2023 (1) TMI 1145 - AT - Insolvency and Bankruptcy

Tribunal Upholds Decision to Refund Bank, Rejects Arguments

DCB Bank Limited Versus Mr. R. Sadasivsan, Liquidator of Thiru Arooran Sugars Limited, State Bank of India, Shri Ramalingam Vadapathimangalam Tyagarajan

The Tribunal upheld the Adjudicating Authority's decision directing the Bank to refund Rs.11,30,40,034 to the Corporate Debtor's account. The Bank's ... Seeking refund to the Corporate Debtor’s Account in the Corporate Insolvency Resolution Process - existence of sufficient cause and non-appearance of the parties or not - the grievance of the Appellant / Bank / Petitioner is that the Application came to be dismissed by the Tribunal on 18.10.2022 without taking into consideration Rule 49 of the NCLT Rules, 2016 - HELD THAT:- Rule 49 (2) of the NCLT Rules, 2016 under the caption, Ex parte Hearing and Disposal points out that if a Notice was not duly served or the concerned person was prevented by any sufficient cause for appearing at the time when the Petition / Application was called for Hearing, the Tribunal (Adjudicating Authority) can pass an Order, by setting aside the Ex parte Hearing, as against it / him or them, (after being satisfied with the reason (s) assigned, of course) on such terms, as it thinks fit. In the instant case, although the Appellant / Bank, has come out with a specific plea that only due to Covid-19 Pandemic, the Appellant / Bank / Petitioner had skeletal staff operation, both at the Corporate Office, Branch Office, etc. and that were the only reasons for the Petitioner / Appellant / Bank was not quite enough to enter its appearance in the subject matter of the case before the Adjudicating Authority (Tribunal). Although the Plea of Covid-19 Pandemic, appears to be a persuasive one, at the first blush, on acceptable one, on going through the spirit and tenor of the Counter filed by the Respondent, this Tribunal without any haziness, comes to an inevitable and inescapable conclusion that there is no Sufficient Cause / Good Cause for Allowing the application - this Tribunal is in Complete Agreement with the Conclusion, arrived at by the Adjudicating Authority (Tribunal) in the impugned order which is free from any Legal Flaws. Application dismissed. Issues Involved:1. Validity of the order directing the Bank to refund Rs.11,30,40,034 to the Corporate Debtor's account.2. Adequacy of notice and opportunity provided to the Bank during the proceedings.3. Justification for setting aside the ex parte order due to the Covid-19 pandemic.Detailed Analysis:1. Validity of the Order Directing Refund:The Appellant/Bank contested the impugned order dated 03.03.2022, which directed it to refund Rs.11,30,40,034 to the Corporate Debtor's account. The Bank argued that this sum was part of a Non-Consortium Facility granted on 29.11.2017 and not part of the Consortium Facility. The Bank maintained that its rights to 'Live' and 'set off' were preserved under Article 5 of the Consortium Agreement. The sum was granted before the commencement of the Corporate Insolvency Resolution Process (CIRP) on 19.12.2018.2. Adequacy of Notice and Opportunity:The Bank claimed that notices were sent to its Head Office in Mumbai and Registered Office in Chennai, which were received. However, due to the Covid-19 pandemic and subsequent lockdown, the Bank was unable to enter an appearance, resulting in the ex parte order on 03.03.2022. The Bank argued that it had a good case on merits and filed an application to set aside the ex parte order, which was dismissed on 18.10.2022 without considering Rule 49 of the NCLT Rules, 2016, which provides for 'sufficient cause' for non-appearance.The Respondent/Liquidator countered that the Bank had ample opportunities to appear, as the case was listed on multiple dates, and notices were duly served. The Tribunal noted that the Bank admitted receiving notices on 16.07.2021, 17.07.2021, and 22.07.2021, and thus had adequate opportunity to represent itself.3. Justification for Setting Aside the Ex Parte Order:The Bank argued that the failure to appear was due to the Covid-19 pandemic, which led to skeletal staff operations. The Tribunal, however, found this reason insufficient, especially given that notices were duly served. Rule 49 (2) of the NCLT Rules, 2016, allows setting aside ex parte orders if the concerned person was prevented by 'sufficient cause' from appearing. The Tribunal concluded that the Bank's reason did not constitute 'sufficient cause' and upheld the Adjudicating Authority's order.Conclusion:The Tribunal dismissed the appeal, agreeing with the Adjudicating Authority's decision, which was deemed free from legal flaws. The connected pending IA/1132/2022 (for stay) was also closed.