National Company Law Appellate Tribunal
M/S. D.J. Laboratories vs Kerala Medical Services Corporation ... on 20 June, 2025
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) (Ins) No. 228 / 2022
In the matter of:
M/s. D.J. Laboratries Pvt. Ltd.
Represented by its Chief Executive Officer
Mr. Kailash Jindal
Having Office at:
255, Sector 1,
Industrial area,
Pithampur Dist:- Dhar (M.P) - 454 775. ...Appellant
Versus
KERALA MEDICAL SERVICES
CORPORATION PRIVATE LIMITED
Having Office at:
C.V. Raman Pillai Rd.,
Thycaud, Thiruvananthapuram,
Kerala - 695 014. ...Respondent
Present :
For Appellants : Mr. Kumarpal R Chopra, Advocate
For Respondent : Mr. G. Ananda Krishnan, Advocate
JUDGEMENT
(Hybrid Mode) [Per: Justice Sharad Kumar Sharma;(Member Judicial)]
1) The status of the present Appellant in the instant Company Appeal is that of an Operational Creditor (OC), who contends that he was a supplier of drugs and medicines to the Corporate Debtor (CD), that four/tenders, which were awarded by the CD in his favour on 07.01.2010, 10.01.2012, 12.06.2012 & 22.12.2012, that he supplied drugs and medicines against various purchase orders issued by the CD and delivered the same to the designated warehouses, and that the CD had acknowledged the receipt of the same from time to time.
2) He has further contended that, the Corporate Debtor during the subsistence of the tenders, did not raise any objection qua the quality of the Comp App (AT) (CH) (Ins) No.228/2022 Page 1 of 9 goods supplied till he approached MSEFC, Bhopal, that when he, the Appellant filed an application before the Micro and Small enterprises Facilitation Council (MSEFC), Bhopal for payment of unpaid dues, the CD raised quality issues with respect to the supplies made by him for the first time and that in the proceeding M.S.E.F.C./592/2014, MSEFC, Bhopal delivered its award on 16.04.2018 asking the CD to pay him Rs. 2,12,48,146.48, inclusive of the Principal and the interest thereon.
3) The Appellant has further stated that owing to the determination of the settled liability, as it has been fastened upon the Respondent by the award of MSEFC, Bhopal dated 16.04.2018, he issued of the Demand Notice in Form-III & Form-IV, to the Corporate Debtor on 05.05.2021, and since the CD failed to make any payment in response to such notice, he filed the Application in CP(IB)/46/KOB/2021 under Section 9 of I & B Code against the CD. However, the Learned NCLT, Kochi dismissed the application on 11.03.2022 on grounds of pre-existing disputes with regard to dates & suppression of facts and imposed a cost of Rs. 26,000/-.
4) It is the case of the Appellant, that based upon the award dated 16.04.2018 and determination of the liability that had been made, he had preferred an application under Section 9 of I & B Code, 2016, which was numbered as CP(IB)/46/KOB/2021, being the proceedings initiated under Section 9 of I & B Code, 2016, that though the Respondent CD in his reply to the demand notice has stated that the award made by the M.S.E.F.C. dated 16.04.2018, is presently the subject matter pending consideration in Writ Comp App (AT) (CH) (Ins) No.228/2022 Page 2 of 9 Petition No. 25454/2018, is currently subjudice as orders have been passed on the same till date, since in the Writ Petition there operates no Interim Order, therefore, the amount of liability as quantified by the award dated 16.04.2018, will have to be treated as financial debt due and hence drawing of the proceedings under Section 9 of I&B Code, by him was absolutely justified.
5) It has been the contention of the Appellant that, being an Operational Creditor, there stood a business relationship for the purpose of supply of drugs and medicines by him, which were alleged to have been delivered to the various warehouses of the Corporate Debtor and despite of the invoices being raised, the said amount was not credited into his accounts, that though the Respondent has stated that, the basis of demand notice under Section 8 of I & B Code, is a fallacy, for the reason being that the award which was rendered by the M.S.E.F.C. is already a subject matter of consideration in Writ Petition (C) No. 25454/2018, until and unless the quantification made by the M.S.E.F.C. award dated 16.04.2018, is accorded finality by the adjudication, to be made by the Honourable High Court of Kerala, the same cannot be taken as to be the basis of issuance of the Demand Notice, it will not have any impact on his Application as there is no interior stay, that though the Writ Petition (C) No. 14640/2016, filed by him against the order of blacklisting by the CD is yet to be decided, it will have no bearing for the purposes of deciding the controversy pertaining to the initiation of the proceedings under Section 9 of I & B Code.
