TaxTMI 
TaxTMI 
2021 (3) TMI 626
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.....2019 and 10.1.2020 passed by the Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) in CA(IB) No.87/CTB/2019 in IA(IB)No.21/CTB/2019 in TP No.40/CTB/2019 arising out of CP(IB)No.24/KB/2018. 2. The 'Adjudicating Authority' (National Company Law Tribunal, Cuttack Bench), while passing the Impugned Order (First Order) dated 25.6.2019 in IA No.21/CTB/2019 in TP No.40/CTB/2019 [CP (IB) No.24/KB/2018] among other things at Paragraphs 15 to 19 observed as under : Para 15. "It is seen from the perusal of the Order of Hon'ble Orissa high Court dated 25.03.2019 that the Hon'ble High Court on the basis of contentions of the bank observed that, "Opposite party no.2(SBI) being public sector bank is obliged under law to adhere to the provisions and guidelines/policies claimed by opposite party no.1(RBI) from time to time. In reply to the averments made by the petitioner in Paragraph No.5 to the Writ Petitions, SBI has stated in its counter affidavit that RBI has issued directions as per annexure 2 of the Writ Petition and instructions of RBI are complied with". Para 16. Above evidence is enough to hold that this proceeding Under Section 7 of the Insolvenc....
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....n Saturday 18th November, 2017 at Hotel Park Prime, AJC Bose Road, Kolkatta-20". The suit shall be filed against company before 31.12.2017 which is also directed by RBI Circular dated 28.08.2017. All the representative of the other major lenders present in the meeting." Para 19. Above minutes make it abundantly clear that the SBI has initiated this proceeding under Insolvency and Bankruptcy code, against the corporate debtor on the basis of RBI directions dated 28.08.2017 Circular dated 28.08.2017 is also on record at Page 142. RBI has directed State Bank of India to initiate proceeding under Insolvency and Bankruptcy Code, against some of the defaulters including the Corporate Debtor. RBI now in view of the interpretation of Hon'ble Apex Court of Section 35-AA of Banking Regulation Act, 1949 in case of Dharani Sugar & Chemicals Limited, cannot issue such instructions without concurrence of the Central Government. It appears to me from evidence on record that this proceeding is initiated by the State Bank of India against the Corporate Debtor as per instructions of the RBI and, ultimately allowed the Interlocutory Application No.21/CTB/2019 filed by the 'Corporate Debtor' ....
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.... in its judgement, but had not quashed the same. 7. It is represented on behalf of the 'Appellant' that the 'Adjudicating Authority' (National Company Law Tribunal) had failed to appreciate that the Central Government Notification dated 5.5.2017 had already authorised the 'Reserve Bank of India' to issue directions in regard to the 'specific defaults' and to pass specific directions in relation to such 'default'. 8. The Learned Counsel for the 'Appellant', forcefully comes out with an argument that the 'Adjudicating Authority' (National Company Law Tribunal) failed to appreciate that the constitutional validity of Sections 35- AA and 35-AB of the 'Banking Regulations Act, 1949' was considered and upheld in the decision of Hon'ble Supreme Court in 'Dharani Sugars' case and hence, actions of the 'Reserve Bank of India' taken thereunder stood valid except the 'Reserve Bank of India' Circular dated 12.2.2018 which was struck down. 9. It is the version of the 'Appellant' that the 'Adjudicating Authority' (National Company Law Tribunal) had acted beyond his jurisdiction and in violation of the Hon'ble Supreme Court's order dated 29.7.2019 in dismissing the 'Review Application' o....
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.... 35-AA and 35-AB of the 'Banking Regulations Act, 1949'. 15. The Learned Counsel for the Appellant submits that the 'Reserve Bank of India' Letter dated 28.8.2017 was expressly mentioned in the judgement of the Hon'ble Supreme Court in 'Dharani Sugars', wherein at Paragraph 20, the specific accounts were mentioned in the said letter and that if the 'Banks' failed to finalise and implement viable 'Resolution Plan' by 13.12.2017, the 'Banks' would be required to file applications under the 'Insolvency & Bankruptcy Code', before 31.12.2017. 16. The Learned Counsel for the Appellant contends that the 'Impugned Order' dated 25.6.2019 (first order) of the 'Adjudicating Authority' proceeds on the incorrect assumption that no prior authorisation of the Central Government was taken for issuance of instructions to the Appellant by the 'Reserve Bank of India'. Continuing further, it is projected on the side of the Appellant that as per the 'Reserve Bank of India' Affidavit in Writ Appeal and as mentioned in Para 21 of the Hon'ble Supreme Court judgement in 'Dharani sugars' case, the Central Government Notification dated 5.5.2017 authorise 'Reserve Bank of India' to identify specific cas....
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....21. The Learned counsel for the Appellant argues that the Reserve Bank of India's Counter Affidavit in Writ Appeal No.201 of 2019 was not disclosed by the 'Respondent'/Corporate Debtor' before the Learned 'Adjudicating Authority' in view of the 'Review Application' proceedings which amounts to suppression of material facts and playing fraud upon the Court. Also that, the 'Respondent'/'Corporate Debtor' had not disclosed the 'Adjudicating Authority' in regard to the hearing of 'Review Application' which took place on 5.11.2019, that on 4.11.2019, it had withdrawn the Writ Appeal in WA No.201 of 2019 which was filed against the order dated 25.3.2019. 22. It is the submission of the Learned Counsel for the Appellant that once the Writ Appeal, i.e. WA No.201 of2019 was withdrawn, the order dated 25.3.2019 becomes final and binding on the 'Adjudicating Authority' had no jurisdiction to disregard the judgement of the Hon'ble High Court of Orissa dated 25.3.2019. 23. The Learned Counsel for the Appellant contends that the 'Respondent'/'Corporate Debtor's position before the Hon'ble High Court was recorded to the effect 'however it is not disputed that the bank has jurisdiction to ap....
