National Company Law Appellate Tribunal
Mr. Sethuraman Mahadevan vs Ozone Urbana Infra Developers ... on 15 February, 2024
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NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH
CHENNAI
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022
(Arising out of judgement and Order dated 24.06.2022 passed by the National
Company Law Tribunal, Bangalore in CP(IB) No.119/BB/2021)
In the matter of:
Mr. Sethuraman Mahadevan & Ors Appellant
Vs
M/s Ozone Urbana Infra Developers Pvt. Ltd.
No. 38, Ulsoor Road
Bangalore,
Karnataka - 560042. Respondent
For Appellant: Mr. Navod Prasannan, Advocate.
For Respondent: Mr. PH Arvindh Pandian, Sr. Advocate
Mr. Vikram Veerasamy and Mr.J.Ramesh,
Advocates
JUDGEMENT
JUSTICE M. VENUGOPAL, MEMBER (JUDICIAL) PREAMBLE The Appellants have preferred the instant Company Appeal (At)(Ins)(CH) No.330/2022 (under Section 61 of the I&B of the Code) as an 'Aggrieved person' in respect of the impugned order dated 24.06.2022 passed by the 'Adjudicating Authority/NCLT, Bengaluru Branch.
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 1 2
2. The Adjudicating Authority/NCLT, Bengaluru Bench, while passing the impugned order dated 24.06.2022 in CP(IB) No.119/BB/2021 (filed by the Appellants/Financial Creditors) at para 13 to 16 had observed the following:-
"13. The instant C.P. was filed originally by 169 Flat Buyers. Thereafter, vide order dated 24.05.2022 in I.A. No. 128/2022, 15 other Homebuyers of the same real estate project got impleaded in the C.P. as Petitioners and thereby the total number of Petitioners in the C.P. are now 184. The 1st Petitioner i.e. Shri Sethuraman Mahadevan and the 2nd Petitioner i.e. Shri Bipul Bhattarcharya filed the C.P. directly along with their supporting individual affidavits and signed the vakalatnama. The Petitioner Nos. 3 to 184 have only given authorization letters in favour of the Petitioner Nos. 1 and 2 authorising them to sign on their behalf and to file the C.P.
14. As pointed out by the learned Senior Counsel appearing for the Respondent/Corporate Debtor that except in case of the 3rd Petitioner i.e. Shri Rohit Menon, the signature of the respective Petitioners were not attested by either any Advocate or notary public. Further, as pointed out by the learned Senior Counsel appearing for the Respondent/Corporate Debtor there were a number of Joint purchasers of various units, but only one of them issued the said unattested and un-notarised authorization letters in favour of the Petitioner Nos. 1 and 2. Admittedly, there were number of Applicants who are the Residents in various Countries other than India and the alleged authorization COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 2 3 letters issued by them were not in accordance with law, as applicable, in the respective countries where they reside. There was no explanation from the Petitioner Nos. 1 and 2 about the invalid, unattested and un-notarised authorization letters of the Petitioners. It is also not the case of the Petitioners that the authorization letters without even identifying the signature of the deponent by a notary public or as per the rules in force applicable in a particular country where the respective Petitioners is residing, are valid as per law.
15. Similarly, with regard to non-joining of the joint owners of number of flats, no explanation forthcoming from the Petitioners. Though the Respondent raised various objections as observed above, with regard to the authenticity and validity of the authorization given to the Petitioner Nos. 1 and 2, no steps were taken and no explanation was given till date. Therefore, the C.P. is to be considered as if filed by the Petitioner Nos. 1 and 2 only and there by does not satisfy the minimum requirement of 10% or 100 in number, whichever is less, and accordingly, liable to be dismissed on this ground alone. Accordingly, issue Nos. 1 and 2 are held against the Petitioners.
16. In view of holding issue Nos. 1 and 2 against the Petitioners, there is no need to delve upon the remaining issues."
and resultantly dismissed the main Company Petition by observing that the impugned order shall not preclude the Appellant/Petitioners from filing a fresh Company Petition in accordance with Law, if they are so advised. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 3 4 APPELLANTS' SUBMISSIONS
3. The Learned Counsel for the Appellants contends that the 'Appellants' are home buyers/allottees of residential units in the Respondents' under construction project/Ozone Urbana, in Bangalore.
4. The Learned counsel for the Appellants submits that the Appellants, 'as Affected Persons', in respect of the 'Misrepresentations', 'false promises' and 'Defaults' had filed an Application in CP(IB) No. 119/BB/2021 (under Section 7 of the I&B Code, 2016) before the NCLT, Bangalore Bench for initiation of the Corporate Insolvency Resolution Process (CIRP) in respect of the Respondent.
5. It is represented on behalf of the Appellants that since they are residing/working for gain in different places in the country, as well as across the world, for ease and convenience in filing the Application, the Appellant Nos 1 and 2 were duly authorized by the rest of the Appellants (vide Letters of authorization to file the Application).
6. According to the Appellants, the Respondent contended among other things that the Petition was not filed in accordance with the NCLT Rules, as per the letters of authorization were not attested either by an 'Advocate' or a 'Notary Public' and that the Respondent took a 'plea' that most of the Petitioners were so called speculative investment customers and had not qualified as Allottees for the purpose of maintaining an application under Section 7 of the I&B Code, 2016.
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 4 5
7. The Appellants points out that the Adjudicating Authority/Tribunal through the impugned order dated 24.06.2022 in CP/IB/BB/119/2021 had summarily rejected the petition based on the reasons that the letters of authorization were not attested by an Advocate or by a Notary Public and that therefore, the Petition would be deemed to have been filed only by the Appellant No.1 and 2 and had not met the minimum requirement of 10% or 100% in number.
8. The Learned counsel for the Appellant emphatically takes a plea that the Adjudicating Authority/Tribunal at para 14 of the impugned order had held that the Letters of authorization were not accessible, as they were not attested by an Advocate/by a Notary Public. Moreover, the Adjudicating Authority/Tribunal also held that the Letters of authorization were not drawn up in accordance with the Rules prevailing in various countries in which some of the Appellants resided.
9. According to the Appellants, the Adjudicating Authority/Tribunal does not say which Rule or Regulations requires a Letter of authorization, to be attested by an Advocate or by a Notary Public. Besides this, the Adjudicating Authority/Tribunal does not say which Rule of which country was violated by drawing up the Letters of the authorization without attestation by an Advocate or by a Notary Public.
10. It is the version of the Appellants, as per Section 7(5) of the Code, the Adjudicating Authority/Tribunal should have granted an opportunity to Appellants, to rectify the defects in the Application. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 5 6
11. The Learned Counsel for the Appellants, points out that in Company Appeal (AT)(Ins) No.299/2022 filed by the Respondent, against the very same impugned order dated 24.06.2022, this Tribunal had passed an order on 16.08.2022. In this regard, it is pointed out by the Learned counsel for the Appellant that although the Hon'ble Adjudicating Authority/tribunal, Bangalore Bench has rejected the Appellants' petition against the Respondent, the Respondent preferred an appeal before this Tribunal by taking a plea that the Adjudicating Authority/Tribunal should have given a finding on the Respondents contentions that some or most of the Appellants were speculative investors and were not qualified as Allottees.
12. The Learned counsel for the Appellants, contends that through an order dated 16.08.2022 in Company Appeal (AT)(Ins) No.299/2022, this Tribunal had passed an order in the Respondents' appeal by directing the Adjudicating Authority/Tribunal to necessarily deal with the Respondents' contentions that some or most of the Appellants were 'speculative investors and were not qualified as Allottees'.
13. The Learned counsel for the Appellants while rounding up points out that no harm or prejudice will be caused to the Respondent, if the instant Appeal is allowed as prayed for by the Appellants. However, the Appellants, will be put to severe harm, loss and prejudice and if their Appeal is to be rejected by this Appellant Tribunal.
APPELLANTS' DECISIONS COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 6 7
14. The Learned counsel for the Appellants relies on the decision in Surendera Trading Company V. Juggilal Kamlapat Mills Company Limited & Others (2017) 16 SCC 143 wherein at paras 5, 22, 24, 25 and 26 it is observed as under:-
5) One of the conditions, with which we are concerned, is that application under sub-section (2) has to be complete in all respects. In other words, the adjudicating authority has to satisfy that it is not defective. In case the adjudicating authority, after the scrutiny of the application, finds that there are certain defects therein and it is not complete as per the provisions of sub-section (2), in that eventuality, the proviso to sub-section (5) mandates that before rejecting the application, the adjudicating authority has to give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice.
