National Company Law Appellate Tribunal
Mr. Ratnakar Shetty vs Sathish Kumar on 20 June, 2024
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
IA No. 524/2024
IN
Company Appeal (AT) (CH) (Ins) No.101/2024
(IA Nos.281, 282 & 303/2024)
In the matter of:
Mr. Ratnakar Shetty, RP,
M/s. Lalith Gangadhar Constructions Pvt. Ltd. ... Appellant
WITH
IA No. 525/2024
IN
Company Appeal (AT) (CH) (Ins) No.102/2024
(IA Nos.283, 284 & 302/2024)
In the matter of:
Mr. Ratnakar Shetty, RP,
M/s. Lalith Gangadhar Constructions Pvt. Ltd. ... Appellant
WITH
IA No. 526/2024
IN
Company Appeal (AT) (CH) (Ins) No.104/2024
(IA Nos.286, 285 & 304/2024)
In the matter of:
Mr. Ratnakar Shetty, RP,
M/s. Lalith Gangadhar Constructions Pvt. Ltd. ... Appellant
WITH
IA No. 527/2024
IN
Company Appeal (AT) (CH) (Ins) No.105/2024
(IA Nos.289, 288, 287 & 305/2024)
In the matter of:
Mr. Ratnakar Shetty, RP,
M/s. Lalith Gangadhar Constructions Pvt. Ltd. ... Appellant
Present :
For Appellant : Mr. T.K. Bhaskar & Mr. Bharadwaja Ramasubramaniam,
Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 1 of 15
Advocates
For Respondent : Mr. Vijith AN, Advocate, For R1 & R3
Mr. Aakash Sherwal, Advocate, For R4
With
Company Appeal (AT) (CH) (Ins) No. 204/2024
(IA Nos.556, 557, 558 & 559/2024)
In the matter of:
India Real Estate Investment Fund ... Appellant
V
Ratnakar Shetty& Ors. ... Respondents s
Present :
For Appellant : Mr. PH Arvindh Pandian, Senior Advocate
For Mr. K Gowtham Kumar, Advocate
For Respondents : Mr. T.K. Bhaskar, Advocate
ORDER
(Hybrid Mode) 20.06.2024:
The debate which is being perused, is with regards to the controversy, which has been pressed by the Learned Senior Counsel for the Appellant in CA (AT) (CH) (Ins) No. 204/2024, where by the Appellant had put a challenge to the part of an order, as it was rendered on 24.05.2024 by the Learned Adjudicating Authority, whereby the Learned Adjudicating Authority, while considering Company Petition CP(IB)No.87/BB/2021, had directed to take necessary steps as per the code specially in context of the provisions contained under section 33 of I & B Code, 2016 and consequentially, the necessary action was directed to be taken within a period of three weeks from the date of passing of the order. As far as the directions issued by the Learned Adjudicating Authority for taking an action under section 33 of the I & B Code, 2016, is not an order admittedly, which has been passed against a statute, but still the Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 2 of 15 Learned Senior Counsel for the Appellant, argues that in the earlier set of proceedings which had culminated into the orders under challenge i.e., 22.01.2024, as it has been rendered in IA Nos. 292, 406, 547, 594, 601, 631 & 666 and particularly as it was under consideration in CA (AT) (CH) (Ins) No. 101/2024 being IA Nos. 755, 835, 836, 861/2022 & IA No. 01/2024, they all engage consideration of the issue with regards to the extension of time for completion of CIRP proceedings, as contemplated under section 12 of I & B Code, which provides for the purposes of extension of time for completion of the CIRP procedings. The Application thus preferred by the Appellant in the said Company Appeal (AT) (CH) (Ins) No. 101/2024 being IA No. 835/2022, particularly as it referred to therein, has been rejected on the ground that since there had been earlier consecutive applications, it was held against the appellant seeking for the extension of time. The further extension as consequentially extension sought for by the subsequent application which was under
consideration, in the order dated 22.01.2024 it was observed to be unsustainable being contrary of the very intention of Section 12(2), which contemplates that once an extension had been granted, no further application for the extension of time for completion of the CIRP proceedings, is required to be granted.
