AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 418
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.... M/s. Empee Distilleries Limited, came forward to file this writ petition by making a challenge to the common order passed by the National Company Law Tribunal, Chennai dated 20.01.2020 made in MA/780/2019 and MA/1250/2019 of CP/280/IB/2018. 2. The petitioner, in the affidavit filed in support of this writ petition, would aver among other things that a petition in CP/280/IB/2018 under Section 7 of the Insolvency and Bankruptcy Code, 2016 [in short "IBC"] was filed by the 4th respondent, namely Union Bank of India (petitioning creditor) before the National Company Law Tribunal [in short "NCLT"] at Chennai. The petitioner would state that pendency of the said petition, a sum of Rs. 50 lakhs was paid to the 4th respondent on 27.08.2018 and a further sum of Rs. 50 lakhs was paid on 19.09.2018 and thereby reducing the total outstanding due with accumulated interest to a sum of Rs. 9,18,20,789/- and it was also followed by very many requests to the 4th respondent to restructure the said debt. 3. NCLT, Chennai, vide order dated 01.11.2018 in CP/280/IB/2018 had initiated Corporate Insolvency Resolution Process in respect of the said company and moratorium was declared and an Interim ....
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....led an application before the NCLT, Chennai in MA/780/2019, praying for approval of the Resolution Plan submitted by the 3rd party, namely the 10th respondent. 6. The order of NCLT, Chennai dated 29.07.2019 referred to supra was put to challenge by way of appeal before the NCLAT and vide order dated 06.09.2019 made in CA(AT)(Insolvency) No.921 of 2019, liberty was granted to the petitioner to move an application under Section 12A of IBC for settling the claims of all the creditors including guarantors, and NCLAT also taken note of the fact as to the settlement of claims of some financial creditors. 7. In the appeal filed by the petitioner in C.A.No.7581 / 2019, the Hon'ble Supreme Court of India had initially granted an order of Status Quo on 04.10.2019 and subsequently, the appeal came to be dismissed, vide order dated 18.10.2019 by extended the time granted by NCLAT for a period of two weeks from 18.10.2019. The petitioner, along with M/s.Empee Holdings Limited, had submitted a Settlement Plan to the 4th respondent on 30.10.2019 in terms of Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 20....
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....250/2019 were taken up together and argued at length on 19.11.2019 and the NCLT, Chennai had reserved orders in both the applications on that date. Written submissions were also filed by the petitioner. 12. The petitioner would further state that the Bench which heard both the applications consisted of Mr.B.S.V..Prakash Kumar (Member Judicial) and Mr.S.Vijayaraghavan (Member Technical). The 1st respondent, vide notification in S.O.72(E) dated 08.01.2020 had notified that Mr.B.S.V. Prakash Kumar, being the seniormost member of NCLT shall act as President, NCLT in terms of Section 415 of the Companies Act, 2013 for a period of 3 years with effect from 05.01.2020 or until a regular President is appointed or until further orders, whichever is earlier. Accordingly, the Principal Bench of NCLT, New Delhi was reconstituted, which include Mr.B.S.V..Prakash Kumar as Acting President and Mr.S.K.Mohapatra as Member Technical. 13. The petitioner has also invited the attention of this Court to the various notification issued by NCLT at New Delhi and stated that, vide order dated 07.01.2020 signed by the Registrar of NCLT, Principal Bench at NCLT, New Delhi was reconstituted comprising of ....
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....0004; In terms of Rule 150 of the NCLT Rules, the Tribunal, after hearing the applicant and respondent, shall make and pronounce an order either at once or, as soon as thereafter as may be practicable but not later than thirty days from the final hearing and as per Sub-Rule (4) of Rule 152, if the order cannot be signed by reason of death, retirement or resignation or for any other reason by anyone of the Members of the Bench who heard the case, it shall be deemed to have been released from part-heard and listed afresh for hearing. ✔ In the light of the fact that the Cause List as to the pronouncement of the orders in MA/1250/2019 have not been pre-published or uploaded in the website coupled with the fact that in the Additional Cause List there was no indication as to the pronouncement of the orders in MA/1250/2019 and in the Cause List neither the name of the applicant nor his Counsel has been indicated and that the orders came to be pronounced nearly two months from the date of reserving orders and therefore, prayed for setting aside the common order dated 20.01.2020 with a further direction for listing and hearing of the matter afresh. ✔ Attentio....
