National Company Law Appellate Tribunal
Mr. S.V. Sunil Kumar Chowdary vs Corporation Bank Hyderabad & Anr on 4 May, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT
CHENNAI
(APPELLATE JURISDICTION)
T A No. 115 of 2021
in
Company Appeal (AT) (CH) (INS) No.539 of 2019
(Under Section 61 of the Insolvency and Bankruptcy Code, 2016)
(Arising out of Impugned Order dated 26.05.2020 passed in
CP (IB) No.374/7/HDB/2 019 passed by the Adjudicating
Authority, (National Company Law Tribunal, Hyderabad Bench)
In the matter of:
S.V. Sunil Kumar Chowdhury
(Promoter/Shareholder and Member of
suspended Board of Directors of Corporate Debtor) ..... Appellant
V
1) Corporation Bank, Hyderabad
Hyderguda Branch,
Hyderabad 500029
2) Mr. Sridhar Venkatraya Sundararaja,
Interim Resolution Professional
of Neerajaksha Iron and Steel Pvt Ltd.
Plot No.14/46, Survey No.1 (Part)
IDA-Uppal Village and Mandal,
Uppal Notified Industrial Area
Service Society,
Hyderabad 500039, Telengana
3). The Registrar
National Company Law Tribunal
Block No.3, Ground, 6th, 7th & 8th Floor,
C.G.O. Complex, Lodhi Road,
New Delhi - 110003 .... Respondents
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019
Page 1 of 68
Present:
For Appellant : Mr. Samar Bansal, Mr. Sachin Mishra
and Mr. Sushant Mahajan, Advocates
For Respondent No.1 : Ms. Ekta Chaudhury,
Advocate
For Respondent No.2 : Ms. JVL Bharati, Advocate
(For Interim Resolution Professional)
JUDGMENT
(Virtual Mode) Justice M. Venugopal, Member (Judicial) :
Preface:
The `Appellant' / `Promoter'/`Shareholder' and `Member' of the `suspended Board of Directors' of the `Corporate Debtor' has preferred the instant `Transfer Appeal' No.115 of 2021 [Comp App (AT) (CH) (INS) No.539 of 2019 before this `Tribunal' as an `Affected Person' seeking to set aside the `impugned order' dated 26.05.2020 passed by the `Adjudicating Authority' (`National Company Law Tribunal', Hyderabad) in IA No. 900 of 2019 & IA No. 901 of 2019 in CP(IB)374/7/HDB/2019.
2). Earlier, the `Adjudicating Authority' (`National Company Law Tribunal', Hyderabad), while passing the impugned order on 26.05.2020 T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 2 of 68 in IA No. 900 of 2019 in CP(IB)374/7/HDB/2019 at paragraph 10 to 17 had observed the following:
10. ``It is the contention of the Corporate Debtor that no notice was served at any point of time prior to admission of Application U/s. 7 of IB Code and that there was no intimation to the Corporate Debtor being the Respondent about this matter till the initiation of CIRP.
11. The Ld. Counsel for the Applicant herein further contended that the Registered Office of the Corporate Debtor is situated at Kurnool, Andhra Pradesh and therefore NCLT Amaravati Bench only had the jurisdiction to entertain the CP filed against it.
12. The Financial Creditor/Respondent has stated that the notice first sent to the Corporate Debtor were returned with an endorsement `Left'. Subsequently, this Adjudicating Authority directed the Financial Creditor to send another notice to the Corporate Debtor for appearance and also ordered notice by way .of Paper Publication. A further direction was also given by this Adjudicating Authority, to send notice to the Directors of the Corporate Debtor which was also complied with.
13. Pursuant to the said notices, when the matter came up for hearing on 18.07.2019, Mr. Sunil, who is the deponent in the instant Applications, appeared in person and prayed time for engaging a Counsel and for filing reply affidavit. Since on the subsequent hearing, there was no representation on behalf of the Corporate Debtor, the Corporate Debtor was set Ex-parte.
14. It is seen that, though Mr. Sunil appeared on behalf of the Corporate Debtor, he failed to place the objection in relation to the point of jurisdiction referring to the change of address of the Corporate Debtor to Andhra Pradesh.
15. The fact of change in the Registered Office of the Corporate Debtor from the State of Telengana to the State of Andhra Pradesh was not brought to the notice of this Adjudicating Authority at any point of time during the proceedings. If any information regarding T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 3 of 68 change of address was submitted by way of counter affidavit, this Adjudicating Authority would have definitely considered the same before passing any orders.
16. Though the fact of the Registered Office of the Corporate Debtor being situated at Kurnool, Andhra Pradesh, is now brought on record, we feel it is not proper to consider at this stage, the prayer to set-aside the order dated 27.09.2019, considering the submissions now made by Corporate Debtor. The real question to be answered here is that once the order of admission of the CP(IB) No.374/7/HDB/2019 was passed by this Adjudicating Authority, which is an appealable order under the provisions of the Code, whether this Adjudicating Authority has powers to recall and set aside the same? In our considered view, this Adjudicating Authority has no such powers under the provisions of the Code. Since the Order of Admission of the CP is an appealable order, the powers of Appellate Authority cannot be circumvented by recalling our own order.
17. We, however, observe that the Applicant may approach appropriate forum for the reliefs sought in the Instant Application."
and accordingly, disposed of the Interlocutory Applications as `not maintainable'.
3). The `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench, Hyderabad) in CP(IB) No.374/7/HDB/2019 on 27.09.2019 at paragraph 16 to 19 had among other things, observed the following:
16. "During the hearing on 18.07.2019, one Mr. Sunil, Director of the Corporate Debtor appeared and prayed time for engaging a counsel and giving reply. Considering his request, T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 4 of 68 matter was adjourned to 08.08.2019. But no representation was made on behalf of Corporate Debtor on 08.08.2019.
17. In view of the above and having satisfied with the proof of service of notice and since there was no representation, Respondent/Corporate Debtor was proceeded ex-parte on 08.08.2019.
18. Heard submissions of the learned counsel for the Petitioner/Financial Creditor and perused the record.
19. After hearing submissions of the learned counsel for the Petitioner/Financial Creditor and having perused the records, this Adjudicating Authority is satisfied with the proof placed by the Petitioner that default has occurred in respect of financial debt which the Corporate Debtor was liable to pay to the Petitioner.
The Petitioner has also placed on record proof of sending notices and paper publication. The Petitioner has complied with all the requirements as stipulated under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, this Adjudicating Authority is inclined to admit the instant petition." and ultimately, admitted the `Petition' by commencing the `CIRP' and appointed Mr. Sridhar Venkatraya Sundararaja as an `Interim Resolution Professional' and declared `Moratorium'.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 5 of 68 Back Ground Facts:
4). According to the `Appellant' in and around the Year 2011, the `Corporate Debtor' had approached the `1st Respondent'/`Corporation Bank' and `Vijaya Bank', Banjara Hills Branch, Hyderabad, for availing the `Loan Facilities' to an extent of Rs.14,75,00,000/- (`Loan Sum') under the `Consortium Banking Arrangements'. After due verification, execution of documents, `Guarantees' and `Deposit of Title Deeds' of the properties of the `Corporate Debtor' by the two Banks, the loan amount was disbursed.
5). It is represented on behalf of the `Appellant' that in and around the Year August 2013, as the `Corporate Debtor' had approached the `Consortium Banks' for renewal of existing `Working Capital Facility' and fresh `Working Capital Facility' Rs.2 Crores from the 2 nd Respondent and Rs.2 Crores from the Vijaya Bank. The said additional limit was sanctioned upon verification of the documents and financial position of the `Corporate Debtor', the said additional limit was sanctioned to the terms and conditions agreed upon earlier.
6). It comes to be known that the `Financial Creditor' filed an Original Application No.1331/2016 before the `Debts Recovery T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 6 of 68 Tribunal' and the same was allowed on 12.10.2018 directing the `Corporate Debtor' and other `Guarantors' to pay a sum of Rs.20,63,07,900/- (Rupees Twenty Crore Sixty Three Lakhs Seven Thousand and Nine Hundred Only) together with 14.80% interest per annum till date of realisation. Apart from that, the Registered Office of the `Corporate Debtor' was changed from Flat No.108, Sovereign Shelter, Near Ganga Jamuna Hotel, Lakdi-ka-pool, Hyderabad, Telengana to Site No.4 and 5, Medehal Village, Halaharvi Mandal, Kurnool, Vishakhapatnam, Andhra Pradesh - 518395 and the same was duly intimated to the `Competent Authorities', which is reflected in the `Ministry of Corporate Affairs' Website.
7). The `Appellant' takes a stand in January 2019, despite facing severe financial difficulties, the `Corporate Debtor' with a view to resolve its `debts' was in the process of negotiating and restructuring its dues keeping in mind the grievances of the `Creditors' including the Respondent No.1. Subsequently, the Collector and District Magistrate, Kurnool District, wrote a letter dated 27.02.2019 to the 1 st Respondent, to extend the time for repayment of loan by 12 months, in view of the fact that large number of `families' are dependent upon the Unit and the `General Market Conditions'. Thereafter, the `Corporate Debtor' was T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 7 of 68 repaying the loan amounts diligently and repaid a sum of Rs.5,19,00,000/- of the entire loan amount.
8). In this connection, the Learned Counsel for the `Appellant' points out that the `1st Respondent'/`Bank' had initiated proceedings under the `I & B Code' and on 18.07.2019, the `Appellant' had entered appearance before the `Adjudicating Authority', Hyderabad, and prayed for time, to file `Reply' and to engage an `Advocate' to represent him and the matter was adjourned to 08.08.2019.
9). Apart from that, according to the `Appellant' that despite the 1 st Respondent/Bank, being aware of the change of address of the `Corporate Debtor' at the time of filing the Section 7 Application under `I & B Code' had wrongly mentioned the Registered Office Address of the Corporate Debtor to institute proceedings before the `Adjudicating Authority'. In fact, all the subsequent `Notices' and the `Publications' were carried out in and around Flat No.108, Sovereign Shelter, Near Ganga Jamuna Hotel, Lakdi-ka-pool, Hyderabad, Telengana. However, the `Corporate Debtor' was no longer operating its business out of Site No.4 & 5, Medehal Village, Halaharvi Mandal, Kurnool, Vishakhapatnam, Andhra Pradesh-518395.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 8 of 68
10). The Learned Counsel for the `Appellant' points out that the `Appellant's Advocate' was unable to remain present on 08.08.2019, because of `viral fever' and that the `Adjudicating Authority' was pleased to proceed `Ex-parte' and listed the matter on 26.08.2019. On 27.09.2019, the `Adjudicating Authority' had admitted the application for `Initiation of CIRP' and appointed the `2nd Respondent' as the `Interim Resolution Professional' who was subsequently confirmed as `Resolution Professional'.
11). The `Appellant' on 16.10.2019 had changed his `Advocates' and preferred IA No.900 of 2019 in CP(IB) No.374/7/HDB/2019 seeking to set aside the ex-parte order dated 27.09.2019 and also filed IA No.901 of 2019 seeking stay of all further proceedings, in furtherance of an order dated 27.09.2019 on account of an issue with the Jurisdiction in the light of the change in the Registered Address of the `Corporate Debtor' prior to the initiation of the impugned proceedings.