In the connected Appeal CA (AT) (CH) (Ins) No. 102/2024, it is almost based upon the similar set of circumstances, where challenge have been given to an order passed on 22.01.2024 in IA No. 547/2023. In Company Petition Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 3 of 15 (IB)No.87/BB/2021, where by the Learned Adjudicating Authority had already rejected the Application for seeking an extension of time and it was almost based upon the same circumstances as it has already been referred to in the context of issue involved consideration in CA (AT) (CH) (Ins) No. 101/2024.
In CA (AT) (CH) (Ins) No. 104/2024, the Appellant therein has put a challenge to the Impugned Order dated 22.01.2024, which was passed on IA No. 601/2023 in Company Petition (IB)No.87/BB/2021, which once again was putting an end by rejecting the application preferred by the Appellant therein under section 12(2) seeking the extension of time for completion of CIRP proceedings.
In another and the last connected Appeal being CA (AT) (CH) (Ins) No. 105/2024, it too puts challenge to an order of 22.01.2024 which was passed on IA No. 861/2023 in Company Petition (IB)No.87/BB/2021 by virtue of which the Learned Adjudicating Authority here too has rejected the Application of the Appellant for seeking an extension of time for the purposes of completion of the CIRP proceedings.
At the stage when these company Appeals were heard at admission stage, this Tribunal has passed an order dated 20.03.2024 to the following affect:
"At the request of the Learned Counsel Mr. T.K. Bhaskar appearing for the 'Appellant' in Comp. App. (AT)(CH)(Ins) Nos.101/2024, 102/2024, 104/2024 and 105/2024, to file an 'Interlocutory Application' to implead the 'CoC' in these Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 4 of 15 'Appeals' as one of the 'Respondent', one week time is granted from today.
In the meanwhile, it is open to the Learned Counsel for the 'Appellant' in these 'Appeals to bring to the 'Notice' of the 'Adjudicating Authority/Tribunal' that these 'Appeals' are pending before this 'Tribunal'."
By virtue of the alleged Interim Order which was passed on 20.03.2024, the Tribunal has only observed that the intimation with regards to the aspect of pendency of appeal before this Appellate Tribunal as detailed above, engaging consideration of the issue with regards to the aspects of extension of time and pendency of respective Company Appeals, should be brought to the knowledge of the Learned Adjudicating Authority.
The said order dated 20.03.2024 of this Appellate Tribunal, is being interpreted by the Learned Counsel for the Appellant, while arguing the Company Appeal (AT) (CH) (Ins) No. 204/2024, as if, the order which was passed on 20.03.2024, in the batch of Company Appeals detailed above would have an implication as if that the Learned Adjudicating Authority, automatically ought to have laid off its hand in proceeding further in the Company Petition while issuing directions under section 33 of I & B Code, 2016, thereby issuing directions, for initiation of the liquidation process.
With all due reverence at my command, the tenacity of argument of the Learned Senior Counsel, so far as the implication of the order on 20.03.2024, Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 5 of 15 which is being sought to be read as if it was creating an embargo for the Learned Adjudicating Authority, not to proceed any further under section 33 of I & B Code, 2016, is not acceptable. The reason being that the observation made thereof in the order dated 20.03.2024 was only made limited to the extent, leaving it open for the Appellant to bring to the knowledge of the Learned Adjudicating Authority about the factum of pendency of the appeals, would be limited to as to in what way question of extension of time under section 12 of the Code, has to be constituted to be considered for the purposes of completing the CIRP proceedings. But the inference as is it is being drawn by the Learned Senior Counsel that it would automatically lead to a caution to the Learned Adjudicating Authority, not to proceed under section 33 of the I & B Code, 2016, will be too hypothetical and would be rather an extension of interpretation as given to the order of 20.03.2024 because it was no way restricting the Learned Adjudicating Authority to proceed further, it was only a discretion left with the Adjudicating Authority, thus the said contention is not acceptable by us.