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....t inclined to entertain to consider the said submission for the reason that it is concerned with rather called upon to answer the issue as to the prejudice caused to the petitioner on account of the alleged non-compliance of the procedure contemplated by the NCLT Rules. The learned counsel appearing for the petitioner, in support of his submissions, has placed heavy reliance upon the Division Bench decision of the Bombay High Court in Kamal K.Singh v. Union of India and Others [2019 SCC OnLine Bom 5609] and also the judgments in Pushpa Singh v.Union of India and Others [2019 SCC OnLine Bom 2385] and Arcelormittal India Private Limited v. Satish Kumar Gupta and Others [(2019) 2 SCC 1]. 16. Mr.K.Ramanamoorthy, learned Central Government Standing Counsel appearing for the 2nd respondent has drawn the attention of this Court to the affidavit of the 2nd respondent and the typed set of documents and would submit that on 07.01.2020, four orders were passed by the Registrar, NCLT, New Delhi under directions from the Acting President, which include constitution of a Special Bench for NCLT, Chennai, Court II for pronouncements of orders, comprising of Mr.B.S.V. Prakash Kumar, Acting Pr....
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....g in Court No.II did not rise until 4.45p.m. It is also brought to the knowledge of this Court by the learned Senior Counsel appearing for the 3rd respondent that pursuant to the Resolution Plan, the 10th respondent has brought in Rs. 134.78 Crores as stipulated in the Resolution Plan and Rs. 15.90 Crores towards the difference in payment of Tax and all amounts as stipulated in the Resolution Plan and payment of operational creditors have been done in accordance with the terms of the Resolution Plan and about 33% of the dues to the financial creditors have been paid and also made a submission that the Promoters / Corporate Debtors did not provide for any solution, despite opportunities granted by the NCLAT and the Hon'ble Supreme Court of India. 18. The learned Senior Counsel appearing for the 3rd respondent on the legal plea made a submission that the relevant statutory rules relied on by the learned Senior Counsel appearing for the petitioner can be construed only as directory in nature, in the absence of any indication as to the result of such non-compliance and would further add that the petitioner has also not been prejudiced for the reason that he became aware of the o....
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....this case, it is not so and also supported the plea of the 3rd respondent that time limit prescribed for pronouncing orders are only directory in nature. 21. In response to the same, the learned Senior Counsel appearing for the petitioner would submit that non-following of certain provisions of NCLT Rules would vitiate the impugned order as the said Rules are mandatory in nature. It is submitted by the learned Senior Counsel appearing for the petitioner that Section 12A of the IBC have not been followed and there exist manifest error of Law and therefore, it can be set right by this Court by issuing a Writ of Certiorari. It is further submitted by the learned Senior Counsel appearing for the petitioner that NCLT Rules came to be framed in exercise of the powers conferred under Section 469 of the Companies Act, 2013 and therefore, Rules 89, 150 to 153 of NCLT Rules are mandatory and from the materials placed, it is seen that the Tribunal had failed to adhere to the same and as such, the impugned common order stand vitiated and it is to be set aside. The learned Senior Counsel appearing for the petitioner would further add that the Tribunal did not record any reasons as to the bel....
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....f the President, Judicial Member and Technical Member constituting the Bench, (3) Against the number of each case lists in the daily cause list, the following shall be shown, namely:- (a) names of the legal practitioners appearing for both sides and setting out in brackets the rank of the parties whom they represent ; (b) names of the parties, if unrepresented, with their ranks in brackets. (4) The objections and special directions, if any, of the Registry shall be briefly indicated in the daily cause list in remarks column, whenever compliance is required." 26. A perusal of the affidavit of the second respondent dated 13.02.2020 would read that on account of the retirement of Justice M.M.Kumar (Judge Retd., High Court of Karnataka) as the President of NCLT on 04.01.2020, Mr.B.S.V.Prakash Kumar, Member (Judicial), being the seniormost member of NCLT, was appointed as Acting President of NCLT in terms of powers conferred upon the Central Government under Section 415 of the Companies Act, 2013, vide Gazette Notification dated 03.01.2020 and the said member assumed charge on 05.01.2020 as the Acting President of NCLT, Principal Bench at New Delhi....
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.... not published in the website and the reason for non-publication of the pronouncement of the orders in the website is stated in Para 9, wherein it is averred that on 20.01.2020, orders were pronounced in 9 cases including MA/780/2019 and MA/1250/2019 (common order) and for that purpose, cause list was displayed on 20.01.2020 at 10.a.m in the Notice Board at NCLT, Chennai Bench. It is further stated in the 2nd respondent affidavit that the Registrar, NCLT, was unable to display the Cause List as well as in the Notice Board on the previous day on 19.01.2020 as it happen to be a Sunday (Holiday) and on account of the said reason, Cause List was unable to uploaded in the website. 30. In para 10 it is averred by the 2nd respondent that the Coram for pronouncing the orders on 20.01.2020 has been clearly depicted in the Cause List and thereby giving notice to the Bench having been constituted to all parties concerned. It is further stated that the Acting President Mr.B.S.V.Prakash Kumar (Former Judicial Member, Chennai Bench) is the Administrative Authority responsible for constituting Special Bench and therefore, the said Bench was competent to pronounce orders on 20.01.2020. In para ....