12). It is projected on the side of the `Appellant' that before the `Appellate Tribunal', Company Appeal (AT) (INS) No. 267 of 2020 was filed by the `Appellant' claiming the relief of `stay' of the order in main CP(IB) No.374/7/HDB/2019 and further sought early hearing of IA No. 900 - 901 of 2019 in the main `Petition'. The `Appellate Tribunal' T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 9 of 68 through its Order dated 18.02.2020 had disposed off the Comp App (AT) (INS) No. 267 of 2020 by directing the `Adjudicating Authority' to decide the matter with utmost expedition.
13). In fact, the `Adjudicating Authority' had passed the `impugned order' dated 26.05.2020 in IA No. 900 of 2019 & IA No. 901 of 2019 in CP(IB) No.374/7/HDB/2019 in `disposing off' the `Applications' by directing the `Applicant' therein to approach the `Appropriate Forum' for the reliefs sought for in the `Applications' and accordingly, `disposed off' the IA No.900 of 2019 and IA No.901 of 2019 as `not maintainable'. Also, the `Adjudicating Authority' had opined that once an `Order Of Admission' was passed, the `Adjudicating Authority' has no power under the `I & B Code', 2016, to `Recall' or `Set-aside the Order'.
14). It is brought to the notice of this `Tribunal' that the `Corporate Debtor' had filed Civil Revision Petition No. 2508 of 2019 between `Neerajaksha Iron and Steel Pvt. Ltd. V Corporation Bank' whereby, the Hon'ble High Court of Telengana, on 30.10.2019 was pleased to stay the operation of the order dated 27.09.2019 by staying the `CIRP' and `Moratorium'. Again, the `Corporate Debtor' was perforced to approach the `Hon'ble High Court of Telengana' in Civil Revision Petition T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 10 of 68 No.3080 of 2019 in the matter of `Neerajaksha Iron and Steel Pvt. Ltd. V Corporation Bank', which was dismissed as withdrawn on 30.01.2020. Appellant's Submissions:
15). The Learned Counsel for the `Appellant' contends that the `Adjudicating Authority' had failed to consider that the `Corporate Debtor' had changed its Registered Address much before the initiation of the proceedings by the `1st Respondent'/`Bank'.
16). The Learned Counsel for the Appellant submits that the `Adjudicating Authority' had failed to consider that it had no jurisdiction to entertain the `Insolvency Petition' in CP(IB) No.374/7/HDB/2019 filed by the `1st Respondent' / `Bank' (under Section 7 of the Code) when evidently the registered office of the `Corporate Debtor' was not within the Jurisdiction.
17). It is represented on behalf of the Appellant that the `Adjudicating Authority' had committed an error in admitting the Application filed by the `1st Respondent'/`Bank', contrary to the ingredients of `Section 60' of the `I & B Code', 2016. In reality, the `Adjudicating Authority' had overlooked the fact that the `National Company Law Tribunal', Hyderabad, had no jurisdiction to entertain the `Application' filed by the T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 11 of 68 `Bank', when the `National Company Law Tribunal', `Amaravathi' has the necessary jurisdiction to entertain the `Company Petition'.
18). The other contention advanced on behalf of the `Appellant' is that the `Adjudicating Authority' had wrongly admitted the `Application' filed by the `1st Respondent'/`Bank' without providing an opportunity to the `Corporate Debtor', to file a `Reply Statement'.
19). The Learned Counsel for the `Appellant' contends that the `non-
appearance' of the `Corporate Debtor' before the `Adjudicating Authority' was neither `intentional' nor `wanton' as the `Corporate Debtor' had engaged an `Advocate' to look after the matter and refers to the decision of the `Hon'ble Supreme Court' in the matter of Secretary, Department of Horticulture, Chandigarh and Anr. V Raghu Raj - (2008) 13 SCC 395 wherein at paragraphs 23 to 29, it is observed that a party should not suffer for their non-appearance or default of his counsel and hence, the Exparte order dated 27.09.2019 of the `Adjudicating Authority' ought to be set-aside.
20). The Learned Counsel for the `Appellant' adverts to the decision of the `Hon'ble Supreme Court' in Sunitadevi Singhania Hospital Trust and Anr. V Union of India, reported in (2008) 16 SCC at page 365, T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 12 of 68 wherein it is held that every `Tribunal' has an `inherent power' to recall its order and as such, the `Adjudicating Authority' ought to have exercised the said power.
21). The Learned Counsel for the `Appellant' submits that for the mistake of `nonappearance' of the `Corporate Debtor/Petitioner's Counsel, the `Corporate Debtor/Petitioner' should not suffer.
22). The `Adjudicating Authority' ought to have considered the factual aspects and the legal aspects in a proper perspective and therefore, prays for :
1) To set aside the impugned order dated 26.05.2020 in I.A. No.900 of 2019 and in I.A.No. 901 of 2019 in CP (IB) No.374/7/HDB/2019 passed by the `Adjudicating Authority'.
2) To set aside the order dated 27.09.2019 in CP (IB) No.374/7/HDB/2019 passed by the `Adjudicating Authority Appellant's Decisions:
23). The Learned Counsel for the `Appellant' refers to the decision of the `Hon'ble Supreme Court' in Harshad Chiman Lal Modi V DLF Universal Ltd & Anr. reported in (2005) 7 SCC 791 at Spl Page 792 to 793 and 794 wherein, it is observed as under:
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 13 of 68 "Section 16 CPC recognises a well-established principle that actions against res or property should be brought in the forum where such res is situate. A court within whose territorial jurisdiction the property is not situate has no power to deal with and decide the rights or interests in such property. A court has no jurisdiction over a dispute in which it cannot give an effective judgment. The proviso to Section 16, no doubt, states that though the court cannot, in case of immovable property situate beyond jurisdiction, grant a relief in rem still it can entertain a suit where relief sought can be obtained through the personal obedience of the defendant. The proviso is based on a well-known maxim `equity acts in personam". The principle on which the maxim is based is that the courts can grant relief in suits respecting immovable property situate abroad by enforcing their judgments by process in personam i.e. by arrest of the defendant or by attachment of his property. (Para 16) The proviso to Section 16 is an exception to the main part of the section which cannot be interpreted or construed to enlarge the scope of the principal provision. It would apply only if the suit falls within one of the categories specified in the main part of the section and the relief sought could entirely be obtained by personal obedience of the defendant. (Para 18) The submission that the parties had agreed that the Delhi Court alone had jurisdiction in the matters arising out of the transaction also has no force. Such contract be said to be against public policy. It is legal, valid and enforceable. However, such a provision would apply to those cases where two or more courts have jurisdiction to entertain a suit and the parties have agreed to submit to the jurisdiction of one court. A clause vesting jurisdiction on a court which otherwise does not have jurisdiction to decide the matter, would be void as being against the public policy. Hence, even if there is an agreement between the parties to the contract, it has no effect and cannot be enforced.
(Paras 20, 27 and 34) T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 14 of 68 The jurisdiction of a court may be classified into several categories. The important categories are (i) territorial or local jurisdiction; (ii) pecuniary jurisdiction; and (iii) jurisdiction over the subject-matter. So far as territorial and pecuniary jurisdictions are concerned, objection to such jurisdiction has to be taken at the earliest possible opportunity and in any case at or before settlement of issues. The law is well settled on the point that if such objection is not taken at the earliest, it cannot be allowed to be taken at a subsequent stage. Jurisdiction as to subject- matter, however, is totally distinct and stands on a different footing. Where a court has no jurisdiction over the subject-matter of the suit by reason of any limitation imposed by statute, charter or commission, it cannot take up the cause or matter. An order passed by a court having no jurisdiction is a nullity. Further, neither consent nor waiver nor acquiescence can confer jurisdiction upon a court, otherwise incompetent to try the suit. Hence, even though the plaintiff is right in submitting that the defendants had agreed to the jurisdiction of the Delhi Court and in the original written statement, they had admitted that the Delhi Court had jurisdiction and even after the amendment ion the written statement, the paragraph relating to jurisdiction had remained as it was i.e. the Delhi Court had jurisdiction, it cannot take away the right of the defendants to challenge the jurisdiction of the court nor can it confer jurisdiction on the Delhi Court, which it did not possess.
(Paras 30, 32 and 37) Where a court takes upon itself to exercise a jurisdiction it does not possess, its decision amounts to nothing. A decree passed by a court having no jurisdiction is non est and its invalidity can be set up whenever it is sought to be enforced as a foundation for a right, even at the stage of execution or in collateral proceedings. A decree passed by a court without jurisdiction is a coram non judice." (Para 32) T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 15 of 68
24). In the Order of this `Tribunal' in Spectrum Voyages Pvt. Ltd. V Fortis Healthcare Ltd. dated 04.10.2018 (vide Comp App (AT) (INS) 409 of 2018) at paragraph 2 and 3, it is observed as under:
2.``Learned Counsel appearing on behalf of the Appellant submits that in terms of Sub-section (1) of Section 60 the Adjudicating Authority, where the office of the Corporate Person located, has the statutory jurisdiction. The Appellant being located at Delhi, National Company Law Tribunal, New Delhi, which is the Adjudicating Authority for the purpose of I & B Code has jurisdiction to entertain the application. Though such submission appears to be attractive, yet cannot be accepted in view of the specific provisions of the law, which are as follows:
(i) Sub-section (1) of Section 5 defines Adjudicating Authority for the purpose of Part II i.e. National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013.
(ii) Sub-section (1) of Section 60 of I & B Code also deliberates with Adjudicating Authority for Corporate Persons which is as follows:
"60. Adjudicating Authority for corporate persons. - (1) The Adjudicating Authority, in relation to insolvency and 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."
3. From the aforesaid provision it is clear that 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 that means that it will be the Corporate Debtor against whom the resolution process or liquidation is initiated, the National Company Law Tribunal has the jurisdiction, Adjudicating Authority having jurisdiction to T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 16 of 68 entertain such application. It is not in dispute that with regard to Corporate Debtor whose registered office is situated in Haryana, the National Company Law Tribunal, Chandigarh has been made the Adjudicating Authority. In the present case, the Corporate Debtor / Corporate Person's registered office is situated in Gurgaon, Haryana, therefore, the Hon'ble President, NCLT for New Delhi Bench (Adjudicating Authority) rightly observed that petition at New Delhi is not maintainable."
and finding no merit, the `Appeal' was `dismissed'.
25). In the decision in `Pramod Sharma V Dental Implants, reported in (2017) 200 Comp Cas 381 at paragraph 8 to 10, it is observed as under:
8. "Sub-rule (2) of rule 49 says, that when an application is heard ex-parte against the respondents, such respondents are given right to apply to the Tribunal to set aside the said order and the Tribunal can set aside the order if the respondents satisfy the Tribunal that the notices were not duly served or that they were prevented by any sufficient cause from appearing for hearing. In the case on hand, admittedly, no notice has been given on the application, I.A.No. 31 of 2016 to the original petitioner.
Therefore, it is a case of non-tendering of notice to the original petitioner in I.A.No. 31 of 2016, leave alone due service of notice to the petitioner. Therefore, this Tribunal has to consider this fact in the right perspective and set aside the ex-parte order dated November 22, 2016.