22) Various provisions of the Code would indicate that there are three stages:
(i) First stage is the filing of the application. When the application is filed, the Registry of the adjudicating authority is supposed to scrutinise the same to find out as to whether it is complete in all respects or there are certain defects. If it is complete, the same shall be posted for preliminary hearing before the adjudicating authority. If there are defects, the applicant would be notified about those defects so that these are removed. For this purpose, COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 7 8 seven days time is given. Once the defects are removed then the application would be posted before the adjudicating authority.
(ii) When the application is listed before the adjudicating authority, it has to take a decision to either admit or reject the application.
For this purpose, fourteen days time is granted to the adjudicating authority. If the application is rejected, the matter is given a quietus at that level itself. However, if it is admitted, we enter the third stage.
(iii) After admission of the application, insolvency resolution process commences. Relevant provisions thereof have been mentioned above. This resolution process is to be completed within 180 days, which is extendable, in certain cases, up to 90 days. Insofar as the first stage is concerned, it has no bearing on the insolvency resolution process at all, inasmuch as, unless the application is complete in every respect, the adjudicating authority is not supposed to deal with the same. It is at the second stage that the adjudicating authority is to apply its mind and decide as to whether the application should be admitted or rejected. Here adjudication process starts. However, in spite thereof, when this period of fourteen days given by the statute to the adjudicating authority to take a decision to admit or reject the application is directory, there is no reason to make it mandatory in respect of the first stage, which is pre-adjudication stage.
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 8 9
24) Thus, we hold that the aforesaid provision of removing the defects within seven days is directory and not mandatory in nature. However, we would like to enter a caveat.
25) We are also conscious of the fact that sometimes applicants or their counsel may show laxity by not removing the objections within the time given and make take it for granted that they would be given unlimited time for such a purpose. There may also be cases where such applications are frivolous in nature which would be filed for some oblique motives and the applicants may want those applications to remain pending and, therefore, would not remove the defects. In order to take care of such cases, a balanced approach is needed. Thus, while interpreting the provisions to be directory in nature, at the same time, it can be laid down that if the objections are not removed within seven days, the applicant while refilling the application after removing the objections, file an application in writing showing sufficient case as to why the applicant could not remove the objections within seven days. When such an application comes up for admission/order before the adjudicating authority, it would be for the adjudicating authority to decide as to whether sufficient cause is shown in not removing the defects beyond the period of seven days. Once the adjudicating authority is satisfied that such a case is shown, only then it would entertain the application on otherwise it will have right to dismiss the application. The aforesaid process indicated by us can find COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 9 10 support from the judgment of this Court in Kailash v. Nanhku & Ors., (2005) 4 SCC 480, wherein the Court held as under:
"46. (iv) The purpose of providing the time schedule for filing the written statement under Order 8 Rule 1 CPC is to expedite and not to scuttle the hearing. The provision spells out a disability on the defendant. It does not impose an embargo on the power of the court to extend the time. Though the language of the proviso to Rule 1 Order 8 CPC is couched in negative form, it does not specify any penal consequences flowing from the non-compliance. The provision being in the domain of the procedural law, it has to be held directory and not mandatory. The power of the court to extend time for filing the written statement beyond the time schedule provided by Order 8 Rule 1 CPC is not completely taken away.
(v) Though Order 8 Rule 1 CPC is a part of procedural law and hence directory, keeping in view the need for expeditious trial of civil causes which persuaded Parliament to enact the provision in its present form, it is held that ordinarily the time schedule contained in the provision is to be followed as a rule and departure therefrom would be by way of exception. A prayer for extension of time made by the defendant shall not be granted just as a matter of routine COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 10 11 and merely for the asking, more so when the period of 90 days has expired. Extension of time may be allowed by way of an exception, for reasons to be assigned by the defendant and also be placed on record in writing, howsoever briefly, by the court on its being satisfied. Extension of time may be allowed if it is needed to be given for circumstances which are exceptional, occasioned by reasons beyond the control of the defendant and grave injustice would be occasioned if the time was not extended. Costs may be imposed and affidavit or documents in support of the grounds pleaded by the defendant for extension of time may be demanded, depending on the facts and circumstances of a given case."
26) In fine, these appeals are allowed and that part of the impugned judgment of NCLAT which holds proviso to sub-section (5) of Section 7 or proviso to sub-section (5) of Section 9 or proviso to sub-section (4) of Section 10 to remove the defects within seven days as mandatory and on failure applications to be rejected, is set aside. No costs."
15. The Learned counsel for the Appellants cites the decision of this Tribunal in Travels Private Ltd. V. Altius Travels Pvt Ltd 2021 SCC Online NCLAT 351 "14. In the case of Ramesh Murji Patel (supra) and Rajendra Narottamdas Sheth (supra), this Appellate Tribunal has already taken the view that if Authorisation is prior to the enactment of the Code, then COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 11 12 it can not be treated as a defect in the Application and 'authorisation letter, even if, issued prior to the enactment of I&B Code can be looked into for the purpose of entertaining an Application under Section 7 or 9 of the Code.
19. The Learned Counsel for the Respondent further placed reliance on the direction of Hon'ble Delhi High Court in the case of Nibro Ltd V National Insurance Company, AIR 1991 Delhi 25 wherein it is held that the question of the Authority to institute a suit or a claim on behalf of the Company cannot be termed as a technical matter.
20. It is pertinent to mention that the Insolvency and Bankruptcy Code is a self-contained Code. It has made provision for providing an opportunity to rectify the defects of application, and in any position, it can not be denied.
21. In case of Surendra Trading Co. v. Juggilal Kamlapat Jute Mills Co. Ltd., (2017) 16 SCC 143 : 2017 SCC OnLine SC 1208 : (2018) 2 SCC (Civ) 730 at page 149 Hon'ble Supreme Court of India has held that the time provided for rectifying the defection application under Section 9 (5) of the Code is directory in nature and in the given circumstances the tribunal can provide time more than 7 days to rectify the defect. Hon'ble Supreme Court has held that;
"5. One of the conditions, with which we are concerned, is that application under sub-section (2) has to be complete in all respects. In other words, the adjudicating Authority has to satisfy that it is not defective. In case the adjudicating Authority, after the scrutiny of the application, finds that there are certain defects therein and it is not complete as per the provisions of sub-section (2), in that eventuality, the proviso to sub-section (5) mandates that before rejecting the application, the adjudicating Authority has to give a COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 12 13 notice to the applicant to rectify the defect in his application within seven days of receipt of such notice.
6. Sub-section (5) of Section 9, thus, stipulates two time periods. Insofar as the adjudicating Authority is concerned, it has to take a decision to either admit or reject the application within the period of fourteen days. Insofar as defects in the application are concerned, the adjudicating Authority has to give a notice to the applicant to rectify the defects before rejecting the application on that ground and seven days' period is given to the applicant to remove the defects.
22. Let us examine the question from another lens. The moot question would be as to whether such a rejection would be treated as rejecting the application on merits thereby debarring the applicant from filing fresh application or it is to be treated as an administrative order since the rejection was because of the reason that defects were not removed and application was not examined on merits. In the former case it would be travesty of justice that even if the case of the applicant on merits is very strong, the applicant is shown the door without adjudication of his application on merits. If the latter alternative is accepted, then rejection of the application in the first instance is not going to serve any purpose as the applicant would be permitted to file fresh application, complete in all aspects, which would have to be entertained. Thus, in either case, no purpose is served by treating the aforesaid provision as mandatory. 23.2. When the application is listed before the adjudicating Authority, it has to take a decision to either admit or reject the application. For this purpose, fourteen days' time is granted to the adjudicating Authority. If the application is rejected, the matter is given a quietus at that level itself. However, if it is admitted, we enter the third stage. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 13 14
24. Further, we are of the view that the judgments cited by NCLAT and the principle contained therein applied while deciding that period of fourteen days within which the adjudicating Authority has to pass the Order is not mandatory but directory in nature would equally apply while interpreting the proviso to sub-section (5) of Section 7, Section 9 or sub- section (4) of Section 10 as well. After all, the applicant does not gain anything by not removing the objections inasmuch as till the objections are removed, such an application would not be entertained. Therefore, it is in the interest of the applicant to remove the defects as early as possible."