While arguing the Company Appeal (AT) (CH) (Ins) No. 204/2024, where the direction has been issued by the Learned Adjudicating Authority while deciding Company Petition (IB) No. 87/BB/2021, the Learned Adjudicating Authority had only passed a direction to the effect "to take necessary steps" as per the code in context of the provisions contained under Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 6 of 15 section 33 of the I & B Code, 2016. The relevant part of the order which has been put to the challenge before this Appellate Tribunal in Company Appeal (AT) (CH) (Ins) No. 204/2024 extracted hereunder:
"C.P. (IB)No.87/BB/2021
1. Heard the Ld. Counsel for the RP.
2. It is noticed that vide order dated 22.01.2024 in I.A. Nos.547, 601, 755 & 861/2023, no further extension has been granted for the CIRP by this Adjudicating Authority. However, the RP has not taken any action in this regard even after lapse of four months' time and no liquidation application has been filed till date. Therefore, he is directed to take necessary steps as per the Code, especially, under Section 33 of the IBC within a period of two weeks from today and compliance affidavit thereof may be filed in this Tribunal i.e., by 07.06.2024."
This argument pertaining to, as to whether this direction issued by the Learned Adjudicating Authority for taking necessary steps for proceeding under Section 33 of I & B Code, is being preceded by the words in accordance with the provisions of I & B Code, meaning thereby the Learned Adjudicating Authority obviously while issuing such directions for initiation of liquidation process will not function in a manner alien or contrary to the provisions and intention of the law, for the purposes of initiation of the liquidation process under Section 33 of I & B Code and the direction thus given in the Impugned Order under challenge in Company Appeal (AT) (CH) (Ins) No. 204/2024, interpreting it as if it was giving a cause of action to the Appellant to file the Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 7 of 15 company appeal, is not acceptable by this Appellate Tribunal because it was absolutely the procedural prerogative of the Learned Adjudicating Authority to pass an order, particularly in the absence when the non-completion of CIRP proceedings had not been completed within the prescribed period as contemplated under the statute was not disputed. Apart from it, this Tribunal cannot be ignorant of the fact, that if the Impugned Order which has been put to challenge in this Company Appeal (AT) (CH) (Ins) No. 204/2024, is taken into consideration, when it is preceded by the words; that the resort to the process under section 33, has had to be logically proceeded in accordance with law, it does not mean nor could be inferred that it was a direction issued to positively initiate proceedings under Section 33 of the I & B Code, 2016, because it meant that if at all it was to be resorted to, it has to be resorted in accordance with law, which would obviously cannot be done in the absence of giving the present Appellant a right to protest and protect, if the process of liquidation was at all permitted to be initiated under section 33 of the I & B Code, 2016 and was being carried contrary to the provisions of the I & B Code.
But the Learned Counsel for the Appellant while addressing upon the Company Appeal (AT) (CH) (Ins) No. 204/2024 has referred to a Judgement of the Hon'ble Apex Court as reported in 2020(8) SCC 531 as rendered in the matter of Committee of Creditors of Essar Steel India Ltd. Vs. Sathish Kumar Gupta & Ors. In the said Judgement, as rendered by the Hon'ble Apex Court, Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 8 of 15 the basic issue which was under consideration therein was as to whether the restriction of time period which was being imposed by the statute for the purposes of time for completion of the CIRP proceedings would be taken as "mandatory" or "directory" in nature. Ultimately, the Hon'ble Apex Court has arrived at a conclusion that in order to meet out the basic objective of the Companies Act, 2013 and I & B, 2016, the restriction of extension of limitation of time as contemplated under section 12 for the purposes of completing the CIRP proceedings may not be construed in a manner to defeat the very intention of the act and to force a Corporate Debtor, to undergo an uncalled for Liquidation Process, which should normally be resorted to as a last resort when all avenues of completion of the CIRP proceedings has closed. The relevant paragraph of the said Judgement is extracted hereunder:
"However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent to liquidation and that the time taken in legal proceedings is largely due to factors owing to which fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extent time beyond 330 days. Likewise, even under the newly added Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 9 of 15 proviso to Section 12, if by reason of all the aforesaid factors grace period of 90 days from date of commencement of the Amending Act 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate is to be driven into liquidation."