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....of procedure. The Division Bench of Bombay High Court, in the above cited judgment, in Paras 50, 56, 59 to 61 has dealt with the rule position and in paras 72 and 75 observed as follows: "72. Therefore, by sub-rule (1) of Rule 89, the Registry is required to prepare and publish on the notice board of the Registry before the closing of working hours on each working day the cause list for the next working day and subject to the directions of the President, listing of cases in the daily cause list shall be in the order of priority, unless otherwise ordered by the concerned Bench. Ultimately, the requirement of this nature and to be followed by a court, particularly a substitute for a Civil and Company Court means that people and litigants should know when orders are to be pronounced in cases which have been already heard. Therefore, the broad heads which have to be enumerated in the daily cause list ensure that litigants, parties and equally the public at large know that the cases have been listed for that purpose and with that object. In cases in which arguments are concluded and judgments are ready for pronouncement, then, the pronouncement has to be done after notifying to....
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.... in every fact situation or circumstances judicial orders would not be declared as illegal or not binding merely because there is a minor deviation or departure or non-adherence to procedural rules. Ultimately, no general rule can be laid down. However, when Part XIX of the NCLT Rules, 2016 titled as "Disposal of Cases and Pronouncement of Orders" contains Rules 146 to 162 and particularly Rules 150 to 152 specifically on the point of subject of pronouncement, then, they cannot be ignored totally and in all situations, particularly on broad consideration of expediency. The expediency that is demonstrated in the present case is disturbing. If there was a hearing held in the month of August, 2019 and that was the last one, the remainder of the months of August and September were available for the Members of the Bench to prepare and pronounce their order. There was no great hurry in rushing and pronouncing the order when the Member (Judicial) knew that he was due for promotion or that he has been intimated about the promotion and that there was a notification issued promoting him. The stage or the date from issuance of such notification till the date of taking charge is the period uti....
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...., on the first page, after the cause-title, date of reserving the judgment and date of pronouncing it be separately mentioned by the Court Officer concerned. (ii) That Chief Justices of the High Courts, on their administrative side, should direct the Court Officers/Readers of the various Benches in the High Courts to furnish every month the list of cases in the matters where the judgments reserved are not pronounced within the period of that month. (iii) On noticing that after conclusion of the arguments the judgment is not pronounced within a period of two months the Chief Justice concerned shall draw the attention of the Bench concerned to the pending matter. The Chief Justice may also see the desirability of circulating the statement of such cases in which the judgments have not been pronounced within a period of six weeks from the date of conclusion of the arguments amongst the Judges of the High Court for their information. Such communication be conveyed as confidential and in a sealed cover. (iv) Where a judgment is not pronounced within three months from the date of reserving judgment, any of the parties in the case is permitted to file an applicat....
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....ules 131 (2) and 131(3) of the U.P. Municipalities Act, 1916, formulated the following 3 questions for consideration: (i) Is the publication as provided in Section 13(3) mandatory or directory? (ii) Was the publication in this case strictly in accordance with the manner provided in Section 94(3)? and (iii) If the publication was not strictly in accordance with the manner provided in Section 94 (3) is the defect curable under Section 135(3)? In para 8 of the said judgment, the Hon'ble Supreme Court of India had dealt with the general question whether a particular provision of the Statute which on the face of it appears mandatory is merely directory or not? and it is relevant to extract para 8 of the said judgment: "8. The question whether a particular provision of a statute which on the face of it appears mandatory, inasmuch as it uses the word "shall" as in the present case - is merely directory cannot be resolved by laying down any general rule and depends upon the facts of each case and for that purpose the object of the statute in making the provision is the determining factor. The purpose for which the provision has been made and its n....
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....e mandatory rule and directory rule and it is relevant to extract para 9 of the said judgment: "9. The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarised thus: The fact that the statute uses the word "shall" while laying down a duty is not conclusive on the question whether it is a mandatory or directory provision. In order to find out the true character of the legislation, the court has to ascertain the object which the provision of law in question has to sub-serve and its design and the context in which it is enacted. If the object of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision....