16. The Learned counsel for the Appellants adverts to the decision of Hon'ble Supreme Court in Asset Reconstruction Company India Ltd V. Tulip Start Hotels Ltd and others reported in 2022 SCC Online SC 944 wherein at para 64 it is observed as under:-
"64. Furthermore, the proviso to Section 7(5)(b) of the IBC requires the Adjudicating Authority to give notice to an applicant, to rectify the defect in its application within seven days of receipt of such notice from the Adjudicating Authority, before rejecting its application under Clause (b) of sub-section (5) of Section 7 of the IBC. When the Adjudicating Authority calls upon the applicant to cure some defects, that defect has to be rectified within seven days. However, in the absence of any prescribed penalty in the IBC for inability to cure the defects in an application within seven days from the date of receipt of notice, in an appropriate case, the Adjudicating Authority may accept the cured application, even after expiry of seven days, for the ends of justice."
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 14 15 RESPONDENTS' PLEAS
17. The Learned senior counsel for the Respondent contends that the 'Adjudicating Authority/Tribunal', through the impugned order dated 24.06.2022 had categorically held that the 'Letters of Authorisation' were not in accordance with Law. As a matter of fact, the Section 7 Petition in CP(IB) No.119/BB/2021 was preferred by the Appellant No.1 and 2, on behalf of other 182 Appellants, claiming to be their authorised representatives, by virtue of the same 'Letter of Authorisation' which was produced before this Appellate Tribunal.
18. According to the Respondent, the Appellant No.1 and 2 had failed to take any steps nor give an explanation apropos, the 'authenticity', and the Validity of Authorisation given to them by the other 182 Appellants. Furthermore, the Adjudicating Authority/Tribunal had disregarded these 'Letter of Authorisation' and proceeded with the 'main company petition' on the footing that it was filed only by the Appellant No.1 and 2 and held that they failed, to meet the minimum 'threshold of 10% or 100' in number, specified under Section 7 of Code.
19. It is represented on behalf of the Respondent that it was not open to the Appellants 1 and 2 to place reliance upon the very same 'Letter of Authorisation' when the Adjudicating Authority/Tribunal had rendered a finding on the authenticity and validity of the Letter of Authorisation. Also that, mere, filing of an Appeal, by any 'process of reasoning', can not validate and invalid 'Letter of Authorisation'. As such, it is contended on behalf of the COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 15 16 1st Respondent that the instant Appeal on behalf of 182 Appellants claiming to be their 'Authorised Representative' on the strength of invalid, 'unauthenticated' and un-notarised 'Letters of Authorisation' and as such, the instant Appeal deserves to be dismissed in 'limine' as not maintainable.
20. The Learned Counsel for the Respondent adverts to the NCLAT Rules, 2016 pertaining to the General Procedure, for filing Appeals before the Appellate Tribunal and as per Rule 68, the Affidavit shall conform to the requirements of Order XIX, Rule 3 of the Code of Civil Procedure, 1908 (5 of 1908). Further, as per Rule 69, an Affidavit has to be sworn or affirmed before an Advocate or Notary who shall affix his official seal.
21. It is projected on the side of the Respondent that the 'aspect of verification' is to test the 'genuineness' and the 'authenticity', of the 'allegations', and the 'verification' aspect is to enable the Tribunal, to find out as to whether, it would be safe to act on the averments made in the Appeal. Moreover, in the instant case, 'Appeal' is shown to have been signed in Bangalore, and the affidavit of the 1st Appellant was shown to have been notarised in Seattle, Washington, USA stating that the Affidavit verifying the Appeal was signed by the Deponent in my presence on 9th July, 2022. In terms of the documents filed, the 1st Appellant has verified an Appeal in Seattle, Washington, USA, which was signed in Bengaluru.
22. According to the Respondent, the Vakalatnama of the 1st Appellant at Page No.2238 of the Appeal, was signed by the 1st Appellant, on 18.07.2022 in Bengaluru. But the 1st Appellant had signed the Affidavit in Seattle, COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 16 17 Washington, USA on 09.07.2022 affirming, declaring and verifying the contents of the Appeal, which was dated 18.07.2022. The 1st Appellant had executed the Vakalanama on 18.07.2022 in Bengaluru.
23. It is the version of the Respondent that the case of the 1st Appellant is that he was in Bengaluru on 18.07.2022, then he could have very well executed his affidavit in Bengaluru on 18.07.2022, affirming, declaring and verifying the contents of the 'Appeal' which is dated 18.07.2022. The 1st Appellant howbeit executes an Affidavit in Seattle, USA on 09.07.2022. Also that if it is the case of the 1st Appellant that he executed Vakalatnama in Seattle, USA, then the Vakalatnama should have been Notarised or consularized in USA. In any event, the 'Authority' given by the 1st Appellant, through Vakalatnama is not in accordance with Law and hence the Appeal is liable to be dismissed.
24. The Learned counsel for the Respondent points out that the 'Letter of Authorisation' has all the trappings of a 'Power of Attorney' and it is relevant to refer to Section 1A of the Power of Attorney Act, 1882 which runs as under:-
"1A-Definition-In this Act, "Power of Attorney'' includes any instrument empowering a specified person to act for an in the name of the person executing it."
25. The Learned counsel for the Respondent points out that once the 'Letters of Authorisation' falls within the ambit of a Power of Attorney, the next question that arises would be, whether the 'Letter of Authorisation' was duly executed and duly authenticated or not. In this regard, the Learned counsel COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 17 18 for the 1st Respondent falls back upon Section 85 of Indian Evidence Act, 1872 under the caption Presumption as to Power of Attorney runs as under:-
"85.Presumption as to powers-of-attorney- The Court shall presume "that every document purporting to be a power-of-attorney, and to have been executed before, and authenticated by, a Notary Public, or any Court, Judge, Magistrate, 1 (Indian) Consul or Vice-Consul, or representative 2 *** of the 3 (Central Government), was so executed and authenticated."
26. The Learned counsel for the Respondent points out that the presumption as to the execution and authentication of the 'Letter of Authorisation' would be wrong in favour of the Appellant No.1 and 2 only if it is shown to the satisfaction of the Adjudicating Authority/Tribunal that the same was executed before and authenticated by an 'Attesting Officer' or a 'Functionary', recognised by Law in other countries. Further, an authentication by such an 'Officer' will mean that the Officer authenticating has assured himself of the 'identity of the person' who has signed the instrument as well as the factum of 'execution'.
27. According to the Respondent, the ingredients of Section 85 of the Indian Evidence Act, 1872 were not complied with by the Appellants, because of 'Letters of Authorisation' executed by 182 Appellants in favour of Appellant No.1 and 2 were not authenticated by an 'Attesting Officer' or a 'Functionary', recognised by Law, in other countries.
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 18 19
28. In the instant case on hand, according to Respondents, the Appellants have failed to establish the genuineness and authenticity of the 'Letter of Authorisation' and as such, the Adjudicating Authority/Tribunal had disregarded the 'Letters of Authorisation' and proceeded with the main Company Petition, on the footing, that it was filed only by the Appellant No.1 and 2 herein. Also that, in the absence of such an authorisation the Appellant No.1 and 2 would not have satisfied the minimum requirement of 10% or 100 in number.
29. On behalf of the Respondent, a reference to a 'Letter of Authorisation' (vide Page 263 of Appeal Paper Book) executed by Mr. Nikhil Lavanian (Appellant No.20), a resident of United Kingdom, had executed the said 'Letter of Authorisation' in London. But the said 'Letter of Authorisation' was notarised in Bengaluru, Karnataka, India stating that the same was 'sworn to before me'.
30. According to the Respondent, it is baffling and shocking as to how the 'Letter of Authorisation' by Appellant No.20 in London could have been sworn to before a Notary Public in Bengaluru, and Notarised in India.