9. There is need to address to what had happened to the actions that have been undertaken by original respondent No. 2 pursuant to the order dated November 22, 2016. It appears from the record that the second respondent has withdrawn only Rs.63,500 and it appears that was paid towards salaries, value tax and entry tax etc., and the order permitting withdrawal is there only till December 31, 2016 and therefore the withdrawal of amounts by virtue of the order dated November 22, 2016 need not be undone. T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 17 of 68 As already stated, during the pendency of this application, respondent No.2 has given an undertaking not to hold any meeting till the disposal of this application.
10. In the petition, the original petitioner alleged about fraud, but there is no need to discuss that aspect on this application since the order itself is an ex-parte order. The decision cited by learned counsel for the original petitioner reported in M.S.D.C. Radha Ramanan v. Jayabkarath Textiles P. Ltd. MANU/CL/0031/2013 :
[2013] 181 Comp Cas 461 (CLB), wherein the findings relate to the issue that whether a Company Law Board is a Tribunal or court and whether the Company Law Board can stay its original proceedings or not under section 10 of the Code Civil Procedure, 1908. Therefore, the said decision is not applicable to the facts of the case. In another decision relied upon by the original petitioner in Smt. Pushpa Katoch v. Manu Maharani Hotels Ltd. reported in MANU / CL / 0038 / 2001 : [2003] 117 Comp Cas 315 (CLB), what was discussed was about the power of review of the Company Law Board. In the case on hand, this Tribunal is not exercising the power of review but it has exercised its power by virtue of rule 49(2) and therefore there is no need to enter into discussion with regard to the aspect whether this Tribunal has power to review its orders or not. In the result, this application I.A.No. 33 of 2016 is allowed setting aside the ex-parte order dated November 22, 2016 passed by this Tribunal in I.A. No. 31 of 2016 in T.P.No. 100 of 216 (old C.P. No. 51 of 2015). I.A. No. 31 of 2016 shall be posted along with T.P. No. 100 of 2016 for reply of the original petitioner and other original respondents.
Respondent No. 2 shall pay costs of Rs.10,000 to the original petitioner within two weeks."
26). The Learned Counsel for the `Appellant' seeks in aid of the decision of the `Hon'ble Supreme Court' in `Hasham Abbas Sayyad V T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 18 of 68 Usman Abbas Sayyad - reported in (2007) 2 Supreme Court Cases at page 355 at Spl Page 357, wherein it is observed and held as under:
"A distinction must be made between a decree passed by a court which has no territorial or pecuniary jurisdiction in the light of Section 21 CPC, and a decree passed by a court having no jurisdiction in regard to the subject-matter of the suit. Whereas in the former case, the appellate court may not interfere with the decree unless prejudice is shown, ordinarily the second category of the cases would be interfered with." (Para 24)
27). The Learned Counsel for the `Appellant' refers to the order dated 17.07.2019 in the matter of NUI Pulp and Paper Industries Private Limited V M/s. Roxcel Trading GMBH (Comp App (AT) (INS) 664 of 2019), wherein at paragraph 4 and 10, it is observed as under:
4.``Learned Counsel for the Appellant submits that before admission of an application under Section 7 or 9, the Adjudicating Authority has no jurisdiction to restrain the `Corporate Debtor' and its Directors from alienate, encumbering or creating any third party interest on the assets of the `Corporate Debtor'. No such power can be exercised under Rule 11 of the National Company Law Tribunal Rules, 2016.
10. From the aforesaid provisions, it is clear that once an application under Section 7 or 9 is filed by the Adjudicating Authority, it is not necessary for the Adjudicating Authority to await hearing of the parties for passing order of `Moratorium' under Section 14 of the `I & B Code'. To ensure that one or other party may not abuse the process of the Tribunal or for meeting the ends of justice, it is always open to the Tribunal to pass appropriate interim order."
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 19 of 68
28). The Learned Counsel for the `Appellant' points out the order dated 07.12.2018 in CA(IB) No.987/KB/2018 in CP(IB) No. 202/KB/2018 of the `Adjudicating Authority' (`National Company Law Tribunal, Kolkata Bench), wherein at paragraph 13 and 14, it is observed as under:
13.``It is to be noted that on date 19.11.2018, one advocate (not who is to appear early) requested this Adjudicating Authority not to proceed further with CIRP because Corporate Debtor was intending to challenge the order passed by this Adjudicating Authority by way of appeal. Accordingly, this Authority had adjourned the matter. It appears from record that even prior to that, the Corporate Debtor had filed appeal bearing no. 607/2018.
This fact was not disclosed to this Authority. Once this Authority direct IRP not to proceed for 7 days the Corporate Debtor conveniently withdraw the appeal and has filed this application before this Authority. This conduct of the Corporate Debtor is not only unethical but also illegal to some extent. In spite of that, I am allowing this application only with a view that Corporate Debtor should not undergo CIRP for non-appearance of their advocate.
14. Be that as it may, I hold that as the Advocate of the Corporate Debtor did not appeared in the matter, the ex-parte order is passed against them. I inclined to set aside that order. But while doing so, I direct the Corporate Debtor to deposit sum of Rs.1,00,000/- (Rupees One Lakh Only) in account of Deputy Registrar of NCLT, Kolkata Bench within 7 days and produce receipt thereof because it was also duty of director/officer of corporate debtor to keep the track of the matter but they appeared to have ignored duty. This amount will be used as part Resolution cost incurred by IRP/Operational Creditor, if any. The Corporate Debtor is also directed to file affidavit-in-reply within 7 days and give copy of the same to the other side. If above conditions are not fulfilled then this application would deemed to be rejected and the Corporate Insolvency Resolution Process would be proceeded T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 20 of 68 further. With this, application being CA(IB) No. 987/KB/2018 in CP(IB) No. 202/KB/2018 is disposed of."
`1st Respondent'/`Bank' Submissions:
29). The Learned Counsel for the `1st Respondent'/`Bank' contends that objection to the `Territorial Jurisdiction' of a Court' or `Tribunal' or an `Inherent Lack of Jurisdiction Plea' to entertain a `Suit'/`Application' should be raised at the first instant and can be waived and in this connection refers to the decision of the `Hon'ble Supreme Court in Mantoo Sarkar V Oriental Insurance Co. Ltd. & Ors. reported in AIR (2009) Supreme Court page 1022 wherein at paragraph 17 to 19 and 21, it is observed that as under:
17. "The Tribunal is a court subordinate to the High Court. An appeal against the Tribunal lies before the High Court. The High Court, while exercising its appellate power, would follow the provisions contained in the Code of Civil Procedure or akin thereto. In view of Sub-section (1) of Section 21 of the Code of Civil Procedure, it was, therefore, obligatory on the part of the appellate court to pose unto itself the right question, viz., whether the first respondent has been able to show sufferance of any prejudice. If it has not suffered any prejudice or otherwise no failure of justice had occurred, the High Court should not have entertained the appeal on that ground alone.
18. We, however, while taking that factor into consideration must place on record that we are not oblivious of the fact that a decision rendered without jurisdiction would be coram non juris.
Objection in regard to jurisdiction may be taken at any stage. (See Chief Engineer, Hydel Project v. Ravinder Nath , MANU/SC/0573/2008; (2008) IILLJ294SC) wherein inter alia the decision of this Court in Kiran Singh v. Chaman Paswan, MANU/SC/0116/1954 : [1955] ISCR117 was followed, stating:
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 21 of 68
26. The Court also relied upon the decision in Kiran Singh v. Chaman Pawan MANU/SC/0116/1954 : [1955] ISCR117 and quoted (in Harshad Chiman Lal case MANU/SC/0710/2005 : AIR2005SC4446) therefrom: Kiran Singh case (supra), AIR p.342, para6
6. ...It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings.
A defect of jurisdiction, ...strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties."
Though in the aforementioned decision these observations were made since the defendants before raising the objection to the territorial jurisdiction had admitted that the court had the jurisdiction, the force of this decision cannot be ignored and it has to be held that such a decree would continue to be a nullity.
19. A distinction, however, must be made between a jurisdiction with regard to subject matter of the suit and that of territorial and pecuniary jurisdiction. Whereas in the case falling within the former category the judgment would be a nullity, in the latter it would not be. It is not a case where the Tribunal had no jurisdiction in relation to the subject matter of claim. As a matter of fact the civil court had no jurisdiction to entertain the suit. If the Tribunal had the jurisdiction to entertain a claim petition under the Motor Vehicles Act, in our opinion, the Court should not have, in absence of any finding of sufferance of any prejudice on the part of the first respondent, entertained the appeal. In Bikash Bhushan Ghosh v. Novartis India Ltd., MANU/SC/7351/2007 (2007) IILLJ837SC, this Court had held:
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 22 of 68
17. There is another aspect of the matter which cannot be lost sight of. If the provisions contained in the Code of Civil Procedure are given effect to, even if the Third Industrial Tribunal, West Bengal had no jurisdiction, in view of the provisions contained in Section 21 of the Code of Civil Procedure, unless the respondent suffered any prejudice, they could not have questioned the jurisdiction of the court. In Kiran Singh v. Chaman Paswan this Court held:
(AIR p. 342, paras 6-7) `6. ... If the question now under consideration fell to be determined only on the application of general principles governing the matter, there can be no doubt that the District Court of Monghyr was `coram non judice' and that its judgment and decree would be nullities. The question is what is the effect of Section 11 of the Suits Valuation Act on this position.
7. Section 11 enacts that notwithstanding anything in Section 578 of the Code of Civil Procedure an objection that a court which had no jurisdiction over a suit or appeal had exercised it by reason of overvaluation or undervaluation, should not be entertained by an appellate court, except as provided in the section. Then follow provisions as to when the objections could be entertained, and how they are to be dealt with. The drafting of the section has come in--and deservedly--for considerable criticism; but amidst much that is obscure and confused, there is one principle which stands out clear and conspicuous. It is that a decree passed by a court, which would have had no jurisdiction to hear a suit or appeal but for overvaluation or undervaluation, is not to be treated as, what it would be but for the section, null and void, and that an objection to jurisdiction based on overvaluation or undervaluation, should be dealt with under that section and not otherwise.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 23 of 68 The reference to Section 578, now Section 99 CPC, in the opening words of the section is significant. That section, while providing that no decree shall be reversed or varied in appeal on account of the defects mentioned therein when they do not affect the merits of the case, excepts from its operation defects of jurisdiction. Section 99 therefore gives no protection to decrees passed on merits, when the courts which passed them lacked jurisdiction as a result of overvaluation or undervaluation. It is with a view to avoid this result that Section 11 was enacted. It provides that objections to the jurisdiction of a court based on overvaluation or undervaluation shall not be entertained by an appellate court except in the manner and to the extent mentioned in the section. It is a self-contained provision complete in itself, and no objection to jurisdiction based on overvaluation or undervaluation can be raised otherwise than in accordance with it.