6) The logic, assigned by the Learned Tribunal while rejecting the application under Section 9 of I & B Code, is that in the pleading and Comp App (AT) (CH) (Ins) No.228/2022 Page 3 of 9 documentation, that was filed by the Applicant/Appellant, there have been substantial concealment of material and vital facts. Learned Tribunal has observed that an averment has been made by the Appellant, as if the demand notice was never replied by the Respondent, nor disputed by the Respondent, which is contrary, to the available records, that, the Appellant has further concealed the fact of the pendency of the proceedings, on the aspect of calculation of dues in a Writ Petition, before Honourable High Court, Kerala that he had concealed the fact of filing of a Writ Petition at his behest on the aspect pertaining to his blacklisting by CD on the grounds of, supply of the sub- standard goods which is also pending consideration before the Honourable High Court of Kerala, which being areas of dispute between him and the CD would have a material bearing on the proceedings that were drawn under Section 9 of I & B Code. Further, the Learned Tribunal has taken a judicial note of the fact that, in Para-3 of the affidavit that was filed by the Appellant on 30.11.2021, it was specifically contended by the Appellant that the Corporate Debtor has neither replied nor disputed the Demand Notice, was absolutely a wrong fact and contrary to the documents that were placed on the record because, the Appellant himself has produced the reply, which was received from the Corporate Debtor on 28.05.2021, in Page-23 of his Section 9 application, where the demand notice was replied and decided. Accordingly, Learned Tribunal rejected the application under Section 9 of I & B Code, on the ground that no equity lies in favour of the Appellant, because the proceedings that were drawn under Section 9 of I & B Code, was based upon a concealment of vital materials Comp App (AT) (CH) (Ins) No.228/2022 Page 4 of 9 and facts including the pendency of two Writ Petitions referred to herein above and the reply submitted to the Demand Notice by the Corporate Debtor, and upon a false pleading that, on record the contents of the Demand Notice as such was not replied and controverted by the Respondent, and hence it will be deemed to be true for the purposes of the initiation of the proceedings under Section 9 of I & B Code. The Learned Tribunal after appreciation of the documents and the reply itself, which was filed by the Appellant, had found that the Demand Notice and the liability to pay the amount as demanded was objected by the Corporate Debtor on the ground that there was a pre-existing pending dispute and therefore no proceedings under Section 9 of I & B Code, can be initiated taking into account all these concealed material facts which were subsequently brought on record before the NCLT, the Tribunal, declined to exercise its jurisdiction while considering the application under Section 9 of I & B Code and dismissed the Application.
7) This Appellate Tribunal is of the view that, in the courts of law when a party approaches for adjudication of his grievances or to press any of its legally enforceable rights it is expected to approach the Court/Tribunals with clean hand in the instant case, there have been Concealment of material fact, firstly, to the effect that the basis of demand dated 05.05.2021, was the award of MSEFC, Bhopal dated 16.04.2018, secondly, that there had been a concealment of the fact that a Writ Petition as against the said award being Writ Petition (C) No. 25454/2018, was pending consideration before the Honourable Kerala High Court. Thirdly, as there is, this averment of the Appellant in the application Comp App (AT) (CH) (Ins) No.228/2022 Page 5 of 9 under Section 9 of I & B Code, that, the Demand Notice of 05.05.2021, was not denied, which itself was contrary to the records because the reply was submitted by the Corporate Debtor to the Demand Notice under Section 8 on 28.05.2021, denying the liability on the ground of a pre-existing dispute and the reply was part of the records of Appellant. Therefore, the Tribunal on these grounds declined to entertain the Section 9 Application since, the very basis of proceeding, was based upon a false averment and upon material concealment of vital fact, holding thereof that no equity was available for the Appellant. The said view taken by the Tribunal does not suffer from any apparent error, for the reason being that time and again various Honourable High Courts of the country, have held that the party to a proceedings has to approach before a court of law by disclosing all facts, which may bearing on the adjudication. Even Honourable Apex Court, has held the same view. One of the leading judgements in this regard has been rendered in the matters of Ramjas Foundation and Another Vs. Union of India & Ors., Civil Appeal No. 6662/2004. Para-14 of the said judgment is extracted hereunder: -
"14) The principle that a person who does not come to the Court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums. The object underlying the principle is that every Court is not only entitled but is duty bound to protect itself from unscrupulous litigants who do not have any respect for truth and who try to pollute the stream of justice by resorting to falsehood or by making misstatement or by suppressing facts which have bearing on adjudication Comp App (AT) (CH) (Ins) No.228/2022 Page 6 of 9 of the issue(s) arising in the case. In Dalglish v. Jarvie 2 Mac. & G. 231, 238, Lord Langdale and Rolfe B. observed: "It is the duty of a party asking for an injunction to bring under the notice of the Court all facts material to the determination of his right to that injunction; and it is no excuse for him to say that he was not aware of the importance of any fact which he has omitted to bring forward. In Castelli v. Cook (1849) 7 Hare, 89, 94 Wigram V.C. stated the rule in the following words: "A plaintiff applying ex parte comes under a contract with the Court that he will state the whole case fully and fairly to the Court. If he fails to do that, and the Court finds, when other party applies to dissolve the injunction, that any material fact has been suppressed or not property brought forward, the plaintiff is told the Court will not decide on the merits, and that, as he has broken faith with the Court, the injunction must go." In Republic of Peru v.