The aforesaid Judgement of the Hon'ble Apex Court, where it has been held that the aspect of extension of time is directory in nature and not mandatory, the same came up for consideration before the NCLAT, Chennai Bench in the matter of Committee of Creditors of Vasan Health Care Pvt. Ltd. & Anr. Vs. S. Rajendran, RP of Vasan Health Care Pvt. Ltd. & Ors. and drawing its implication from the ratio laid down by the Hon'ble Apex Court, the relevant observation has been made by this Tribunal, and as relied by the Learned Counsel for the Appellant No.2 in para 58 of Judgement, where the aspect of the restriction of extension of time contemplated under section 12 of I & B Code beyond the prescribed period of 330 days, was held to be directory in nature basically it aimed in order to widely meet the objective, that the Liquidation process, should not be forced upon when there is even a fleak possibility of completion of CIRP proceedings in a limit if reasonable extension of time if granted. Considering the aspect of time period for which the extension Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 10 of 15 ought to be granted by the Tribunal was considered in Para 58 of the Judgement which is extracted hereunder:
"58. The Hon'ble Supreme Court while striking down the word 'mandatorily' held further that the Tribunal (Adjudicating Authority) or the Appellate Tribunal may extend time beyond 330 days. However, the Hon'ble Supreme Court held that it is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which Resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation. Therefore, the Hon'ble Supreme Court keeping in view of the paramount interest of the Corporate Debtor and to save the Corporate Debtor from its death by liquidation, struck down the word 'mandatorily' for completion of CIR Process within 330 days and extended the time beyond 330 days in exceptional cases and the power is given to the Tribunal i.e. the Adjudicating Authority and also this Appellate Tribunal. The Judgment of the Hon'ble Supreme Court is law of the land and bound by this Appellate Tribunal and all other Tribunals."
Even we had an occasion to deal with the issue and particularly based upon the Principle of the Hon'ble Apex Court, in a bunch of company appeals with the leading Company Appeal (AT) (CH) (Ins) No. 192/2023, Sharon Hills Residents Association VS Samson & Sons Builders & Developers Pvt. Ltd. We had dealt with the issue as to what would be ambit of exercise of powers under section 12(2) by the Appellate Tribunal for that matter even Tribunal too and based upon the interpretation given by the Hon'ble Apex Court, this Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 11 of 15 Tribunal too has also recorded the finding almost based on similar circumstances in Para 36. Which is extracted hereunder:
"36. But, primarily for the purposes of facilitating the filing of an Application for seeking an extension of time to conclude the Insolvency Process, the Resolution Professional had submitted that they had filed the approved Resolution Plans, under Section 30(6) & 31, before the Committee of Creditors, but, the delay has occurred, because of the procedural flaw at the hands of the Financial Creditors and because of other procedural formalities which were required to be fulfilled. Consequent to which, the Resolution Professional on 15.04.2023, has moved an Application being IA (IBC) / 157/KOB/2023 (common in all the Appeals), wherein he has invoked Rule 11 of the NCLAT Rules, for seeking an extension of CIRP Process by further period of 90 days."