With reference to objections relating to territorial jurisdiction, Section 21 of the Civil Procedure Code enacts that no objection to the place of suing should be allowed by an appellate or revisional court, unless there was a consequent failure of justice. It is the same principle that has been adopted in Section 11 of the Suits Valuation Act with reference to pecuniary jurisdiction. The policy underlying Sections 21 and 99 CPC and Section 11 of the Suits Valuation Act is the same, namely, that when a case had been tried by a court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds, unless it had resulted in failure of justice, and the policy of the legislature has been to treat objections to jurisdiction both territorial and pecuniary as technical and not open to consideration by an appellate court, unless there has been a prejudice on the merits. The contention of the appellants, therefore, that the decree and judgment of the District Court, Monghyr, should be treated T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 24 of 68 as a nullity cannot be sustained under Section 11 of the Suits Valuation Act.' "
Furthermore in determining as to whether a part of cause of action has arisen within the territorial jurisdiction of the court vis- a-vis an appellate court a large number of factors may have to be taken in consideration. [See Ambica Industries v. CCE MANU/SC/7727/2007 : 2007 (213) ELT323(SC)].
We cannot also lose sight of the fact that the appellant herein was a labourer. The justness or otherwise of the amount of compensation has not been disputed before us. If the High Court judgment is to be complied with, appellant would again have to initiate another proceeding either at Bareilly or Gurgaon or at Delhi or at Jabalpur. The same evidence would have to be rendered once again. The question of fact which was required to be determined in the proceeding before the Tribunal, namely whether the driver of the truck or the driver of the bus had been driving their respective vehicles rashly and negligently would have to be determined afresh. The factual finding recorded in this case is that the driver of the truck was driving the truck rashly and negligently. In our opinion, in a case of this nature, we may even exercise our extra ordinary jurisdiction under Article 142 of the Constitution of India. In New India Insurance Company v. Darshana Devi and Ors., MANU/SC/7137/2008 : (2008) 7SCC416, this Court held:
"20. Having said so, we must take notice of the fact that the deceased Baldev Singh was labourer. The Tribunal has found that besides being a labourer, he also used to deal in Safeda wood. He was the owner of the 'Safeda' wood which was being transported to the market for its sale. The first respondent, Darshana Devi, in her deposition, stated that the deceased used to purchase wood from the State of Himachal Pradesh on contract basis. Only Gurdial Singh and Ravinder Singh were accompanying him as labourer. His income was assessed only at Rs. 2,400 per month." T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 25 of 68
21. In this view of the matter, we are of the opinion that it is not a fit case where this Court should exercise its discretionary jurisdiction under Article 136 of the Constitution of India. Even in Brij Mohan this Court held:
(SCC p. 64, paras 13-14)
13. However, Respondent 1 is a poor labourer. He had suffered grievous injuries. He had become disabled to a great extent. The amount of compensation awarded in his favour appears to be on a lower side. In the aforementioned situation, although we reject the other contentions of Ms Indu Malhotra, we are inclined to exercise our extraordinary jurisdiction under Article 142 of the Constitution of India so as to direct that the award may be satisfied by the appellant but it would be entitled to realise the same from the owner of the tractor and the trolley wherefor it would not be necessary for it to initiate any separate proceedings for recovery of the amount as provided for under the Motor Vehicles Act.
14. It is well settled that in a situation of this nature this Court in exercise of its jurisdiction under Article 142 of the Constitution of India read with Article 136 thereof can issue suit directions for doing complete justice to the parties."
30). The Learned Counsel for the `1st Respondent/Bank' falls back upon the decision of the `Hon'ble Supreme Court in Sneh Lata Goel V Pushplata and Ors., reported in AIR 2019 SC at Page 824, wherein at paragraph 14 to 19, it is observed as under:
14. "The objection which was raised in execution in the present case did not relate to the subject matter of the suit. It was an objection to territorial jurisdiction which does not travel to the root of or to the inherent lack of jurisdiction of a civil court to T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 26 of 68 entertain this suit. An executing court cannot go behind the decree and must execute the decree as it stands. In Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman MANU/SC/0531/1970 : (1970) 1 SCC 670, the Petitioner filed a suit in the Court of Small Causes, Ahmedabad for ejecting the Defendant-tenant. The suit was eventually decreed in his favour by this Court. During execution proceedings, the Defendant-tenant raised an objection that the Court of Small Causes had no jurisdiction to entertain the suit and its decree was a nullity. The court executing the decree and the Court of Small Causes rejected the contention. The High Court reversed the order of the Court of Small Causes and dismissed the petition for execution. On appeal to this Court, a three judge Bench of this Court, reversed the judgment of the High Court and held thus:
6. A court executing a decree cannot go behind the decree:
between the parties or their representatives it must take the decree according to its tenor, and cannot entertain any objection that the decree according to its tenor, and cannot entertain any objection that the decree was incorrect in law or on facts. Until it is set aside by an appropriate proceeding in appeal or revision, a decree even if it be erroneous is still binding between the parties.
8. If the decree is on the face of the record without jurisdiction and the question does not relate to the territorial jurisdiction or Under Section 11 of the Suits Valuation Act, objection to the jurisdiction of the Court to make the decree may be raised; where it is necessary to investigate facts in order to determine whether the Court which had passed the decree had no jurisdiction to entertain and try the suit, the objection cannot be raised in the execution proceeding.
15. In this background, we are of the view that the High Court was manifestly in error in coming to the conclusion that it was within the jurisdiction of the executing court to decide whether the decree T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 27 of 68 in the suit for partition was passed in the absence of territorial jurisdiction.
16. The Respondent has filed a first appeal (First Appeal No. 43/2015) where the issue of jurisdiction has been raised. We must clarify that the findings in the present judgment shall not affect the rights and contentions of the parties in the first appeal.
17. The High Court has manifestly acted in excess of jurisdiction in reversing the judgment of the executing court which had correctly declined to entertain the objection to the execution of the decree on the ground of a want of territorial jurisdiction on the part of the court which passed the decree.
18. We have also not found merit in the contention that the impugned order of the High Court, being an order of remand, is in the nature of an interlocutory order which does not brook any interference. By the impugned order, the High Court has directed the executing court to entertain an objection to the validity of the decree for want of territorial jurisdiction. Such an objection would not lie before the executing court. Moreover, the objection that the property at Ranchi did not belong to the common ancestor is a matter of merits, which if at all, has to be raised before the appropriate court in the first appeal.
19. For the above reasons, we allow the appeal and set aside the impugned judgment and order of the High Court. The executing court shall conclude the execution proceedings expeditiously.
There shall be no order as to costs."
31). The Learned Counsel for the `1st Respondent/`Bank' points out that the `Debt' of the `1st Respondent/Bank', on 12.10.2018, stood adjudicated against the `Corporate Debtor' in O.A.No. 1331 of 2016, on the file of `Debt Recovery Tribunal', Hyderabad', for recovery of a sum of Rs.20,63,07,900/- (Rupees Twenty Crore Sixty Three Lakhs Seven T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 28 of 68 Thousand and Nine Hundred Only) along with pendenlite and future interest @ 14.80%. Further, the `Debt Recovery Tribunal - 1', Hyderabad, in O.A. No. 1331 of 2016 through its order dated 12.10.2018 had observed that the Bank was also entitled to proceed against the person and properties of the `Defendants', towards realisation of its `Dues'.
32). It is the plea of the `1st Respondent/Bank' (in its `Reply' to the instant `Appeal') that the `Insolvency Proceedings' was filed against the `Corporate Debtor' upon (failure to repay the dues) before `National Company Law Tribunal', Hyderabad Bench, in the month of June 2019 and both the States of `Telengana' and `Andhra Pradesh' were under the Jurisdiction of `National Company Law Tribunal', Hyderabad Bench, in June 2019, and that the `Amaravati Bench' though notified earlier became effective only from August 2019.
33). The Learned Counsel for the `1st Respondent/Bank' contends that the `principle of Natural Justice' was followed in the instant case and further that the `Notice of Default' was served by the `1 st Respondent/Bank' on 03.05.2018 which got returned with an endorsement "Left'' and the Advance Notice was attempted to be served T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 29 of 68 and the same was returned with an endorsement "Unserved". Further, the `1st Respondent/Bank' was again directed to serve `Notice' and also effected service through `Paper Publication', which was effected on 10.07.2019 in `Telengana Today'. Subsequent to the `service', the `Appellant' had entered his appearance on 18.07.2019 and sought time to file `Reply'.
34). The clear-cut stand of the `1st Respondent/Bank' is that, at request of the Appellant's side, the matter was adjourned and listed to 08.08.2019 and that the `Appellant's Advocate' was engaged in the matter had not appeared on 08.08.2019 because of `Viral Fever'. According to the `1st Respondent/Bank', the `Appellant' had failed to explain his `nonappearance' on 26.08.2019, when the submissions of the `1st Respondent/Bank' were heard and orders were reserved. Later, on 27.09.2019, the final order was passed.
35). It is the submission of the `1st Respondent/Bank' that the `Appellant' `at no point of time' had informed the `1st Respondent/Bank' about the `change of address' of the Registered Office of the Company. Further, the `Board Resolution' filed by the `Appellant' together with I.A. Nos.900 and 901 of 2019 also reflects that the registered office of the `Appellant' was Hyderabad, Telengana. Indeed, the `Appellant' T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 30 of 68 along with I.A. Nos. 900 and 901 of 2019 had brought on record a `Letter' addressed by the `Vijaya Bank' which reflects the address for all communication was Lakdikaphool, Hyderabad, Telengana.
36). The Learned Counsel for the `1st Respondent/Bank' submits that it is the `Appellant's case' that he was informed of the `Admission' of the `Application' filed under Section 7 of the Code, by the `Resolution Professional' through letter dated 28.10.2019. However, I.A. No. 900 of 2019 and I.A.No. 901 of 2019 for setting aside an `Exparte Order' were filed on 16.10.2019, which is earlier to 28.10.2019 i.e., the date of alleged knowledge. No reasons were given for the failure of the `Appellant" to contact his `Advocate' for more than two months' period.
37). The Learned Counsel for the `1st Respondent/Bank' brings it to the notice of this `Tribunal' that the `Appellant' had not challenged the aspect of `Territorial Jurisdiction', despite making appearance before the `Adjudicating Authority'. As a matter of fact, only after the `CIRP' proceedings were admitted, the `Appellant' filed an `Application' as per Rule 49 (2) of the NCLT Rules, 2016, and simultaneously filed `Civil Revision Petition No. 2508 of 2019 and that on 30.10.2019, `Stay' was granted by the `Hon'ble High Court of Telengana'. Because of the T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 31 of 68 `Stay', the `Adjudicating Authority' had not proceeded with the application filed under Rule 49 (2) of the NCLT Rules, 2016.
38). In this connection, the Learned Counsel for the `1st Respondent/Bank' points out that the `Appellant' took advantage of the `Stay Order' withdrew a sum of Rs.75,00,000/- (Rupees Seventy Five Lakhs only) from the `Andhra Bank Account' of the `Corporate Debtor', without an intimation to `Interim Resolution Professional' / `Committee of Creditors' and hence he is guilty of `Violation' of the `I & B Code'.
39). The other contention projected on the side of the `1st Respondent/Bank' is that the `Appellant' relies on the aspect of `Lack of Territorial Jurisdiction' and in this regard, the `1 st Respondent/Bank' submits that the plea of `Lack of Territorial Jurisdiction' can be waived by a `Party'.