31. The Learned counsel for the Respondent contends that as per Indian Stamp Act, 1899, a 'Power of Attorney' is an instrument, which is chargeable with 'Duty' and the said duty payable is mentioned in Schedule I of the Stamp Act. Further, Section 17 points out that all instruments chargeable with duty and executed in India shall be stamped before or at the time of execution, as per Section 18 of the Stamp Act any Power of Attorney, executed outside India COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 19 20 has to be adjudicated in India as per the ingredients of Indian Stamp Act within a period of three months. In the present case, the 'Letter of Authorisation' was executed by the 182 Appellants from various parts of the world, including India had failed to pay the requisites stamp duty in accordance with the provisions of the Stamp Act.
32. Section 18 of the Indian Stamp Act determines a time frame of three months, within which any Power of Attorney executed outside India has to be stamped. The Appellants, residing outside India had failed to follow the ingredients of Section 18 of the Stamp Act and hence the 'Letters of Authorisation' executed in favour of Appellant No.1 and 2 are not valid and that the Appellant No.1 and 2 are not entitled to represent other 182 Appellants.
33. The Learned counsel for the Respondent advances an argument that the authenticity and genuineness of the 'Letter of Authority' questioning the right to maintain the Application cannot be equated to a mere defect in the Application under Section 9 of the I&B Code, 2016.
34. According to the Respondent, the ingredients of Section 7(1) of the I&B Code, 2016 has to be satisfied before proceeding to Section 7(2) of the Code when there is a specific statutory requirement of a minimum threshold of 10% or 100 in number, it is important that such requirement is to be satisfied firstly and the 'tool' used by the Appellants to satisfy the requirement is the 'Letter of Authorisation' furnished by the 182 Appellants, to and in favour of Appellant No.1 and 2. Furthermore, because of the fact that the 'Letter of COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 20 21 Authority' through which the Appellant No.1 and 2 derive the right to file an Application/Petition under Section 7 of the I&B Code, 2016, only on satisfaction of the authenticity and genuineness of the 'Letter of Authority' the right to maintain the Application is bestowed on the Appellants.
35. The Learned counsel for the Respondent submits that the primary test is whether the Appellants meet the threshold and can sustain the Application/Petition before a Court of Law. In fact, without fulfilling such requirement, the aspect of 'Debt' and its 'Default' need not be gone into.
36. The Learned counsel for the Respondent raises an argument that the 'locus standi' of the Appellants is yet to be determined and that the Respondent had assailed the very same impugned order dated 24.06.2022 before this Tribunal on the basis that Appellants are speculative investors and as such, cannot claim the status of a Financial Creditor, under Explanation
(i) of Section 5(8)(f) of the Code.
37. The Learned counsel for the Respondent points out that in Company Appeal (AT)(CH)(Ins) No.299 of 2022 an order was passed directing the Adjudicating Authority/Tribunal to determine the issue, as to whether the 'Appellants/Speculative Investors' are 'Allottees' as per Section 5(8)(f) of I&B Code, 2016 and then proceed further on merits, in the event of Appellants moving a fresh Company Petition before the Adjudicating Authority. Besides, this the 'Status of the Appellants', claiming to be 'Financial Creditors/Allottees' under Section 5(8) of I&B Code, 2016 is very much in doubt, because of the orders passed by this Tribunal. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 21 22
38. The Learned counsel for the Respondent contends that the impugned order dated 24.06.2022 passed by the Adjudicating Authority/Tribunal in CP(IB) No.119/BB/2021 is free from any infirmities and that a 'reasoned order' was passed in tune with the 'Scheme and Spirit' of the I&B Code. In reality, the Appellants were given the liberty by the Adjudicating Authority/Tribunal to file a fresh 'Application', if they are so advised and without working out their remedy, as per Law, the 'Appellants', ought not to have filed the instant 'Appeal' and hence 'prays for the dismissal' of the instant Company Appeal (AT)(CH(Ins) No.330 of 2022, on the file of this Tribunal. RESPONDENTS' DECISION
39. The Learned counsel for the Respondent relies on the decision of the Hon'ble High Court of Allahabad in Wali Mohammad Chaudhari & Ors V. Jamal Uddin Chaudhari reported in AIR 1950 All 524 wherein at para 4 it is observed as under:-
"4. Under Section 85, Evidence Act, "'there is a presumption that every document purporting to be a power of attorney, and to have been executed before and authenticated by, a notary public, or any Court, Judge, Magistrate, British Counsel or Vice-Counsel or representative of Her Majesty or of the Central Government, was so executed and authenticated. The authentication is not merely attestation, but something more. It means that the person authenticating has assured himself of the identity of the person who has signed the instrument as well as the fact of execution. It is for this reason that a power of attorney COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 22 23 bearing the authentication of a notary public or an authority mentioned in Section 85 is taken as sufficient evidence of the execution of the instrument by the person who appears to be the executant on the face of it. The presumption, no doubt, is rebuttable. But unless rebutted the presumption stands and the document can be admitted in evidence as a' document executed by the person alleged to have executed it without any further proof: vide Haggitt v. Ineff, (1855) 24 L. J. Ch. 120 :(3 W.R. 141) and Performing Right Society Ltd V. Indian Morning Post Restaurant, A.I.R. (26) 1939 Bom. 347: (I. L. R. (1939) Bom. 295).
40. The Learned counsel for the Respondent adverts to the decision of Hon'ble Madras High Court in K Gopinath and Ors V S Saviramuthu Sebastian and Ors reported in (2021) 7 MLJ at Page 355 wherein at para 23 to 25 it is observed as under:-
"23. Insofar as the Power of Attorney, which was marked as Ex.A.6 is concerned, which was executed by the plaintiff in favour of S.Edward Enoch Thompson on 07.07.2008. Admittedly, it was not adjudicated before the concerned registering authority. In this regard, the learned counsel for the appellant/third defendant relied upon the un-reported judgment of this Court in W.P MD) No.3598 of 2016 (S.Saravanan v. District Collector, Pudukkottai), in which it has been held as follows:-
"3. This writ petition is dismissed on the main ground that the petitioner has filed the Writ Petition on the basis of the power of attorney executed by his son, who is residing in foreign country, though it has been executed before the consulate General as per the Registration Act, it has to be adjudicated within four months before the Registrar herein and only then, it becomes a valid power COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 23 24 of attorney. Therefore, https://www.mhc.tn.gov.in/judis/ the office has also made an endorsement at that time of filing. In the said endorsement it is stated that this has to be clarified before the admission stage. He has clearly stated it has not been adjudicated before the Registration Office in India. Therefore, the Power of Attorney itself becomes invalid. The filing of Writ Petition on the basis of Power of Attorney itself is invalid."
24. The learned counsel for the first appellant/third defendant further relied upon the un-reported judgment of this Court in C.R.P (PD) Nos.1793 to 1798 of 2011 (Hamshaveniammal v. Stanley Paul) in which it has been held as follows:-
"14. According to the power agent of the petitioner, the respondent in both the civil revision petitions are working in abroad and they have executed power of attorney before the consulate officer by respondent in C.R.P (PD) No.1795/second defendant and before Notary Public by respondent in C.R.P (PD) No.1796/third defendant. The power of attorney is not registered as per Section 18 of Indian Stamp Act and said power of attorney is not a valid one. The learned Judge, allowed the applications on the ground that the power of attorneys are executed before the consulate officer and Notary https://www.mhc.tn.gov.in/judis/ Public and they need not be registered. The learned Judge has committed an irregularity in allowing both the applications.
The learned Judge failed to see that any power of attorney executed outside India it is to be adjudicated in India as per the provisions of Section 18 of the Indian Stamp Act. The power of attorney having failed to get adjudicated by a competent Sub-Registrar, is not entitled to represent the respondent, as power of attorney are not valid."