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....ision may be determined by an expression in the statute itself of the result that shall follow non-compliance with the provision. At p. 111 it is stated as follows: "As a corollary of the rule outlined above, the fact that no consequences of non-compliance are stated in the statute, has been considered as a factor tending towards a directory construction. But this is only an element to be considered, and is by no means conclusive." 44. In Dattatraya Moreshwar v. State of Bombay [AIR 1952 SC 181] it was held as under: (AIR p. 185, para 7) "[G]enerally speaking the provisions of a statute creating public duties are directory and those conferring private rights are imperative. When the provisions of statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty and at the same time would not promote the main object of the legislature, it has been the practice of the courts to hold such provisions to be directory only, the neglect of them not affecting the validity of the acts d....
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....n of procedural provision should be examined from the point of view of prejudice." 42. Similar view has been taken in M/s.Hyundai Motors India Ltd. v. Union of India [(2016) 1 CTC 308] and it is relevant to extract the following portions of the said judgment: "56. Generally, time limits prescribed, especially in subordinate legislation, can be taken only to be directory and not mandatory. Otherwise, a subordinate legislation may even destroy the Parent legislation, by default. 57. In Raza Buland Sugar Co. Ltd. v. The Municipal Board [AIR 1965 SC 895], a Constitution Bench of the Supreme Court held that the question whether a particular provision is mandatory or directory, cannot be resolved by laying down any general rule and that it would depend upon the facts of each case. The Court has to consider the purpose for which the provision had been made, its nature, the intention of the legislature in making the provision, the serious general inconvenience or injustice to persons resulting therefrom when the provision is read one way or the other, the relation of the particular provision to other provisions dealing with the same subject as well as other considerati....
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.... provision contains a prescription and also stipulates the consequences of non compliance with the condition, it would normally be taken to be mandatory. If the consequences of non compliance are not indicated, then, the provision has to be seen only as directory." 43. NCLT Rules, 2016 came to be framed in exercise of powers conferred under Section 469 of the Companies Act by the Central Government. 44. Now coming to the issue as to the non-uploading of the information relating to pronouncement of the orders made in MA/780/2019 and MA/1250/2019 either in the website or in the Cause List, it is stated by the 2nd respondent that the said information could not be uploaded in the website on the previous day on 19.01.2020 as it happens to be a Sunday (Holiday) and however, took a stand that the common order in the said applications were pronounced in the open Court and also seems to be apologetic by stating in para 11 that non-mentioning of the information as to the pronouncement of the orders in MA/1250/2019 in the Cause List is neither wilful nor wanton. 45. A perusal of the Cause List dated 20.01.2020 with regard to the pronouncement of the orders by the Bench having coram o....
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.... in the interest of justice and for reasons to be recorded, enlarge such period, even though the period fixed or under these rules or granted by the Tribunal have expired. In the case on hand, the timeline have not been adhered to. 50. In para 5 of the affidavit of the 3rd respondent, it is stated that after the dismissal of the appeal by the Hon'ble Supreme Court on 18.10.2019, the Ex-Directors / Promoters failed to provide Settlement Plan under Section 12A of IBC and the said fact was recorded in the Minutes of the Meeting of COC dated 04.11.2019. The Ex-Director filed an application in MA/1250/2019 in MA/780/IB/2019 in CP/280/IB/2019 challenging the consideration of the Settlement Plan by COC on various grounds and the NCLT, Chennai reheard the entire resolution plan along with MA/1250/IB/2019 and reserved orders on 19.11.2019 and a mention was made by the learned counsel appearing for the 3rd respondent on 06.01.2020 by way of reminder as to the pronouncement of the orders and the Bench assured that orders would be pronounced immediately after the Pongal Holidays and accordingly, orders were pronounced approving the Resolution Plan on 20.01.2020. 51. In Balwant Singh ....
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....mpanies Act, 2013, any person aggrieved by the order of the Adjudicating Authority under this Part may prefer an appeal to the NCLAT". Sub-Section (2) of Section 61 says that the appeal shall be filed within 30 days before the NCLAT and Sub-Section (3) of Section 61 says that an appeal against an order approving a resolution plan under Section 31 may be filed on five grounds. 54. The petitioner got the certified copy of the order within 7 days from the date of pronouncement of the common order dated 20.01.2020 i.e., within the timeline contemplated under Section Sub-Section (2) of Section 61 of IBC and as such, it cannot be said that he has been put to serious prejudice on account of non-uploading of the information relating to pronouncement of the orders on 20.01.2020 and non indication of the same in the Cause List. 55. Now coming to the mandatory nature of NCLT Rules, 2016, more particularly Rules 150 and 153, in the light of the settled legal position that consequences that may arise on account of the non-adherence to the time line/procedure have not been indicated in the said Rules, it can be considered to be only directory. 56. The Division Bench judgment of the Bomb....