40). The Learned Counsel for the `1st Respondent/Bank' points out that the extract of `Minutes of the Meeting of the `Board of Directors' of M/s. Neerajaksha Iron and Steel Private Limited' (duly signed by the Managing Director of the company) that took place on 07.04.2018 at 11.30 a.m. at the Registered Office of the company which provides for T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 32 of 68 `Authorization' given to Mr. S.A. Koteswar Rao, Ms. S. Sitha Mahalakshami or Mr. S.V. Sunil Choudary, Directors to deal with `Statutory Authorities. In fact, the said extract of the `Minutes of the Meeting' of the `Board of Directors' of M/s. Neerajaksha Iron and Steel Private Limited' company dated 07.04.2018 mentions the `Registered and Administration Office of the company' as "# 108, 1st Floor, Sovereign Shelter, Near Ganga Jamuna Hotel, Lakadikapool, Hyderabad
- 500004.; Works : Site No. 4, 5, Mededhal Village, Halaharvi Mandal
- 518395, Kurnool Dist, Andhra Pradesh, India".
41). On the side of the `1st Respondent/Bank', it is brought to the notice of this `Tribunal' that the `Vijaya Bank', SAM Branch, Hyderabad, had addressed a `Letter' dated 06.10.2018 to `M/s. Neerajaksha Iron and Steel Private Limited' (`Corporate Debtor') on the subject of `Approval' of `OTS Proposal' in `NPA Account' of M/s Neerajaksha Iron and Steel Private Limited, wherein it is mentioned as under:
"As per the offer letter given by you Dt. 24.09.2018 the competent authority of our Bank has accorded approval for the captioned OTS proposal on the following terms and conditions:
a) Acceptance of Rs.12.00 Crores to consortium in full and final settlement of the amount payable as under:
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 33 of 68
i) Rs.10.00 lakhs already paid in no-lien account. Rs.90.00 lakhs to be paid on or before 12.10.2018.
ii) Rs.1.00 crore to be paid on or before 31.10.2018.
iii) Balance Rs.10.00 crores to be paid in 5 EMI of Rs.2.00 crores on or before every month end commencing from Nov'18.
b) You have to pay the delayed period interest at MCLR + 1% i.e., 9.70% beyond 30 days from the date of approval on the payable amount of offer amount i.e., from 06.11.2018.
42). The Learned Counsel for the `1st Respondent/Bank' submits that the `Appellant' has not raised any issue/controversy relating to the merits of the case. Also, it is represented on behalf of the `1st Respondent/Bank' that the order dated 12.10.2018 in O.A. No. 1331 of 2016 passed by `Debts Recovery Tribunal-1, Hyderabad, has become a `final' and `conclusive' one between the parties. Besides these, the aspect of `Territorial Jurisdiction' was raised only on 16.10.2019, after the `Application' filed under Section 7 of the I & B Code, 2016, by the `1st Respondent/Bank' was admitted, after a period of three months from the date of Appellant making an appearance before the `Adjudicating Authority' on 18.07.2019.
Pleas of Second Respondent :
43). It is represented on behalf of the `2nd Respondent', when the case was filed before the `Adjudicating Authority' (`National Company Law T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 34 of 68 Tribunal', Hyderabad Bench), the said Bench was available for `Andhra Pradesh' and `Telengana' which were under the jurisdiction of the same Bench. At that point of time, the `National Company Law Tribunal', `Amaravati Bench' was not constituted. Therefore, the `Petition' was filed before the Hyderabad Bench of the `Adjudicating Authority' (`National Company Law Tribunal', Hyderabad Bench) and that the `Appellant' had attended a hearing and informed the Hon'ble Bench that he would file his reply and failed to appear on later occasion. Till this period, the case was under the jurisdiction of the `Adjudicating Authority', Hyderabad Bench, and in the inter regnum, the `Amaravati Bench' of the `National Company Law Tribunal' (`Adjudicating Authority') was constituted. Because of the absence of the `Corporate Debtor' during the course of the next hearing, the case was kept for passing orders by the `Adjudicating Authority'.
44). According to the `2nd Respondent', the `Promoter/Director' has not cooperated in providing any information required for the smooth running and the conduct of the `Corporate Insolvency Resolution Process'. Owing to the non-cooperation of the `Directors', the `Resolution Professional' is unable to take control of the operations of the `Corporate Debtor. In fact, without the concurrence and approval of T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 35 of 68 the `Resolution Professional', the `Promoter/Director' of the `Appellant' had withdrew funds from the `Corporate Debtor's Bank Account' and that the `Corporate Debtor' is left with no `Working Capital / Funds' to recommence its operations. In fact, the factory is `non-operational' because of the hindrance created by the `Promoter/Director/Appellant'.
45). Further, when the `Resolution Professional' had visited the factory, it was noticed as well as informed by the earlier `Plant Manager' that their factory is shut down from July 2019. The `Resolution Professional' filed an `Interlocutory Application No. 331 of 2020', seeking necessary directions from the `Adjudicating Authority' under Sec 19 (2) of the I & B' Code, 2016 and the same is pending.
46). The `Corporate Debtor' is trying to buy time and mishandled the accounts, he had diverted a sum of Rs.75,00,000/- lying in `Corporate Debtor's Bank Account' during the `CIRP' period when there was a stay from the `Hon'ble High Court' without any information to the `Resolution Professional'.
47). An Interlocutory Application No. 459, seeking directions under Section 60 (5) of the I & B Code, 2016 filed by the `Resolution Professional' is pending before the `Adjudicating Authority'. The T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 36 of 68 `Appellant' is not cooperating to provide the required information to the `Interim Resolution Professional/Resolution Professional' and also to deal with the `Banking matters/Cheques' routed through `IRP/RP' (countersigned by IRP/RP). Further, the `Appellant' had not provided any `Information/Accounts/Records' for the period relating to 2019 -
2020.
48). The `Appellant' has not handover the `Assets' or `Books' to the `Resolution Professional' and also refused to permit the `Prospective Resolution Applicants' to have a look of the premises. In fact, neither the `Corporate Debtor' nor his `Learned Counsel' raised any objection at the time of hearing, pertaining to the issue of `jurisdiction', before the `Adjudicating Authority'.
49). The `Attendance Sheet' of the `Adjudicating Authority' of the `National Company Law Tribunal', Hyderabad Bench, on 18.07.2019 in CP (IB) No.374/7/HDB/2019, in respect of M/s. Neerajaksha Iron and Steel Private Limited (`Corporate Debtor') shows the `Appellant' as `Director' has signed the same which was also mentioned in the order of `Adjudicating Authority' which categorically mentions `Mr. Sunil, Director of the Corporate Debtor was present and prayed for time for engaging a Counsel and giving reply and accordingly the time was T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 37 of 68 enlarged at request and the matter was directed to be listed on 08.08.2019 for hearing submissions'.
50). On behalf of the `2nd Respondent', it is pointed out that the web search also shows that the address of the company as "Neerajaksha Iron & Steel Pvt. Ltd., contact address Flat No.108, Sovereign Shelter, Lakdi ka pool, Milapur Hospital Road, Hyderabad, Telengana - 500004, India, supplier Mr. Sunil Kumar Chowdary".
51). Since the `Corporate Debtor' had not appeared after 18.07.2019, the `Adjudicating Authority' (`National Company Law Tribunal'), Hyderabad Bench, had admitted the `Application' in CP(IB) No.374/07/HDB/2019 on 27.09.2019 and the 2nd Respondent `Sridhar Venkatraya Sundararaja' as an `IRP' who was directed to take necessary action.
52). Both the `States of Telengana and Andhra Pradesh' were under the jurisdiction of `National Company Law Tribunal', Hyderabad, till 31.07.2019 and that the `Amaravati Bench' was set up in August 2019 and this fact will not change the position of huge unpaid loan by the `Appellant'. Already, the `Resolution Professional' had issued `Form G' T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 38 of 68 and `RFRP' and because of the `litigation' and `delays', considerable time was lost already.
53). It is represented on behalf of the `2nd Respondent' that the RP has conducted the `4th Committee of Creditors' meeting on 12.03.2020 and that the said committee had approved the `RFRP', to be issued to the `Prospective Resolution Applicants'. The last date for submission of `Resolution Plan' was 15.04.2020.
54). Apart from the above, it is the stand of the `2nd Respondent' that in the `4th Committee of Creditors Meeting', the `Members' had directed the `Resolution Professional' to prefer an `Application' before the `Adjudicating Authority' for an extension of `CIRP' period, further 72 days beyond the 180 days Viz., up to 05.06.2020 and the `CoC Members' had voted 100% in favour of the `CIRP' period extension. Also that, as per `IBBI' (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020 dated 29.03.2020, in terms of Regulation 40C, the period of lock down imposed by the Central Government because of the pandemic of Covid-19, shall not be counted for the purpose of the timeline.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 39 of 68
55). It is the version of the `2nd Respondent', out of six `Prospective Resolution Applicants', 4 could not secure `E-Pass', to visit the site during Covid-19 lock down. In the `5th Committee of Creditors', that took place on 23.06.2020, the `Members of the CoC' by taking out of the aforesaid facts, gave their consent to seek an extension of `CIRP' period for a further period of 120 days, beyond the time limit of 180 days pursuant to Section 12 of the I & B Code, 2016 and authorized the `Resolution Professional' to prefer an extension application before the `Adjudicating Authority' seeking its approval.
56). According to the `2nd Respondent', the `Appellant' is attempting to delay/derail the `Corporate Insolvency Resolution Process' and he has failed to settle the loan through OTS shall make repayment by taking recourse to the `Legal Process'.
Gist of 3rd Respondent's Report :
57). The Assistant Registrar on behalf of the 3rd Respondent in his Report dated 21.02.2021, has averred that the `Ministry of Corporate Affairs' (vide Notification S.O. 1935 (E) dated 01.06.2016 inter alia, T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 40 of 68 constituted NCLT, Hyderabad Bench, located at Hyderabad, to exercise `jurisdiction' over State of Andhra Pradesh and State of Telengana.
58). Later, the Central Government, Ministry of Corporate Affairs, New Delhi, as per Notification S.O. 1216 (E) dated 08.03.2019 by Amendment in the Notification dated 01.06.2016 had constituted the National Company Law Tribunal, Amaravati Bench at Amaravati location, to exercise `jurisdiction' over the area of Andhra Pradesh.
59). The Central Government, Ministry of Corporate Affairs, New Delhi, as per Order No.A-22012/42019-Ad.IV-MCA dated 19.06.2019 made posting of Members of NCLT and for Amaravati Bench, posted the Member Mr. Mohammed Ajmal, Judicial Member, Hyderabad.
60). The Hon'ble President, NCLT, in exercise powers conferred under Section 419 of the Companies Act, 2013, as per Order No. 10/03/2019-NCLT dated 25.07.2019, constituted Amaravati Bench (Single Bench) Shri. Mohammed Ajmal, Judicial Member.
61). Though the `Ministry of Corporate Affairs', New Delhi had constituted the NCLT, Amaravati Bench at Amaravati vide Notification T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 41 of 68 dated 08.03.2019, but for want of premises, the `National Company Law Tribunal', Amaravati Bench, is functioning from Hyderabad.