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 24 25
25. Accordingly, the Power of Attorney executed outside India has to be adjudicated in India as per the provisions of Section 18 of the Indian Stamp Act. The Power of Attorney having been failed to get adjudicated by a competent authority is not entitled to represent the plaintiff as Power holder and it is not valid. Whereas, the Court below failed to frame any issue in this regard, whether the Power of Attorney, which was marked as Ex.A.6 is valid or not. However, as rightly pointed out by the learned counsel for the first appellant/third defendant this issue can be raised before this Court and it can be answered by this Court. The Court below brushed aside the issue that if substantive justice and technicalities are fitted against each other with the technicalities go and substantive justice shall revive. The said settled law is not applicable to the case on hand. Since the Power of Attorney itself was not adjudicated before the authority concerned and as such, the Power holder has no authority to depose on behalf of the plaintiff. Section 18 of the Indian Stamp Act, mandates the adjudication before the registering authority when the Power of Attorney is executed outside India. Therefore, the Power holder cannot maintain the suit, unless the Power of Attorney is adjudicated before the registering authority."
41. The Learned counsel for the Respondent refers to the decision of the Hon'ble Delhi High Court in the matter of M/s Birla DLW Ltd V. M/s Prem Engineering Works reported in 1998 SCC Online Del 504 wherein at para No.8 to 12 it is observed as under:-
"8. We have perused the Power of Attorney on record as well as the evidence recorded in support thereof. The original Power of Attorney is stated to be executed by Shri M.D. Poddar in the presence of one Shri G.K. Sureka. It is based on a Resolution of the Board of Directors dated 14.7.1981. Appellant has neither produced on record the Resolution of the Board of Directors which authorised Shri M.D. Poddar to execute the COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 25 26 Power of Attorney, nor Shri M.D. Poddar or Shri G.K. Sureka appeared as witnesses to prove the execution of the said Power of Attorney. Mr. Saraogi, on behalf of the plaintiff, in his statement, did not depose anything about either being familiar with the signatures of Shri Poddar or the said Power of Attorney having been executed by Shri Poddar in his presence. The Power of Attorney was routinely tendered in evidence and exhibited. The question that comes up for consideration is whether a presumption of its due execution and validity can be raised under Section 85 of the Indian Evidence Act? A Division Bench of this Court had occasion to consider this aspect in Electric Construction & Equipment Co. Ltd. Vs. Jagjit Works (supra). The Division Bench observed as under :
"It is useful to note that Section 85 raises a presumption about the execution of a POA provided two conditions are satisfied. Firstly, it must be executed before a Notary Public and secondly. It must be authenticated by him . In this case, there is no authentication at all. There is no statement of facts by the Notary Public regarding the manner of execution or the persons executing the document. If reference is made to the judgments cited before us, the contrast is striking. In the case of the City Bank, the authentication made by the Notary Public in New York covers nearly two printed pages of the Report and quotes extensively the circumstances in which the General POA was executed. Similarly, in the case of the National & Grindlays Bank Ltd., the authentication shows that the seal of the Bank was impressed on the POA in the presence of the Notary and the same was the genuine seal of the Bank. Thus, it was the authentication that proved both the execution as well as the due authentication of POA and, therefore, satisfied the test laid down in Sec. 85 of the Evidence Act."
9.In Syndicate Bank Vs. M/s. S.A. Trading Corpn. & Ors. (supra), a Division Bench of this Court while dealing with the question of proof of COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 26 27 Power of Attorney, where presumption under Section 85 of the Evidence Act could not be raised, observed as under :
In case the person who has conferred the Power of Attorney has not got it executed, so as to enable him to raise the presumption which may be raised in terms of Section 85 of the Evidence Act, then he is left with no option, but to prove the same in accordance with law. This is done by proving the resolution of the Board of Directors of the company, which gives its officers power to grant Power of Attorney to persons the company considers worthy of it, and also prove the factual execution of the Power of Attorney by the empowered officer or officers. This proof has to be tendered in Court by proving the passing of the resolution by the company in accordance with sections 193 and 194 of the Companies Act, 1956.
10.In the instant case, the Power of Attorney, admittedly, was not executed in the presence of the Notary. The Power of Attorney is stated to be dated 17.7.1981 while the notarial certificate is dated 18.7.1981. It clearly shows that the Power of Attorney was not executed before the Notary. The endorsement by the Notary, stating that he had verified the signatures to be that of Mr. M.D. Poddar, is vague. It does not disclose the basis of such verification. In these circumstances, it cannot be said that the twin requirement of execution and authentication by the Notary are met so as to draw the presumption of validity under Section 85 of the Indian Evidence Act.
11. From the foregoing it is clear that the plaintiff has failed to produce or prove the Resolution of the Board of Directors, authorising Shri M.D. Poddar to execute the Power of Attorney. The Power of Attorney itself has not been proved Mere exhibition of the same would be of no avail. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 27 28
12. We have also perused the plaint in question to see whether the plaintiff could avail of the benefit of the provision under Order XXIX of the Code of Civil Procedure, which enables a Director or Principal Officer of the Corporation to sign and institute the plaint. In the instant case there is no averment in the plaint that Shri Saraogi is either the Principal officer or the Director of the Plaintiff Company. He is merely described as a constituted attorney on the basis of the Power of Attorney, which we have held as not proved. Even in the verification, the rank or position of Mr. Saraogi with plaintiff has not been stated. Accordingly, the benefit of Order XXIX of the Code of Civil Procedure, which would enable a Principal Officer or Director of the Company to sign and verify the plaint is also not available in the instant case."
42. The Learned counsel for the Respondent cites the decision of Hon'ble High Court of Calcutta in Re.Mylne V Unknown reported in (1906) ILR 33 Cal 625 wherein at para 3 it is observed as under:-
"3.The question turns, as we have said, upon the true construction of Section 85 of the Evidence Act. The section runs as follows: "
"The Court shall presume that every document purporting to be a Power-of-Attorney and to have been executed before, and authenticated by a Notary Public ****was so executed and authenticated.
"It is a mandatory section, the Court shall presume that every document, etc. The question is whether, in the face of that section, an affidavit of identification as to the person purporting to make the Power-of-Attorney being the person named therein is necessary. This document purports to be a Power-of-Attorney, and to have been executed before, and COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 28 29 authenticated by a Notary Public. Unless the authentication by the Notary is to be treated as the equivalent of an affidavit of identity it goes for very little. In the present case, the person he authenticates as executing it is William Charles Robert Mylne, the constituent named in the Power, the executor of the will. The power is attested by two witnesses and we think having regard to Section 114 of the Evidence Act, the Court may, in the absence of any thing to excite suspicion, fairly assume that the Notary satisfied himself of the identity of the executant before he certified and attested the Power. If, in addition to this, an affidavit of identity is necessary, another affidavit that the person making the affidavit of identity was in a position to speak of that identity might be required and so on ad infinitum. If the application is the result of a fraudulent conspiracy, we scarcely think the requirement of an affidavit of identity would be likely to prevent the fraud, or afford any real protection. In our judgment, the object of the section was to avoid the necessity of anything of that sort."
43. The Learned counsel for the Respondent relies upon the decision of Hon'ble High Court of Calcutta in Smt Renuprova Paul V Sannyasi Charan Ghosh and ors reported in AIR 2005 Cal 118 wherein at para 2 it is observed as under:-
"2. It appears to this Court that the Court of first instance discussed the matter thoroughly in respect of both the accounts. So far second point is concerned, it was held that there should be due compliance of Section COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 29 30 85 of the Evidence Act read with Section 33 of the Registration Act in respect of execution of the power-of-attorney. Therefore, the real meaning is that either the power-of-attorney will be authenticated or be registered to make a valid piece of document. In the instant case, although all the parties are residence of city of Calcutta (Kolkata), but, I find that power- of-attorney was simply executed in the city of Bombay (Mumbai). There is no plausible reasoning in connection thereto. Therefore, such authenticated document can not be a valid piece of evidence under Section 85 of the Evidence Act. Section 33A of the Registration Act says that authentication will be made within whose sub-district the principal resides. I have no manner of disbelieve that all the parties are residing in the city of Calcutta. But the same was not executed there admittedly. Therefore, any readiness and/or willingness being an outcome of purported agreement for sale on the basis of such document can not have any leg to stand. Therefore, it is expressly visible that the plaintiff was not ready and willing to perform the part performance of the contract as per Section 16 of the Specific Relief Act. So far the 1st point is concerned, the Court of first instance in effect held that there is a difference between pleading and proof as regards readiness arid willingness in terms of Section 16 of the Specific Relief Act. The first Appellate Court, unfortunately held that this can not be the solitary ground for refusing to grant relief in respect of specific performance of the contract. I have no semblance of doubt that such reasoning is not only wrong but also uncalled for. Therefore, I have no hesitation in my mind COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 30 31 that the second appeal has been proceeded before this Court on the right substantial questions of law and shall be allowed on that score."
