2022 (5) TMI 411 - AT - Insolvency and Bankruptcy

Tribunal Upholds Adjudicating Authority's Orders on Jurisdiction and Procedural Compliance

S.V. Sunil Kumar Chowdhury (Promoter/Shareholder and Member of suspended Board of Directors of Corporate Debtor) Versus Corporation Bank, Hyderabad, Mr. Sridhar Venkatraya Sundararaja, The Registrar National Company Law Tribunal

The Tribunal dismissed the appeal, upholding the Adjudicating Authority's orders. It found that the Corporate Debtor waived its right to challenge ... Transfer Appeal - Territorial Jurisdiction to initiate CIRP against Corporate Debtor - Conferment of Jurisdiction - HELD THAT:- The Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench) after satisfying itself that the 1st Respondent/Bank had satisfied with the requirements as enunciated under the I & B Code, 2016 had admitted the main CP(IB) No. 374/7/HDB/2019 on 27.09.2019 and appointed an Insolvency Professional as an Interim Resolution Professional, as proposed by the ₹ 1st Respondent/Financial Creditor. It is not out of place this Tribunal to make a pertinent mention that a Registered Office of the Company determines the Domicile of a company for all purposes. It cannot be brushed aside that the parties submitting to the jurisdiction of the Court even arguing at a later stage would not be permitted to assail the issue of jurisdiction, unless a failure of justice had been caused due to a wrong trial of a case in a Court which had no territorial jurisdiction no interference can be made on merits - A person who is not vigilant and has been duly served will not be qualified to pray for a second opportunity. A Court of Law is not under an obligation to issue Fresh Notic to the parties concerned when a party does not appear before the Court on the day of posting. It cannot be gainsaid that every cause pleaded by a person or party cannot be accepted where he is negligent slept over his rights. Before passing Exparte Orders, a Court of Law must be satisfied of Due Service as opined by this Tribunal. A Substituted Service should be effected as a last resort, when ordinary steps for Service prove futile. Filing of appeals before Appellate Authority - HELD THAT:- It cannot be ignored that in the present case, when the main CP (IB)/374/7/HDB/2019 was adjourned and listed on 08.08.2019 and on that day, the Appellant’s Counsel had not appeared on account of Viral Fever. It comes to be known that the main Company Petition was heard and orders were reserved on 26.08.2019 and further, that the Appellant had not made any arrangements for advancing arguments on 26.08.2019 and later the Petition was admitted for CIRP on 27.09.2019 by the Adjudicating Authority. In the present case, despite the fact that the Appellant has come out with the issue of Territorial Jurisdiction, which was not projected at the earliest point of time, before the Adjudicating Authority on the side of the Corporate Debtor, considering the fact that one Mr. Sunil, Director of the Corporate Debtor had presented himself before the Adjudicating Authority on 18.07.2019 and sought time to engage an Advocate and later, the Corporate Debtor had not acted in a diligent manner by not taking adequate steps to advance arguments on 26.08.2019 when orders were reserved by the Adjudicating Authority in the main petition and later, on 29.07.2019, when the main Company Petition was admitted and the CIRP commenced against the Corporate Debtor, this Tribunal comes to a resultant conclusion that the Corporate Debtor through its Director Mr. Sunil had submitted to the Jurisdiction of the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench) and the aforesaid Director had failed to avail the opportunity to put forth the objections of the Corporate Debtor. Suffice it for this Tribunal to make a pertinent mention that there is no rule enjoined in NCLT Rules, 2016, to file any Review Petition as against the Original / Final Order passed by an Adjudicating Authority (National Company Law Tribunal) and equally there is no power showered upon the Adjudicating Authority to Recall its own Original / Final Order. Looking at from any angle, the Appellant has not exhibited or shown or made out any Sufficient Cause or Good Cause (to the subjective satisfaction of this Tribunal) in respect of all stages of the proceedings. Appeal dismissed. Issues Involved:1. Jurisdiction of the Adjudicating Authority.2. Service of notice to the Corporate Debtor.3. Ex-parte proceedings and setting aside of ex-parte orders.4. Admission of the insolvency petition.5. Compliance with procedural requirements under the Insolvency and Bankruptcy Code (IBC), 2016.Detailed Analysis:1. Jurisdiction of the Adjudicating Authority:The Appellant contended that the National Company Law Tribunal (NCLT), Hyderabad, lacked jurisdiction to entertain the insolvency petition as the registered office of the Corporate Debtor was located in Kurnool, Andhra Pradesh, which falls under the jurisdiction of the NCLT, Amaravati. The Tribunal observed that the Appellant had not raised this jurisdictional issue at the earliest opportunity and had, in fact, submitted to the jurisdiction of the NCLT, Hyderabad, by appearing and seeking time to file a reply. The Tribunal cited various legal precedents to establish that objections to territorial jurisdiction can be waived if not raised promptly and that the Appellant had effectively waived this right by its conduct.2. Service of Notice to the Corporate Debtor:The Appellant argued that no notice was served on the Corporate Debtor before the initiation of the Corporate Insolvency Resolution Process (CIRP). The Tribunal noted that the Financial Creditor had attempted to serve notice, which was returned with an endorsement 'Left.' Subsequently, notice was served by way of paper publication, and the Corporate Debtor's Director appeared before the Adjudicating Authority, indicating awareness of the proceedings. The Tribunal found that the principles of natural justice were followed, and the Corporate Debtor was given adequate opportunity to respond.3. Ex-parte Proceedings and Setting Aside of Ex-parte Orders:The Appellant sought to set aside the ex-parte order dated 27.09.2019, arguing that the non-appearance was due to the Advocate's illness. The Tribunal observed that the Corporate Debtor had failed to take necessary steps to advance arguments on subsequent hearing dates and had not acted diligently. The Tribunal emphasized that a party must demonstrate sufficient cause for non-appearance, which was not established in this case. The Tribunal also highlighted that there is no provision in the NCLT Rules, 2016, for the Adjudicating Authority to recall its own final order.4. Admission of the Insolvency Petition:The Tribunal examined whether the Adjudicating Authority had followed due process in admitting the insolvency petition. It was noted that the Financial Creditor had complied with all procedural requirements under the IBC, 2016, including the submission of necessary documents and evidence of default. The Tribunal found that the Adjudicating Authority had rightly admitted the petition after satisfying itself of the existence of a financial debt and default.5. Compliance with Procedural Requirements under the IBC, 2016:The Tribunal scrutinized the compliance with procedural requirements, including the issuance of notices, substituted service, and adherence to timelines. It was observed that the Financial Creditor had made diligent efforts to serve notice, and the Adjudicating Authority had provided sufficient opportunities for the Corporate Debtor to present its case. The Tribunal concluded that the procedural requirements under the IBC, 2016, were duly followed, and there was no failure of justice.Conclusion:The Tribunal dismissed the appeal, finding no merit in the Appellant's contentions. It upheld the orders of the Adjudicating Authority, emphasizing that the Corporate Debtor had waived its right to challenge territorial jurisdiction and had failed to demonstrate sufficient cause for setting aside the ex-parte order. The Tribunal directed the Appellant to pay the deficit filing fee within two weeks.