62). On providing the premises for NCLT, Amaravati Bench and the Members by the `Ministry of Corporate Affairs', the NCLT will take all possible steps to make the NCLT, Amaravati Bench, functional at Amaravati on priority and till then it is not possible for the NCLT to hold hearing of cases at Amaravati.
Appellant's Rejoinder:
63). It is the stand of the `Appellant' that only, the `National Company Law Tribunal', within whose `jurisdiction' the Registered Office of the `Corporate Debtor' is located shall be deemed to be the `Adjudicating Authority' and shall have `jurisdiction' to initiate ` Corporate Insolvency Resolution Process', against the `Corporate Debtor'. Further, a `Decree'/`Order' passed by a `Court' without `jurisdiction' is a nullity and a plea against it can be set up at any stage.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 42 of 68
64). The `Appellant', during the hearing of IA Nos.900 and 901 of 2019, the opportunity for the first time, to raise an objection as to the `jurisdiction' of the `National Company Law Tribunal', Hyderabad, and thus, the objection as to the `jurisdiction' was taken at the first available instance itself. The `Board Resolutions', annexed to the `Applications' filed before the `National Company Law Tribunal', Hyderabad Bench, were a part of the old printed stationery and it cannot form the basis of alleging that the Registered Address of the `Corporate Debtor' was anywhere, other than the address available on the records of the `Registrar of Companies'.
65). The `National Company Law Tribunal', `Amaravati Bench', was constituted as per notification dated 08.03.2019 and from that date, the `National Company Law Tribunal', Hyderabad Bench, no longer possessed the `jurisdiction', to entertain or decide `Petitions'/`Applications' which did not come within the `Territorial Jurisdiction', of `National Company Law Tribunal', Hyderabad Bench. A party should not suffer for the fault of his/its `Advocate' and that the `Appellant' in the instant case, cannot be faulted for the absence of his `Advocate'.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 43 of 68
66). The lack of `Territorial Jurisdiction', in the instant case, goes to the root of the matter, as the `National Company Law Tribunal', Hyderabad Bench, does not qualify to be an `Adjudicating Authority', as per the provisions of the `I & B' Code.
Conferment of Jurisdiction:
67). It is to be pointed out that the `Conferment of Jurisdiction' is a `Legislative Function' and it can neither be conferred with the consent of the parties nor by the `Superior Court'. A `Court of Law' cannot derive a `Jurisdiction' apart from the `Statute'.
Citations:
68). In the decision in Inacio Martini V Narayan Hari Nayak, reported in (1993) 3 SCC at page 123, it is held that by the `Hon'ble Supreme Court' that when a `Tribunal' is constituted under the `Act' to determine matters mentioned therein, only that `Tribunal' is empowered to entertain the said matter.
69). In SEI Trading India P Ltd. V Aishwarya Technologies and Telecom Ltd., reported in (2018) 3 Comp Cas - OL 423, an `Application' was preferred by an `Operational Creditor' before the T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 44 of 68 Hyderabad Bench of the `Adjudicating Authority', was challenged by the `Corporate Debtor' on the ground that the Forum did not enjoy jurisdiction. This was on the basis of choice of `Territorial Jurisdiction' under the `Distributorship Agreement' between the parties. The said plea was rejected by the `Adjudicating Authority' holding that under the I & B Code, the territorial jurisdiction is determined on the basis of location of the Registered Office of the `Corporate Debtor' Waiver:
70). A `Waiver' is an intentional relinquishment of a known right or an agreement not to assert a right. It involves conscious abandonment of an existing legal right, advantage, benefit, claim or privilege."
Waiver is limited to the right `wavered' as per decision in Danukdhari Singh V Nathunsaha reported in 11 Calcutta Weekly Notes Page 848.
71). In respect of a `Waiver', there ought to be some clear and decisive act or conduct beyond mere silence, as pure silence by a party in regard to a right perfectly known to the other can really mislead a man of average intelligence. The aspect of `Waiver' is a mixed question of `Law and Facts'.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 45 of 68
72). The `principle of waiver' or `Approbation' and `Reprobation' lies at the root of conduct of productive change of activation and principle is akin to the `Rule of Constructive Resjudicata' IV as provided in Explanation 4 of Section 11 of Civil Procedure Code. Also that, a `Court of Law' / `Tribunal' ought to check the tendency of an `Unsuccessful Litigant' to avoid his defeat by devising a new case which was never projected when it should have been set up.
Acquiescence:
73). `Acquiescence' is nothing more than an absolute or positive waiver. It amounts to the abandonment of rights as per decision in Govindsa Marotisa V Ismail and Anr., reported in AIR 1950 Nagpur, Page 22.
Estoppel:
74). Be it noted, that `Estoppel' is not a `Cause of Action'. `Estoppel' deal with `Question of Fact' and not `Question of Right'. However, `Waiver' being an agreement to release or not to assert a right may constitute a `Cause of Action'. There is `no Estoppel' on a point of Law going to the `jurisdiction' of a `Court'. A person may be prevented by way of his action or conduct or silence when it is his duty to speak from T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 46 of 68 asserting a `Right' which he would have otherwise had as per decision of the `Hon'ble Supreme Court' in State of Punjab & Ors. V Dhanjit Singh Sandhu (CIVIL APPEAL Nos. 5698-5699 OF 2009 - decided on 14.03.2014) reported in AIR 2014 SC Page 3004.
75). In `Estoppel' because of a person's own act or acceptance or stopeth or closeth up his mouth to allege or plead the truth (vide 10 RCL
675).
Judicial Estoppel:
76). In the course of litigation, a `party' is not allowed to assume an inconsistent and contradictory position (vide 31 CTS Estoppel Ss 1176).
Judgment by `Consent' / `Default':
77). It is pointed out that a `Judgment' by `Consent' or `Default' is as effective an `Estoppel' between the parties as `Judgment' whereby the `Court' exercises its mind on a contested case, as per decisions (vide in Sailendra Narayan Bhanja Deo V State of Orissa, reported in AIR 1956 SC 346; Kinch V Walcott, reported in 1929 AC 482, reported in South American & Mexican Co. (In re:), 1895 (1) Ch 37).
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 47 of 68 Estoppel (Rule of Equity):
78). It is to be remembered that `Estoppel' is a rule of `Equity' which forbids truth being pleaded or representation, on which faith, another has acted to his detriment being retracted.
Discussions:
79). It is brought to the fore that the `Appellant/Director' of the `Corporate Debtor' based on his authority had `sworn' to an `Affidavit' in I.A.No. 900 of 2019 filed (under Rule 49 (2) of the NCLT, Rules 2016), among other things mentioning that the address of the `Corporate Debtor' shown in the `Cause Title' of the main `Petition' was an incorrect one and further, the 'Corporate Debtor' was not operating its `Business' from the said Address.
80). Furthermore, it was averred in IA No.900 of 2019 by the `Corporate Debtor' (as `Applicant/Petitioner') before the `Adjudicating Authority', that after 08.08.2019, `Financial Creditor' was approached b it (`Corporate Debtor') to settle their dispute and in fact, the `Corporate Debtor' had approached the Learned Counsel Mr. K. Krishna Kishore to represent before the `Adjudicating Authority'. In the meanwhile, the `Adjudicating Authority' had set the `Corporate Debtor' T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 48 of 68 as `Exparte' and proceeded the matter on 08.08.2019 and upon enquiry with his earlier Advocate he was informed that the `Advocate' could not attend the `Court' as he was suffering from `Viral Fever'.
81). That apart, the `Corporate Debtor' as Petitioner in I.A.No. 900 of 2019 in CP (IB) No. 374/7/HDB/2019 had prayed for setting aside the `Exparte Order' dated 27.09.2019 in main CP (IB) No. 374/7/HDB/2019 and further sought permission to contest the main Company Petition on merits by providing an opportunity to it, which will not cause any prejudice to the `Respondent'/`Financial Creditor'/`Applicant'.
82). The `Appellant'/`Director' of M/s. Neerajaksha Iron and Steel Private Limited (`Corporate Debtor'), on behalf of the `Corporate Debtor', (As an `Applicant'/Petitioner), before the `Adjudicating Authority', had filed IA No. 901 of 2019 in CP(IB) No.374/7/HDB/2019 inter alia averring that `No Notice' was served (upon the `Corporate Debtor') before filing of the main CP (IB) No. 374/7/HDB/2019 and further that a copy of the `Application/Petition' (Under Section 7 of the `I & B Code') was also not served to it.
83). In fact, in I.A. No. 901 of 2019 in the main CP(IB) No.374/7/HDB/2019, the `Appellant's Managing Director' had T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 49 of 68 mentioned that, as per Section 60 of the `I & B' Code, `Petition' shall be filed before `National Company Law Tribunal', having `territorial jurisdiction' over the place where the `Registered Office' of the `Corporate Persons' is located and that the `Registered Office' of the `Corporate Debtor' is located in Kurnool, Andhra Pradesh, and hence, the `National Company Law Tribunal', `Amaravati Bench' has a `jurisdiction' to entertain the `Company Petition' and not the `Tribunal', Hyderabad.
84). As a matter of fact, the `Applicant/Corporate Debtor' in I.A.No. 901 of 2019 had prayed for staying of all further proceedings pursuant to the `Exparte Order' dt. 27.09.2019 in CP (IB) No. 374/7/HDB/2019 (including the `CIRP' and `Moratorium').
85). The `1st Respondent/Financial Creditor/Applicant' before the `Adjudicating Authority', in its `counter' had mentioned that the `Bank / Financial Creditor' had sent a `Notice of Default' dated 03.05.2018 to the `Corporate Debtor / Applicant' and the same was retuned with an endorsement "Left" by the `Postal Authority'. In reality, after filing of the main Company Petition, the `Bank / Financial Creditor' had issued the `Notice' along with `Material Papers' to the `Last Known Address of T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 50 of 68 the `Corporate Debtor' and the said `Notice' got retuned as "Unserved" by the `Postal Authorities'.
86). It is the stand of the `1st Respondent/Bank' that the `Adjudicating Authority' had directed the `Registry' to prepare the `Notice' and was directed to collect the same and serve it on the `Corporate Debtor', to file `Proof of Service' and accordingly, the matter was adjourned to 01.07.2019. A memo was filed by the `1st Respondent/Bank' before the `Adjudicating Authority' stating that the `Notice' sent to the `Corporate Debtor' was "Unserved" and the unserved cover was also filed before the `Authority'.
87). Not resting with the above, the `Adjudicating Authority' had directed the issuance of another `Notice' to the `Corporate Debtor' for `Appearance' and also directed to effect `Paper Publication' through `Substituted Service', in respect of the `Corporate Debtor' for appearance and to file `Proof of Service'. Indeed, the `Adjudicating Authority' on 08.08.2019 had passed the following order:
"Counsel for the Petitioner present. No representation on behalf of the Respondent. As seen the Order dated 18.07.2019, one Mr. Sunil, Director of the Corporate Debtor was present and prayed time for engaging counsel to give reply. At the request, matter posted to today. Sufficient time is given to the other side.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 51 of 68 Respondent is proceeded as Ex-parte. For hearing submissions of the Petitioner's counsel, matter adjourned. Petitioner's counsel is directed to inform next date of hearing to the other side. Put up the matter on 26.08.2019."