44. The Learned counsel for the Respondent adverts to the decision of Hon'ble High Court of Andhra Pradesh between M. Parthasarthi & Others V The State of AP Represented by Secretary, Education Department, Hyderabad and another reported in 1970 SCC OnLine AP 175 wherein at paras 1, 2, 4,5, 18, 19 and 20 it is observed as under:-
"1. Fourteen persons purport to file this writ petition. Though all of them signed the Vakalat form, only one of them signed and verified the writ petition stating that he was doing so for himself and on behalf of other petitioners. A letter entitled 'authorisation letter' purporting to be under Rule 17 of the Civil Rules of Practice and Order 6, Rule 14 of the CPC signed by petitioners 1 to 3 and 5 to 14 was also filled with the writ petition. It says:-
"We, the undersigned petitioners hereby authorise Sri G. Pattabhirama Sarcna 4th Petitioner in Writ Petition Mo. 1 of 1970 to sign and verify the writ petition on our behalf."
2. The Office took an objection that all the petitioners should either sign and verify the writ petition or they should file an affidavit or a Power of Attorney authorising the 4th petitioner to sign and verify the writ petition. It was objected that a mere letter of authorisation is not sufficient compliance with the Rules. The learned counsel for the petitioners disagreed with this objection and hence the matter has been referred to COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 31 32 me. Rule 3(a) of the Rules which regulate the proceedings under Article 226 (of the Constitution) published on 21-5-1970 requires that the petition shall be signed and verified by the petitioners in the manner provided for signing and verification of pleadings under the Code of Civil Procedure. Order 6, Rule 14 of the CPC is the relevant provision and it lays down that 'every pleading shall be signed by the party and his pleader (if any)'. Where, however, a party, by reason of absence or for other good cause, is unable to sign the pleading, it may be signed by any person duly authorised by him to sign the same OR to sue or defend on his behalf. By virtue of the provisions of Rule 3(a), the requirements of Rule 14 of Order 6 of the CPC, have become applicable to writ proceedings. Accordingly, if a party is unable to sign the writ petition himself, any person duly authorised by Mm can sign the same. The Code does not define the words 'duly authorised'. Granting a power of Attorney is certainly a 'due authorisation' universally accepted by law. What other modes of 'due authorisation' could be adopted by law. What other modes of 'due authorisation' could be adopted and whether a mere letter of authorisation is one such mode of due authorisation is the question now to be considered.
4. An affidavit is a sworn statement of the other petitioners duly attested by an authority authorised by law to so attest. The possibility of getting false authorisations is thus excluded or, in any case minimised by making a sworn statement in the presence of a duly constituted COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 32 33 authority. It is pertinent to note that clause (b) of Rule 3 of the Writ Petition Rules requires that:-
"The facts relied on by the petitioner shall be verified by an affidavit which shall be filed along with the petition."
5. It is thus manifest that the Court is very anxious to have not only the petitioners that come to the Court but also the facts alleged by them are verified. Such verification is easily done by an affidavit. A mere letter of authorisation, though purported to be signed by other petitioners, is neither a sworn statement of those persons nor is it signed in the presence of a recognised authority.
18. There is, therefore, no doubt in my mind to hold that in order to avoid all future difficulties, doubts or complications it is essential for the parties to prove 'due authorisation' by producing a Power of Attorney or a sworn affidavit of the party who is not personally signing and verifying the petition. Even so, learned counsel submitted that the requirement of filing an affidavit has been satisfied in this case by the fourth petitioner who has filed and verified the petition on behalf of the other petitioners, has himself filed an affidavit stating that the other writ petitioners have authorised him to sign and verify the writ petition. But such an affidavit by a person who is actually signing and verifying the petition does not meet the requirements of the situation. What is required is the affidavit of the party or parties who is or are not signing and verifying. Otherwise, the very purpose for which such an affidavit is required is likely to be COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 33 34 defeated. After all, the fourth petitioner, who is swearing to the affidavit has already signed the petition and it would not be difficult for him to swear to another affidavit. If the Court is to be satisfied that the parties had authorised him to sign and verify the petition on their behalf, it is their affidavit that is essential to prove such authorisation and not the affidavit of the person who has come forward that he has got a representative capacity.
19. For the reasons, I answer the reference by holding that if some of the parties to the writ petition do not personally sign and verify it, but authorise somebody else to sign and verify on their behalf either a Power of Attorney or an affidavit sworn by them in the presence of an attesting Officer or functionary recognised by law stating the reasons for their inability to sign and verify the petition personally and authorising another person to sign and verify on their behalf, should be filed.
20. Before I part with the case, I must express my thanks to the learned Principal Government Pleader who has rendered me valuable assistance on my request."
RECOGNISED AGENTS AND PLEADERS IN CIVIL PROCEDURE CODE
45. It is to be remembered that the word 'act', occurring in Or III R 1 of CPC in juxtaposition with the word 'appearance' and application is used in a technical sense, referable to 'any action' by any 'party', as per decision in 'The Anglo French Drug Company V. RD Tinaikar reported in AIR 1959 Bom. at pg. 21.
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 34 35
46. As a matter of fact, the words 'Except' where otherwise expressly provided', occurring Or III R 1 of CPC refer to Laws, other than the Civil Procedure Code. In this connection, it will be worthwhile for this Tribunal to recall and recollect the Full Bench decision of the Hon'ble High Court of Andhra Pradesh in Satyanarayana V. Venkatasubbayya (AIR 1957 AP 172 (FB)). The 'words' 'Except where otherwise expressly provided' were construed to be one, as including the provisions of the Civil Procedure Code and Or XXXIII R 3 and Or XLIV R 1 and held to constitute exceptions, to this Rule, falling within the 'words' 'Except where otherwise provided'
47. A recognised Agent, includes a person who holds the 'Power of Attorney' and this is because of Section 1A and 2 of the Powers of Attorney Act, 1882.
48. At this juncture, this 'Tribunal' pertinently points out that the 'execution of Power of Attorney', will not denude the principle of his power, to act independently and the principle is not required, to take the consent of 'Attorney'. In terms of Or III R1 of CPC, an appearance, application, or 'act' in or to any Court which is required to be made or done by a party in the Court, can be effectively made by the party in person or by a Recognised Agent.
49. A civil proceeding instituted without the filing of a Power of Attorney is a curable irregularity, as per decision in Ashok Kumar V. Gobinda Chandra, AIR 1984 Cal 337. Indeed, in the decision in Jhamman Lal V. Parma Nand, reported in AIR 1951 All 451 it is observed and held that instead of a COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 35 36 Vakalat/post card authorising a lawyer to appear stiched post card bearing the requisite court fee is a valid power.
50. Further, Order III Rule 2 of CPC, 1908, provides for the 'Recognised Agents' of parties by whom such appearances, applications and acts may be made or done (i) persons holding Power of Attorney, authorising them to make and do such appearances, applications and acts on behalf of such parties. (ii) persons carrying on trade or business for an in the names of parties not resident within the local limit of the Court within which limits the appearance, application or act is made or done in matters connected with such trade or business only where no other Agent is expressly authorised to make and do such 'appearances', 'applications' and 'acts'.
EVALUATION
51. Before the Adjudicating Authority/Tribunal the Appellants in their Section 7 Application of the I&B Code, 2016 in CP(IB)No.119/BB/2021 as 'Financial Creditors', in Form 1, had mentioned in Part I, the name of the Respondent/M/s Ozone Urbana Infra Developers Pvt Ltd, as 'Corporate Debtor' and that the names of 169 'Financial Creditors' were mentioned. Under Part IV of Application under the Head, particulars of Financial Debt, of the 'Applicant', the total amount of debt granted it was mentioned that a total financial debt of Rs.1,27,05,10,277 (Rs. One hundred and twenty seven Crores five lakhs ten thousand two hundred seventy seven only) was the due sum defaulted, as the Respondent/corporate debtor have cumulatively COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 36 37 defaulted the financial debt, paid by the Applicants/Financial Creditors/Allottees towards the purchase of their respective Units.
