legal right to claim payment. It also qualifies as an ‘actionable claim’.

Period spent while pursuing SARFAESI Proceedings cannot extend the period of limitation- M/s. Gradient Nirman Private Limited Vs. M/s. IFCI Ltd. – NCLAT

The NCLAT held that at the cost of repetition, based on the ratio laid down by the aforenoted judgments, we are of the considered view that suit for recovery based upon a cause of action even if it is within limitation, it cannot in any manner impact the separate and independent remedy of a winding-up proceeding. A suit for recovery is a separate and independent proceeding distinct from the remedy of winding-up and therefore the contention of the Learned Counsel appearing for the Respondents/ Financial Creditor that the period spent while pursuing SARFAESI Proceedings should extend the period of limitation, cannot be sustained, as the intent of the Court is not to give a new lease of life to the debt which is already time barred.

Financing Documents, Inter-Creditor Agreement,do not in any manner curtail or limit the rights of the Financial Creditor in its individual capacity to enforce its rights against the Corporate Debtor in regard to the financial debt which is payable in law & in fact & in respect whereof default as alleged is not disputed – Amitabh Kumar Jha Vs. Bank of India & Anr-NCLAT

The Appellate Tribunal upheld the decision of the Adjudicating Authority and held that the statutory right across the ambit of Section 7 of the ‘I&B Code’ cannot be curtailed or made subservient to any ‘Inter-Creditor Agreement’. The contractual rights, unless recognised by the statute as a permissible mode, would not override the statutory mechanism and right created and enforceable under statute.

Whether issuance of six cheques by the Corporate Debtor towards the part payments of the outstanding operational debt would amount to an acknowledgment of debt thereby giving fresh lease of life to the claim of Operational Creditor qua such operational debt – Ritu Murli Manohar Goyal Vs. SVG Fashions Ltd. & Anr.- NCLAT

NCLAT held that it would be appropriate to notice that the general principle embodied in Section 3 of the Limitation Act, 1963 providing that every suit, appeal or application filed after the prescribed period of limitation shall be dismissed irrespective of the fact that limitation has not been set up as a defence is subject to the provisions contained in Sections 4 to 24 (inclusive) of the Limitation Act, 1963. These Sections carve out exceptions by providing exclusion and extension on various grounds enumerated therein.

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