88). It is represented that the orders were reserved on 26.08.2019, after hearing the matter and the `Application' filed by the `1st Respondent/Bank' under Section 7 of the Code was admitted for `CIRP' on 27.09.2019.
89). The `1st Respondent/Bank' in its counter (to both the Applications) before the `Adjudicating Authority' had stated that the `Corporate Debtor' had not informed the Bank in regard to the change of the Registered Office address from `Hyderabad' to `Kurnool'. The `Corporate Debtor' had not made any arrangements to submit its arguments on 26.08.2019 before the `Adjudicating Authority'.
90). It comes to be known that in I.A. No. 1 of 2019 in CRP No. 2580 of 2019, filed by the `Corporate Debtor / M/s. Neerajaksha Iron and Steel Private Limited' (as Petitioner) against the `1st Respondent/Corporation Bank', on 30.10.2019, the `Hon'ble High Court for the State of Telengana, Hyderabad had stayed the operational of the Order dated 27.09.2019 passed by the `Adjudicating Authority' (NCLT, Hyderabad T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 52 of 68 Bench) in CP (IB)/374/7/HDB/2019 till 20.11.2019. Added further, on 06.12.2019, in CRP No.2508 of 2019, the Hon'ble High Court for the State of Telengana, Hyderabad, had made an observation that `if the Revision Petitioner intends to assail the Impugned Order, he has to file an appeal before the `Appellate Tribunal' and accordingly dismissed the `Civil Revision Petition' without costs.
91). On behalf of the `1st Respondent/Bank', it is brought to the notice of this `Tribunal' that CRP No.3080 of 2019 filed by the `Petitioner' therein was granted with a liberty to avail an alternative remedy before the `National Company Law Appellate Tribunal' and accordingly dismissed the `Civil Revision Petition' as `withdrawn', without costs.
92). Be it noted, that the CP (IB) No.374/07/HDB/2019 was filed by the `1st Respondent / Bank' (Financial Creditor), under Section 7 of the `I & B Code', 2016, read with Rule 4 of the Insolvency and Bankruptcy Code on 11.06.2019 before the `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench), against the `Corporate Debtor' / `Neerajaksha Iron and Steel Private Limited'.
93). It is relevantly pointed out that in the `Application' in CP (IB) No.374/7/HDB/2019 before the `Adjudicating Authority' (NCLT, Hyderabad Bench), (filed by the `1st Respondent/Corporation Bank' in T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 53 of 68 Form I seeking to initiate `CIRP' against `M/s. Neerajaksha Iron and Steel Private Limited / Respondent' therein, under Part IV `Particulars of Financial Debt', in Serial No.2, the `total outstanding' as on 28.02.2021 was mentioned as Rs.13,14,62,424/- (Rupees Thirteen Crores Fourteen Lakhs Sixty Two Thousand Four Hundred and Twenty Four only) and the `Date of Default' was mentioned as 12.10.2018 (`Date of Decree' and `Order' before the `Debt Recovery Tribunal - I, Hyderabad).
94). In Form - I filed by the `1st Respondent / Bank' before the `Adjudicating Authority' (NCLT, Hyderabad) in CP (IB) No. 374/7/HDB/2019 (under Section 7 of the `I & B' Code, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, under Part V, `Particulars of Financial Debt' (Documents, Records and Evidence of Default), it was mentioned that the `Charge' was first created in April 2011 and agreement for `Term Loan', `Working Capital Facility' and `Deed of Hypothecation' to secure demand, cash credit was executed, `Joint Mortgage' by `Deposit of Title Deeds' by way of construction delivery of companies, immovable properties was confirmed vide Registered MOD T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 54 of 68 No.1163/2011 dated 06.04.2011. Also, it was mentioned that the `Charge Certificate' dated 11.08.2013 was for Rs.18.75 Crores.
95). Before the `Adjudicating Authority', the `1st Respondent/Bank' in CP (IB) No.374/7/HDB/2019, in the statement of facts filed on behalf of it at paragraph 13 had mentioned that the `Consortium Banks' had executed `inter-se agreement' for `Consortium Working Capital' and `Term Loan Advance' to the `Corporate Debtor' on 09.05.2011.
96). Besides the above, the 1st Respondent/Bank had also averred in its statement of facts before the `Adjudicating Authority' that the `Financial Creditor' issued `Notice of Default' dated 25.03.2019 and that the `Corporate Debtor' had evaded to receive the said `Notice' and the same got returned with an endorsement "Left".
97). There is no two opinion of the fact that the `Corporate Debtor' had approached the `1st Respondent/Corporation Bank', Hyderabad and `Vijaya Bank', Banjara Hills for availing the `Loan facilities' to an extent of Rs.14,75,00,000/- under the `Consortium Banking Arrangements'. The `1st Respondent/Applicant/Financial Creditor' and the `Vijaya T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 55 of 68 Bank' upon verification, execution of documents, etc., was pleased to disburse the `Loan Amount' to the `Corporate Debtor'.
98). In August 2013, the `Corporate Debtor' had approached the `Consortium Banks' for renewal of the existing `Working Capital Facility' and fresh `Working Capital Facility' of Rs.2 Crore from the `1st Respondent/Bank', and Rs.2 Crore from `Vijaya Bank' and the `Additional Limit' was sanctioned upon verification of the documents and financial position of the `Corporate Debtor'. The `Corporate Debtor' was unable to repay the `Loan Amounts' in a time bound manner and hence the `Financial Creditor' filed O.A. No.1331 of 2016 before the `Debt Recovery Tribunal' and the same was allowed on 12.10.2018, directing the `Corporate Debtor' and other `Guarantors' to pay a sum of Rs.20,63,07,900/- along with 14.80% interest per annum till date of realisation.
99). It is to be remembered that O.A.No. 1331 of 2016 filed by the `1 st Respondent/Bank' was ordered by the `Debt Recovery Tribunal' Hyderabad on 12.10.2018. In fact, by the said order, the `Corporate Debtor/Grantors are directed to pay a sum of Rs.20,63,07,900/- together with 14.80% interest per annum till the date of realisation. To put it T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 56 of 68 precisely, the said order of the `Debt Recovery Tribunal' has become final, conclusive and binding between the parties inter se.
100). Before the `Adjudicating Authority', when the CP(IB) No.374/7/HDB/2019 was posted on numerous dates i.e., 11.06.2019, 01.07.2019, 18.07.2019, 08.08.2019 and 26.08.2019, the Corporate Debtor had failed to enter appearance. A `Substituted Service' was ordered on 01.07.2019 by the `Adjudicating Authority' in respect of the Corporate Debtor in `Telengana Today' Newspaper and the same was effected on 10.07.2019. In that publication, the address of the`Corporate Debtor' (M/s. Neerajakshi Iron and Steel Private Ltd, R/o. Flat No. 108, Sovereign Shelter, Ganga Jamuna Hotel, Lakdikapool, Hyderabad - 500004 (OR) Factory Address M/s. Neerajakshi Iron & Steel Private Limited, Site No.4 & 5, Medehal Village, Halaharvi Mandal, Kurnool District, A.P.-518395, Debtor. Also, it is brought to the notice of this `Tribunal' that the `Substituted Service' (paper publication) was made in the Telugu language newspaper `Mana Telengana' (Telugu) on 10.07.2019 (Edition) of course, in the place where the Registered Office of the `Corporate Debtor' was situated and to that effect `proof of service' was filed before the `Adjudicating Authority'. T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 57 of 68
101). On 08.08.2019, the `Adjudicating Authority' had clearly observed in the order of main CP (IB) No.374/7/HDB/2019 that `as seen from the order dated 18.07.2019' one Mr. Sunil, Director of the `Corporate Debtor' was present and prayed time for engaging Counsel to give `Reply'. At his request matter was posted to today. Sufficient time was given to the other side, the Respondent was proceeded as exparte. For hearing the submissions of the Petitioner's Counsel (1 st Respondent/Bank) the matter was adjourned and that the `Petitioner's Counsel was directed to inform the next date of hearing to the other side and the matter was directed to list on 26.08.2019 and that on 26.08.2019 the `Orders' were `Reserved'.
102). The `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench) after satisfying itself that the 1st Respondent/Bank had satisfied with the requirements as enunciated under the `I & B' Code, 2016 had admitted the main CP(IB) No. 374/7/HDB/2019 on 27.09.2019 and appointed an `Insolvency Professional' as an `Interim Resolution Professional', as proposed by the `1st Respondent/Financial Creditor'.
103). Before the `Adjudicating Authority' on 18.07.2019 hearing date of the main CP (IB) No.374/7/HDB/2019 the `Corporate Debtor's Director Mr. Sunil had appeared and prayed for time to engage an T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 58 of 68 Advocate and to file a `Reply'. Based on the said `Directors' request, the `Adjudicating Authority' had adjourned the matter to 08.08.2019. On 08.08.2019, there was no representation made on the side of the `Corporate Debtor' and that the `Adjudicating Authority' on being subjectively satisfied to the effect that there was no representation on behalf of the `Corporate Debtor' had set the `Corporate Debtor' as `Exparte', on 08.08.2019.
104). It is not out of place this `Tribunal' to make a pertinent mention that a Registered Office of the Company determines the `Domicile' of a company for all purposes as per decision Daimler Co. Ltd. V Continental Tyre & Rubber Co. Ltd. reported in (1916) 2AC 307.
105). The `Appellant' at the earliest stage had not moved his little finger to come out with a plea of `lack of territorial jurisdiction' relating to the `Corporate Debtor'. In the instant case, the `Appellant' had represented before the `Adjudicating Authority' as `Director' of the `Corporate Debtor' and sought time to engage a `Counsel' to furnish a `Reply' and based on his request, the main CP (IB) No.374/7/HDB/2019 came to be listed on 08.08.2019 and because of his non-appearance, the `Adjudicating Authority' has set the `Corporate Debtor' as `Exparte' and the matter was directed to be listed on 26.08.2019. An objection as to T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 59 of 68 `territorial jurisdiction' can be waived as per decision in the matter of Seth Hiralal Patni V Sri Kali Nath (decided on 04.05.1961), reported in 1962 SCR (2) 747, wherein it is inter alia observed and held as under:
............."The objection to its territorial jurisdiction is one which does not go to the competence of the Court and can, therefore, be waived. In the instant case, when the plaintiff obtained the leave of the, Bombay High Court on the original side, under el. 12 of the Letters Patent, the correctness of the procedure or of the order granting the leave could be. questioned by the defendant or the objection could be waived by him. When he agreed to refer the matter to arbitration through Court, he would be deemed to have waived his objection to the territorial jurisdiction of the Court, raised by him in his written statement. It is wel settled that the objection as to local jurisdiction of a Court does not stand on the same footing as an objection to the competence of a Court to try a case. Competence of a Court to try a case goes to the very (1) (1886) L.R. 13A.