52. The Appellants in Section 7 Application had mentioned the amount claimed in default as Rs.191,65,13,949/- (Rupees One hundred ninety one crores sixty five lakhs thirteen thousand nine hundred forty nine only). The Default, according to the Appellants, was continuing as soon as, since the year 2016. Further, it was mentioned that the Default was committed by the Respondent/Corporate Debtor as soon as since the years 2016 (being the latest date of Default committed by the Corporate Debtor as per the Agreement). The maximum time, in accordance with the agreement of the Applicant/Allottees for delivering the possession was mentioned as 2016. Also that the Default is continuing even till date, as the construction of Project was not complete and the possession was not handed over.
53. According to the Appellants, they are home buyers/Allottees of Respondents' under construction project 'Ozone Urbana' and had approached the Adjudicating Authority/Tribunal against the 'Default of Financial Debt' of not delivering the possession of the Flats/Units, as committed by the Respondent, in view of the agreed terms and conditions of the Agreement for sale and construction agreement executed between the parties.
54. It is pointed out on behalf of the Appellants that in view of the Default committed by the Respondent in not delivering the possession of the Flats/Units, they being 184 Unit Holders had collectively filed a Section 7 Petition in CP(IB) NO.119/BB/2021 (Before the Adjudicating Authority/NCLT COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 37 38 Bengaluru Bench) through their ''Authorised Representative' Mr. Sethuraman Mahadevan and Mr. Bipul Bhattacharya by executing/signing 'Letters of Authorisation' in their favour.
55. It is represented on behalf of the Appellants that since the Company Petition before the Adjudicating Authority/Tribunal is concerned with total number of '184 Unit Holders' living worldwide, having in all 184 Units in the said Project, it was difficult to procure affidavits and Vakalanama from each one of the Applicants.
56. The Learned counsel for the Appellants points out that the Adjudicating Authority/Tribunal had not raised any Defect or objection to the manner in which the Petition in CP(IB)No.119/BB/2021 was formulated and filed. The other plea taken on behalf of the Appellants is that the Adjudicating Authority/Tribunal should not have rejected the Petition outright, but should have granted time to the Appellants/Applicants to rectify such Defects, as specified in proviso to Section 7(5)(b) of the I&B Code, 2016.
57. The Learned counsel for the Appellants contends that the Adjudicating Authority/Tribunal had failed to appreciate the decision of the Hon'ble Supreme Court of India in the matter of Innoventive Industries Ltd V. ICICI Bank and another, 2018 1 SCC Page 407 while contemplating the Admission of a Section 7 Petition under I&B Code, 2016 had laid down the four factors, to be seen by an 'Adjudicating Authority/Tribunal' and the same is mentioned
(i) There should be a debt; (ii) Default should have occurred; (iii) Debt should COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 38 39 be due to financial creditors; (iv) Such default which has occurred should be by a corporate debtor.
58. According to the Appellants, the Appellants, being the creditors of a distressed 'Corporate Debtor' were affected with the impugned order passed by the 'Adjudicating Authority/Tribunal' which in fact, had not taken into account of the spirit and object of the I&B Code, 2016. Also that the aspect of 'timely resolution' was not taken into consideration by the 'Adjudicating Authority/Tribunal' at the time of passing the impugned order.
59. The Learned counsel for the Appellant relies on the decision of the Hon'ble Supreme Court of India in Arun Kumar Jagatramka V. Jindal Steel & Power Ltd and another reported in 2021 SCC OnLine SC 220 wherein at para 95 it is observed as under:-
"95. However, we do take this opportunity to offer a note of caution for the NCLT and NCLAT, functioning as the Adjudicatory Authority and Appellate Authority under the IBC respectively, from judicially interfering in the framework envisaged under the IBC. As we have noted earlier in the judgment, the IBC was introduced in order to overhaul the insolvency and bankruptcy regime in India. As such, it is a carefully considered and well thought out piece of legislation which sought to shed away the practices of the past. The legislature has also been working hard to ensure that the efficacy of this legislation remains robust by constantly amending it based on its experience. Consequently, the need for judicial intervention or innovation from the NCLT and NCLAT should be kept at COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 39 40 its bare minimum and should not disturb the foundational principles of the IBC."
60. Before the 'Adjudicating Authority/Tribunal', the Respondent/M/s Ozone Urbana Infra Developers Pvt Ltd, had filed a Preliminary Statement of Objection to the CP (IB)No.119/BB/2021 filed by the Petitioners/Financial Creditors stating that the Petitioners/Appellants are all speculative investments customers and are not Allottees, who seek to have a shelter for living.
61. Moreover, the Respondent, in their objections had mentioned that in Company Appeal (AT) 83/2020 (Subha Sharma's case) brought down the differences between a 'Bona fide Allottee' and a 'Speculative Investor' and ultimately the Adjudicating Authority/Tribunal was pleased to dismiss the false claim of a 'speculative investor' who had couched himself as a ''Bona fide Allottee'.
62. According to the Respondent/Corporate Debtor, the Appellants/Petitioners had consciously made an investment in terms of a buy back agreement, wherein, their purpose was to invest and earn profit by selling the invested apartment/unit, under certain terms and conditions and as such, they would never fall within the purview of ''Bonafide Allottees' under I&B Code, 2016 read with Real Estate (Regulations and Development) Act, 2016 which places only Allottees of a Real Estate projects on the pedestal of a 'Financial Creditor''.
COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 40 41
63. It is represented on behalf of the Respondent that out of 169 initial Petitioners, 23 of them had got more than one apartment unit, for the purpose of investment. For example, the Petitioner No.25 namely Mr. Uday Kiran Chaka is also the Applicant No.40, No.41 and No.42. Further, Applicant No.43 Mrs Meera Chaka is also Applicant No.86 to 87, No.88. Thus Mr and Mrs Chaka, in fact, hold 8 units though they are a single family.
64. Likewise, the following tabular form, discloses the details of multiplicate Petitioners, which is described as under:-
Customer Name No. of Units Mr. Ashish Ganpat Rane 2 Mr Bipul Bhattacharya 2 Mr Deepak Kumar 2 Mr Dilip Panjwani 2 Mr George Thomas 2 Mr P Sanjeev U Paniker 2 Mr Prajal Saikia 2 Mr Prasad Hanur Narayana 2 Mr Ravi Kumar Reddy 2 Mr. Rupesh Kumar 2 Mr. Sandeep Kumar Sharma 3 Mr Saumitra Gupta 2 Mr Subhranshu Sekhar Das 2 Mr Uday Kiran Chaka 4 COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 41 42 Mr. Meera Chaka 4 Ms Pallavi Singh 2
65. The Learned counsel for the Respondent points out that the main CP Petition IB 119/BB/2021, portraying Holder of each Unit, as an Applicant is not only an abuse of process of law but an also articulated fraud played on the Tribunal. Moreover, all the present Petitioners, being buy back customers and are not even qualified to be termed as 'Allottees' of 'Real Estate Project'. Besides this, while the 'Letter of Authorisation' was executed by both the parties/joint purchasers, for reasons best known, the Petition was preferred only by one of them.
66. It is pointed out on behalf of the Respondent that Applicant No.1, 2, 3, 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, 16, 20, 22, 24, 28, 29, 30, 32, 33, 34, 35, 39, 40, 41, 47, 48, 49, 50, 54, 55, 57, 60, 61, 62, 63, 64, 65, 66, 68, 72, 75, 77, 78, 79, 80, 83, 93, 95, 96, 102, 106, 107, 109, 110, 113, 114, 115, 117, 118, 124, 125, 126, 127, 129, 130, 135, 137, 138, 140, 141, 142, 143, 144, 145, 146, 147, 150, 152, 157, 158, 163, 167 and 168 are all joint owners but the join.co-owner has not been joined as an Applicant before this Hon'ble Tribunal and therefore Application has to be disregarded and dismissed.