The Company Appeals which have been preferred against the rejection of section 12 Application, it was exclusively on a premise, that since earlier extensions have already been granted, the recurring applications for the same relief in the context of extension of time will not be tenable. The view expressed thereof, we are of the view that the same may not be acceptable, a logical interpretation of Section 12 of I & B Code, for the reason being that extension of time, since being held to be directory in nature, as held by the Hon'ble Apex Court and particularly when it intends to void a forceful liquidation process to meet the object of the Act, where there could be possibility for the purposes of completion of the CIRP proceedings, recurring applications would not be Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 12 of 15 specifically barred which would be subject unless it is being misused, to be preferred on the subject since being only procedural in nature which would be subject to the condition, that it satisfies the laid down test of extension and the reasons for which the inability has been expressed should be justifiable, therein for completion of CIRP proceedings.
In the case at hand and as observed in the Impugned Order, when the extension applications were preferred earlier by the appellants in the respective appeals, all these applications remained pending and before the aspect of extension would be considered on merits and be granted, the time which was sought for extension is stood expired, which necessitated for filing of the subsequent applications because none of the earlier extension application were decided on merits. Thus, the view and the analogy drawn by the Learned Tribunal that subsequent application would be in contravention to the provisions contained under Section 12(2) may not be an aspect to be accepted in these circumstances and particularly it would be an observation made in contravention to the ratio of the Judgement of the Hon'ble Apex Court as rendered in the matters of Committee of Creditors of Essar Steel India Ltd. Vs. Sathish Kumar Gupta & Ors. The observation which has been made in Impugned Order which is subject matter of consideration in the bunch of appeals dealing with an aspect of legal impact of Section 12(2). Being conscious of the fact that the liquidation should only be resorted to as a last Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 13 of 15 resort, an extension should only restricted to be granted until and unless it happens to be absolutely maliciously intended, so as to meet the objective of the act and completion of the CIRP proceedings.
Since in the respective applications seeking for an extension of time, the Appellants have prayed for 60 days' time which was rejected by the respective Impugned Orders under challenge in the bunch of appeals. We are of the view that since the reason which has been assigned by the Appellants in the respective applications preferred under section 12(2) seeking for extension of time period was apparently logical, because if no decision was taken on the prior pending extension application, the Appellant cannot be blamed for it for the procedural delay or laxity and thus when the period as sought to be extended had expired during the pendency of the application, itself and there was no decision on merit itself, the subsequent application would quite locally could be filed by the Appellant for an extension of time to complete CIRP proceedings, when the proceedings could not be completed. Thus, the reason which has been given in the Impugned Orders under the challenge may not be acceptable by us where there is a denial for extension of time for the completion of CIRP proceedings.
Thus, the bunch of company appeal which are listed today and as referred to herein above would stand disposed of with a direction to the Learned Adjudicating Authority, that qua the respective applications for extension of Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 14 of 15 time as prayed for under Section 12, which had been the subject matter of consideration in each of the appeals, the Learned Adjudicating Authority is directed to grant an extension of further 45 days, by way of last opportunity for the purposes of completion of the CIRP proceedings.
In view of the aforesaid observations, the bunch of appeals which are referred to herein above would stand allowed and the Impugned Order under challenge would stand quashed accordingly.
As far as the Company Appeal (AT) (CH) (Ins) No. 204/2024 is considered where direction has already been issued for initiation of the proceedings under section 33 of the I & B Code, 2016 for liquidation, since we have already observed that the Appeal against the said order directing to initiate Liquidation process, would not be maintainable and no orders are required to be passed on it in view of the observations already made. The Company Appeal (AT) (CH) (Ins) No. 204/2024 would stand dismissed.
The extension of the time period as given by this order would be from the date when the order is uploaded and the Registry of this Tribunal is directed to intimate the Learned Adjudicating Authority about this Judgement.
[Justice Sharad Kumar Sharma] Member (Judicial) [Jatindranath Swain] Member (Technical) RO/TM Comp App (AT) (CH) (Ins) Nos.101, 102, 104,105 & 204/2024 Page 15 of 15