134.
root of the jurisdiction, and Where it is lacking, it is a case of inherent lack of jurisdiction. On the other hand, an objection as to the local jurisdiction of a Court can be waived and this principle has been given a statutory recognition by 'enactments like s. 21 of the Code of Civil Procedure. Having consented to have the controversy between the parties resolved by reference to arbitration through Court, the. defendant deprived himself of the right to question the authority of the Court to refer the matter to arbitration or of the arbitrator to render the award. It is clear, therefore, that the defendant is estopped from challenging the jurisdiction of the Bombay High Court to entertain the suit and to make the reference to the arbitrator. He is equally estopped from challenging the authority of the arbitrator to render the award. In our opinion this conclusion is sufficient to dispose of the appeal. It, is not, therefore, necessary to determine the other points in controversy, including the question whether The Decrees and Orders Validating Act, 1936 (Act V of 1936) had the effect of validating what otherwise may have been invalid."
106). It cannot be brushed aside that the parties submitting to the `jurisdiction' of the Court even arguing at a later stage would not be permitted to assail the issue of `jurisdiction', unless a failure of justice T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 60 of 68 had been caused due to a `wrong trial of a case' in a Court which had no `territorial jurisdiction' no interference can be made on merits as per decision (2007) 1 MPHT 522, 526 (MP).
107). A person who is not `vigilant' and has been duly served will not be qualified to pray for a `second opportunity'. A `Court of Law' is not under an obligation to issue `Fresh Notice' to the parties concerned when a party does not appear before the Court on the day of posting.
108). The term `Sufficient Cause' is not different from `Good Cause'. Indeed, the term `Sufficient Cause', implies no `Negligence' nor `Inaction' nor want of `Bonafides' on the part of a `Party', as per decision in Palghat Municipality V National Motor Works, reported in AIR 1967 Madras Page 31,33.
109). It cannot be gainsaid that every cause pleaded by a `person' or `party' cannot be accepted where he is negligent slept over his `rights'. Before passing `Exparte Orders', a `Court of Law' must be satisfied of `Due Service' as opined by this `Tribunal'. A `Substituted Service' should be effected as a last resort, when ordinary steps for `Service' prove futile.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 61 of 68 Filing of `Appeals' Before `Appellate Authority':
110). It is pointed out by this `Tribunal' that Section 61 of the I& B Code, 2016, deals with `Appeals' under `Appellate Authority'.
Undoubtedly, the power to hear an `Appeal' from orders of the `Adjudicating Authority' (vide Section 5 (1) - National Company Law Tribunal), is the `National Company Law Appellate Tribunal'. `Every Appeal' shall be filed within 30 days before the National Company Law Tribunal which may admit the `Appeal' to be filed after expiry of 30 days if it is satisfied that there was `Sufficient Cause' for not filing an `Appeal' within 30 days but such period shall not exceed 15 days.
111). As far as the present case is concerned, the `Insolvency Proceedings' was filed in the month of June 2019 before the `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench) against the Corporate Debtor in regard to the repayment of dues. In June 2019, the States of Telengana and Andhra Pradesh were under the jurisdiction `Adjudicating Authority' (National Company Law Tribunal, Bench at Hyderabad. Although, the Amaravati Bench of the `Adjudicating Authority' (National Company Law Tribunal), was notified on 08.03.2019 for the State of Andhra Pradesh (vide Ministry of Corporate Affairs notification published in `The Gazette of India T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 62 of 68 Extraordinary' it became effective only from August 2019 (as seen from the 1st Cause List of Amaravati Bench (vide Annexure 5 - page 46 of the Appeal Paper Book / Typed Set of Papers - Diary No.20448 dated 13.07.2020).
112). It cannot be ignored that in the present case, when the main CP (IB)/374/7/HDB/2019 was adjourned and listed on 08.08.2019 and on that day, the Appellant's Counsel had not appeared on account of Viral Fever. It comes to be known that the main Company Petition was heard and orders were reserved on 26.08.2019 and further, that the Appellant had not made any arrangements for advancing arguments on 26.08.2019 and later the Petition was admitted for `CIRP' on 27.09.2019 by the `Adjudicating Authority'.
113). In the instant case on hand, notwithstanding the fact that the Appellant has come out with a plea that the Registered Office Address of the Corporate Debtor had changed w.e.f. 27.05.2014 and the same was reflected to be the same on the Website of Ministry of Corporate Affairs (vide page 44 of the Appeal Paper Book - Diary No.20182 presented on 08.06.2020, date of representation being 10.06.2020) and further that the Collector and District Magistrate, Kurnool, through letter dated 27.02.2019 (vide page 54 of the Appeal Paper Book) had written to the T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 63 of 68 address of the Corporate Debtor wherein Registered address of the Corporate Debtor was mentioned as described in the `Ministry of Corporate Affairs' `Records', in view of the fact that the Appellant's Director Mr. Sunil was present before the `Adjudicating Authority' as per the order dated 18.07.2019, he had prayed time to engage an Advocate to furnish `Reply' and on 08.08.2019, the Corporate Debtor was proceeded as `Exparte' and on 26.08.2019, the matter was heard and `reserved for orders' and ultimately `orders were passed by the `Adjudicating Authority' on 27.09.2019 in admitting the Section 7 Application filed by the `1st Respondent/Bank'.
114). The `Appellant' in the instant T.A. No. 115 of 2021 (Comp. App (AT) (INS) No. 539 of 2020 (vide paragraph k at page 18 of the Appeal Paper Book) had mentioned that IA No. 900 and 901 of 2019 was filed on 16.10.2019 and that he came to know of the Admission of the Petition through letter dated 28.10.2019 of the Resolution Professional, these two IAs were filed before the `Adjudicating Authority' for setting aside the final order dated 27.09.2019 in the main CP(IB) No. 374/7/HDB/2019. The fact of the matter is that the aforesaid two IA Nos. 900 and 901 of 2019 were filed by the Corporate Debtor/Petitioner, on 16.10.2019, only after the main Petition being admitted on 27.09.2019 for commencement of `CIRP' against the `Corporate Debtor'.
T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 64 of 68 Glimpse of NCLT Rules, 2016:
115). In this connection, this `Tribunal' aptly points out that Rule 37 of the NCLT Rules, 2016 deals with `Notice to Opposite Party'. Rule 38 speaks of `Service of Notices and Processes'. Rule 41 relates to `Filing of Reply and other Documents by the Respondents'. Rule 42 concerns with `Filing of Rejoinder'. Rule 44 pertains to hearing of `Petitions or Applications'. Rule 45 of NCLT Rules, 2016, refers to `Rights of a Party to appear before the Tribunal'. Rule 48 speaks of `Consequence of Non-
appearance of Applicant'. Rule 49 pertains to `Exparte Hearing and Disposal'.
116). In the present case, despite the fact that the `Appellant' has come out with the issue of `Territorial Jurisdiction', which was not projected at the earliest point of time, before the `Adjudicating Authority' on the side of the `Corporate Debtor', considering the fact that one Mr. Sunil, Director of the Corporate Debtor had presented himself before the Adjudicating Authority on 18.07.2019 and sought time to engage an Advocate and later, the `Corporate Debtor' had not acted in a diligent manner by not taking adequate steps to advance arguments on 26.08.2019 when orders were reserved by the `Adjudicating Authority' in the main CP(IB) No.374/7/HDB/2019, and later, on 29.07.2019, when the main Company Petition was admitted and the `CIRP' commenced against the `Corporate Debtor', this `Tribunal' comes to a resultant T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 65 of 68 conclusion that the `Corporate Debtor' through its Director Mr. Sunil had submitted to the Jurisdiction of the `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench) and the aforesaid `Director' had failed to avail the opportunity to put forth the objections of the `Corporate Debtor' and the IA No. 900 of 2019 (to stay all further proceedings, pursuant to Exparte Order dated 27.09.2019 in main CP(IB) No. 374/7/HDB/2019) & I.A. No. 901 of 2019 (to set aside the `Exparte Order dated 27.09.2019 in main CP(IB) No. 374/7/HDB/2019) filed by the Petitioner/Corporate Debtor before the `Adjudicating Authority' are `per se' `not maintainable' in the `eye of `law', because of the fact that there is no failure of justice when the `Adjudicating Authority' had passed the `impugned order' dated 26.05.2020 in dismissing I.A.No. 900 and 901 of 2019 and also there is `latent and patent inaction', `absence of due diligence' and `lack of bonafides' on the part of the `Corporate Debtor' not only in pursuing the main CP(IB) No.374/7/HDB/2019 but also in filing I.A.No.900 and 901 of 2019 and in any event, that Rule 49 (2) of NCLT, Rules 2016, relating to the `Petition' or an `Application' is not to be pressed into service, in as much as the same will not come to the aid of the `Appellant', especially after the final order was passed in the main CP(IB) No.374/7/HDB/2019 by the `Adjudicating Authority' on 27.09.2019. It cannot be lost sight off T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 66 of 68 that the `Appellant' by participating and submitting to the `territorial jurisdiction' of the `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench), has waived its right tacitly to raise an objection on the aspect of `territorial jurisdiction' in time and accordingly it is deemed to have been waived.
117). Suffice it for this `Tribunal' to make a pertinent mention that there is no rule enjoined in NCLT Rules, 2016, to file any `Review Petition' as against the `Original / Final Order' passed by an `Adjudicating Authority' (National Company Law Tribunal) and equally there is no power showered upon the `Adjudicating Authority' to `Recall' its own `Original / Final Order'. Looking at from any angle, the `Appellant' has not exhibited or shown or made out any `Sufficient Cause' or `Good Cause' (to the subjective satisfaction of this `Tribunal') in respect of all stages of the proceedings in CP(IB) No.374/7/HDB/2019 with a view to enable this `Tribunal' 1) To interfere with the `impugned order' dated 26.05.2020, passed by the `Adjudicating Authority' (National Company Law Tribunal, Hyderabad Bench) in I.A. No. 900 and 901 of 2019 and
2) To interfere with the final order dated 27.09.2019 passed by the `Adjudicating Authority' (National Company Law Tribunal, Hyderabad T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 67 of 68 Bench) in CP(IB) No.374/7/HDB/2019 for setting aside the same. Resultantly, the `Appeal' fails.
Conclusion:
In Fine, the T.A.No.115 of 2021 (Comp. App (AT) (CH) (INS) No.539 of 2019 is dismissed. No costs. I.A. No. 1380 of 2020 and I.A. No. 1381 of 2020 are Closed. Before parting with the case, since the `Appellant' had remitted Rs.7,000/- on 06.06.2020 towards payment of Filing Fee (although he had claimed two reliefs) 1) To set aside the impugned order of the `Adjudicating Authority' dated 26.05.2020 in I.A No.900 of 2019 and I.A. No.901 of 2019 in CP(IB) No.374/7/HDB/2019 and 2) To set aside the Order of the `Adjudicating Authority' dated
27.09.2019 in CP(IB) No.374/7/HDB/2019, he is directed to pay deficit Filing Fee of Rs.5,000/- before the Registry of the `National Company Law Appellate Tribunal', Chennai Bench, within two weeks from the date of `Pronouncement of this `Judgment', without fail.
[Justice M. Venugopal] Member (Judicial) [Mrs. Shreesha Merla] Member (Technical) 04/05/2022 SR/NG T.A.No. 115 of 2021 in Company Appeal (AT) (CH) (INS) No.539 of 2019 Page 68 of 68