67. According to the Respondent, out of 169 initial applicants, 167 are not personally prosecuting the present matter and only the Petitioner No.1 and 2 are prosecuting personally. As per principles of Order III, Rule 2 of Civil Procedure Code deals with the mandatory procedure on authorized agents COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 42 43 demands a valid Power of Attorney and not a mere self styled 'Letter of Authorisation'. Even the Letters of Authorisation which the Applicant No.3 to 169 purported to have executed, in the name of Applicant No.1 and 2 or flagrantly invalid as they are not 'Power of Attorney'. Also that if the said story typed authorization letter, are to be construed as one satisfying the requirement of a Power of Attorney, they are still not valid because most of the Petitioners are residing in foreign territory and they have appeared to have simply signed the same on 'Dotted lines' and sent it without following the due procedure.
68. According to the Respondent the Petitioners had not paid the amounts as depicted under the Tabular representation at Part IV Page 1 of the Application and in fact they had only paid 10% of the sum, while the rest is funded by Bank/Financial Institutions associated with the Respondent. Several of the Petitioners had already taken the refund of 10% investment alongwith profit and interest improvements thereof.
69. It is the version of the Respondent that pre-EMI was being paid by the Respondent and most of the Petitioners have now approached the Hon'ble High Court of Karnataka through many writ petitions, where they are seeking a direction that Banks/Financial Institutions are not to demand or claim for payment of EMI from them and among other things seeking a direction to recover the same from the Respondent. The Hon'ble High Court of Karnataka passed an interim order, to the benefit of the Petitioners whereby stalling 'demand and recovery' from them and the matter is sub-judices. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 43 44
70. According to Respondent, several Applicants had already approached the RERA Forum seeking details of compensation, refund and other reliefs. Under no 'circumstances or stretch of no logic', can the Petitioner be considered as 'Financial Creditor'. The main CP (IB) 119/BB/2021 is filed under the leadership of the Appellant No.1 and 2 and these men are guilty of making false statement to the fact only 47% of the Project is complete and that there are facilities etc.
71. It is pointed out on behalf of the Respondent that several parts of the Project are complete to a larger extent with the intended facilities and that the occupancy certificate was received for several apartment/unit/parts of the Project in the comprehensive Ozone Urbana Project and completion of the Project in its entirety can be completed on or before 30th September, 2023 in terms of RERA allowances, extended by the appropriate Real Estate Regulatory Authority by continuing the Covid 19 concessions and other enlargements.
72. The Learned counsel for the Respondent contends that the Petition is not presented, in the manner known to Law and fails to qualify the requirements of proper institution of case under the I&B Code and Rules and Regulations. A conjoint reading of Section 3(6), 3(10), 3(11), 3(12), 5(20) and 5(21 of the Code, 2016 makes it clear that to sustain an Application, seeking liquidation proceedings before this Tribunal, the existence of clear financial debts and inferable debt liability either admitted or adjudged. COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 44 45
73. The Learned counsel for the Respondent submits that the Appellants had agreed for an arbitration disputes, and by doing so the Petitioners has admittedly 'waived' all other mechanisms in Law, for recovery of dues and other remedies. Further a statutory right can be waived under a 'contract' if it does not go against the public policy and is in relation to a private arrangement.
74. The Learned counsel for the Respondent points out that a 'statutory right' can be waived off by the parties through 'contract' if it can be shown that such right was conferred only for the private benefit of such parties and does not involve any public interest vide (1974) 2 SCC 472; Murlidhar Aggarwal V State of UP; (2017) 1 SCC 487; All India Powers Engineer Federation and ors V. Sasan Power Limited and others; (1988) 1 SCC 70; Shalimar Tar Products Ltd V. H.C. Sharma; (1971) 1 SCC 619; Lachoo Mal V. Radhey Shyam.
75. This Tribunal has heard the Learned counsels appearing for the Appellants as well as the Respondent and noticed their contentions.
76. As far as the present case is concerned, this 'Tribunal' on going through the 'impugned order' dated 24.06.2022 in CP (IB) No.119/BB/2021 passed by the 'Adjudicating Authority' (National Company Law Tribunal, Bengaluru Bench, Bengaluru) is of the considered view that at Paragraph No.12 of the 'impugned order' although 'five issues' were framed for consideration by the 'Adjudicating Authority', therein no specific issue / point being framed or raised for consideration viz., whether the Respondents / Petitioners / COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 45 46 Financial Creditors are the speculative investors, who come within the ambit of Financial Creditors as per the explanation (i) of S.5(8)(f) of the Insolvency & Bankruptcy Code, 2016.
77. In this connection, this 'Tribunal' refers to the sentences occurring in Paragraph '5' of the 'impugned order' i.e., "As per Section 5 (8) (f) of the Insolvency & Bankruptcy Code, 2016, the Applicant should be 'allottee' as per RERA, hence all the 'Applicants are Allotees' and this 'Tribunal' upon hearing the contentions / advanced on respective sides comes to a definite conclusion that the 'Adjudicating Authority'/Tribunal had not framed the issue (whether the Petitioners in Application / Appellants in Appeal) are 'Speculative Investors' and whether they can be termed as 'Allottees' in terms of S.5(8)(f) of the Code.
78. Although, the 'Adjudicating Authority' (National Company Law Tribunal, Bengaluru Bench, Bengaluru) had dismissed the CP (IB) No.119/BB/2021, this 'Tribunal', keeping in mind of the 'prime fact' that in 'Law', there is 'no Estoppel against Statute', to raise all 'Factual' and 'Legal' issues / contentions in a 'Legal Proceedings' before the 'Competent Forum', at this stage, without delving deep into the merits of the matter nor expressing any opinion, one way or the other on the controversies / disputes centring around the Case, permits the 'Appellants' to raise all 'Factual' and 'Legal Pleas' ( Like(i)whether the Petitioners/Appellants have locus to file CP (IB) 119/BB/2021 before the Adjudicating Authority/Tribunal? (ii)whether the 'Letter of Authorisation' was duly executed and duly authorised or not in COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 46 47 accordance with Law? (iii)whether the 'Letter of Authorisation' executed by the Appellants/Petitioners from various parts of the world including India require any stamp duty to be paid in accordance with the Indian Stamp Act, 1899? and(iv) whether the said 'Letter of Authorisation' given by the Petitioners/Appellants is to be adjudicated, in terms of the Indian Stamp Act, 1899, within a period of three months? (v) Whether the Appellant No.1 and 2 had satisfied the minimum threshold of 10% or 100 in number, as per Section 7 of the I&B Code, 2016? (vi) Whether the 'Letters of Authorisation' do have the trappings of a Power of Attorney, as per the Powers of Attorney Act, 1882? And (vii) whether the Appellant No.1 and 2 do have a right to maintain the Section 7 Petitioner in CP No.119 (BB)/2021 before the 'Adjudicating Authority/Tribunal' (viii) whether the Respondents/Petitioners/Speculative Investors/Allottees, in view of the stand taken by the Respondent/Corporate Debtor, before the Adjudicating Authority/Tribunal, Bengaluru, as per Section 5(8)(f) of the Code), /available defences in Law and in that event, the 'Adjudicating Authority/Tribunal' is necessarily required to deal with the issues/points on legal plane and, therefore, this Tribunal, based on 'Fair Play', Good Conscience quite in the fitness of things, remits back the CP No.119/BB/2021 for a 'de novo' enquiry to be conducted, by the 'Adjudicating Authority/Tribunal and to proceed with the matter by providing opportunity of 'hearing' to both parties, by adhering to the 'principles of natural justice' and to proceed further on merits, and to dispose of the CP No.(IB)119/BB/2021 in a fair, just and in an unbiased manner, by passing a 'reasoned speaking order' in a dispassionate manner, dealing with the COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 47 48 issues/points so raised and to render a finding in accordance with Law and in the manner known to Law, of course, uninfluenced and untrammelled with any of the observations made by this 'Tribunal', in this 'Appeal'.
79. With the above said observations and directions, the instant Company Appeal (AT)(CH)(Ins) No.330/2022 stands 'disposed of'. No Costs. The connected IA, if any, is Closed.
(Justice M. Venugopal) Member (Judicial) (Mr. Ajai Das Mehrotra) Member (Technical) NB:
This judgement is pronounced in terms of Rule 92 of NCLAT Rules, 2016 Bm/ss 15.02.2024 COMPANY APPEAL (AT) (Ins)(CH) NO.330 OF 2022 48