Dreyfus Brothers & Company 55 L.T. 802, 803, Kay J.
held as under:
"I have always maintained, and I think it most important to maintain most strictly, the rule that, in ex parte applications to this Court, the utmost good faith must be observed. If there is an important misstatement, speaking for myself, I have never hesitated, and never shall hesitate until the rule is altered, to discharge the order at once, so as to impress upon all persons who are suitors in this Court the importance of dealing in good faith in the Court when ex parte applications are made."
The same rule was restated by Scrutton L., J in R. v.
Kensington Income Tax Commissioner (1917) 1 K.B.
486. The facts of that case were that in April, 1916, the General Commissioners for the Purposes of the Income Tax Acts for the district of Kensington made an additional assessment upon the applicant for the year ending April 5, 1913, in respect of profits arising from foreign possessions. On May 16, 1916, the applicant obtained a rule nisi directed to the Commissioners calling upon them to show cause why a writ of prohibition should not be awarded to prohibit them from proceeding upon the assessment upon the ground Comp App (AT) (CH) (Ins) No.228/2022 Page 7 of 9 that the applicant was not a subject of the King nor resident within the United Kingdom and had not been in the United Kingdom, except for temporary purposes, nor with any view or intent of establishing her residence therein, nor for a period equal to six months in any one year. In the affidavit on which the rule was obtained the applicant stated that she was a French subject and resident in France and was not and had not been a subject of the United Kingdom nor a resident in the United Kingdom; that during the year ending April 5, 1913, she was in the United Kingdom for temporary purposes on visits for sixty-eight days; that she spent about twenty of these days in London at her brother's house, 213, King's Road, Chelsea, generally in company with other guests of her brother; that she was also in the United Kingdom during the year ending April 5, 1914, for temporary purposes on visits, and spent part of the time at 213, King's Road aforesaid; and that since the month of November, 1914, she had not been in the United Kingdom. From the affidavits filed on behalf of the Commissioners and of the surveyor of taxes, who showed cause against the rule nisi, and from the affidavit of the applicant in reply, it appeared that in February, 1909, a leasehold house, 213, King's Road, Chelsea, had been taken in the name of the applicant's brother. The purchase-
money for the lease of the house and the furniture amounted to 4000l., and this was paid by the applicant out of her own money. The accounts of household expenses were paid by the brother and subsequently adjusted between him and the applicant. The Divisional Court without dealing with the merits of the case discharged the rule on the ground that the applicant had suppressed or misrepresented the facts material to her application. The Divisional Court observed that the Court, for its own protection is entitled to say "we refuse this writ of prohibition without going into the merits of the case on the ground of the conduct of the applicant in bringing the case before us". On appeal, Lord Cozens-Hardy M.R. and Warrington L.J. approved the view taken by the Divisional Court. Scrutton L.,J. who agreed that the appeal should be dismissed observed:
"and it has been for many years the rule of the Court, and one which it is of the Comp App (AT) (CH) (Ins) No.228/2022 Page 8 of 9 greatest importance to maintain, that when an applicant comes to the Court to obtain relief on an ex parte statement he should make a full and fair disclosure of all the material facts - facts, not law. He must not misstate the law if he can help it
- the court is supposed to know the law. But it knows nothing about the facts, and the applicant must state fully and fairly the facts, and the penalty by which the Court enforces that obligation is that if it finds out that the facts have not been fully and fairly stated to it, the Court will set aside any action which it has taken on the faith of the imperfect statement."
8) It may be noted that, the Honourable Apex Court has observed that, a person who approaches the judicial forum for adjudication of his rights has to approach it with clean hands and if there is a material concealment of fact or facts, which has got a vital bearing on the merits of the matter, he is not even supposed to be heard. In view of the fact that the entire proceedings under Section 9 of I & B Code, as initiated by the Appellant was based upon a material concealment of fact in addition to there being evidence of pre-existing disputes, the application preferred under Section 9 of I & B Code, was rightly rejected by the Tribunal which does not call for any interference. Thus, the Appeal lacks merit and the same is accordingly dismissed.
[Justice Sharad Kumar Sharma] Member (Judicial) [Jatindranath Swain] Member (Technical) 20.06.2025 RO/MS/RS Comp App (AT) (CH) (Ins) No.228/2022 Page 9 of 9