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.... the Hon'ble Supreme Court in 'Dharani Sugars' only relates to quashing the Circular of 'Reserve Bank of India' dated 12.2.2018 and in fact, the judgement clearly clarified that 'as a result, all cases in which the Debtors have been proceeded against by Financial Creditor under section 7 of the 'Insolvency & Bankruptcy Code' 2016, only because of the operation of the 'Impugned Circular' will be proceedings which, being faulted at the very inception, are declared to be non-est." 28. The Learned Counsel for the Appellant points out that the 'Respondent'/'Corporate Debtor' had not disclosed before the 'Adjudicating Authority' that it was simultaneously pursuing to sanction the 'Scheme of Demerger' while the 'Proceedings' under Section 7 of the 'Insolvency & Bankruptcy Code' were pending. That apart, it is the stand of the Appellant that pendency of Section 7 proceeding of the 'Insolvency & Bankruptcy Code' were not disclosed in the proceedings for the demerger while obtaining the sanction order dated 8.7.2019 from the 'Tribunal' which was without notice to the Creditors of the 'Respondent' and it was stayed by the Hon'ble Supreme Court of India. 29. The Learned Counsel for the A....
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....ey was involved. 34. The Learned Counsel for the Appellant submits that the filing of the 'Appeal' against the 'Impugned Order' is within 'Limitation', after the Appellant is granted the benefit of exclusion of period for prosecuting prior proceeding, in terms of Section 14 of the 'Limitation Act' and in fact, the Appellant/Applicant has prayed for an exclusion of 193 days from the total period of 223 days from 26.6.2019 to 14.2.2020. 35. Appellant's Citations: (a) The Learned Counsel for the Appellant relies on the decision of Hon'ble Supreme Court in 'Dharani Sugars and Chemicals Ltd. Vs. Union of India and others reported in (2019) 5SCC 480 at Spl.Pg.502 to 504 wherein at Paragraph 19 to 21, it is observed as under: 19. "At this stage, as a first step, the Internal Advisory Committee ("IAC") decided to consider the stressed assets within the top 500 exposures of the banking system as on 31-3-2017. This set of 500 accounts was arrived at as per the statement generated from the Central Repository of Information on Large Credits ("CRILC") database. On the said top 500 exposures, it was noted that 71 accounts had been partly or wholly classified as NPAs while the o....
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....ies which may be considered necessary to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016." This happened to be on the very next day on which the Bank Regulation (Amendment) Ordinance, 2017 introduced Sections 35-AA and 35-AB as amendments to the Banking Regulation Act. A Press Note of the Ministry of Finance of 5- 5-2017 explains the genesis of the Ordinance thus : "Press Information Bureau Government of India Ministry of Finance The promulgation of Bank Regulation (Amendment) 5-5-2017 Ordinance, 2017 will lead to effective resolution of stressed assets, particularly in consortium or multiple banking arrangements. The Ordinance enables the Union Government to authorise Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets. The promulgation of the Baking Regulation (Amendment) Ordinance, 2017 inserting two new Sections (viz., 35-AA and 35-AB) after Section 35-A of the Banking Regulation Act, 1949 enables the Union Government to authorise Reserve Bank of India (RBI) to direct banking companies to resolve ....
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....erent power of recalling its own order if sufficient cause is shown therefor. The principles of natural justice, which in a case of this nature, envisage, that a mistake committed by the Tribunal in not noticing the facts involved in the appeal, which would attract the ancillary and/or incidental power of the Tribunal necessary to discharge its functions effectively for the purpose of doing justice between the parties, were required to be complied with. 20. While the Judges' records are considered to be final, it is now a trite law that when certain questions are raised before the court of law or tribunal but not considered by its, and when it is brought to its notice, it is only appropriate authority to consider the question as to whether the said contentions are correct or not. For the aforementioned purpose, the provisions of limitation specified in Section 129-B(2) of the Customs Act would not be attracted. However, such an application cannot be filed at any time. If such an application is filed within a reasonable time and if the court or tribunal finds that the contention raised before it by the applicant is prima facie correct, in order to do justice, which is being....
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....spect of legal certainty in the rule of law. That principle is not obliterated by Section 254(2)of the Income Tax Act, 1961. When prejudice results from an order attributable to ITAT's mistake, error or omission, then it is the duty of ITAT to set it right. Atonement to the wronged party by the court or tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, ITAT was justified in exercising its powers under Section 254(2) when it was pointed out to ITAT that the judgment of the coordinate Bench was placed before ITAT when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. ITAT acknowledged its mistake, it accordingly rectified its order. The Court was not justified in interfering with the said order". d) The Learned Counsel for the Appellant adverts to the judgement of this 'Tribunal' in the matter of Santhosh Vasanth Walocar V Vijayakumar V. Iyer, Resolution Professional, Mumbai and Another in Company Appeal (AT)(Ins) No.871-872 of 2019 dated 24.1.2020 wherein at Para 30(iv) it is observed as under: "Whether the Adjudicating ....
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....ings are civil proceedings prosecuted by the same party. (2) the prior proceedings had been prosecuted with due diligence and a in good faith; (3) the failure of the prior proceedings was due to a defect of jurisdiction or other cause of a like nature; (4) both the proceedings are proceedings in a court". In the submission of the learned Senior Counsel, filing of civil writ petition claiming money relief cannot be said to be a proceeding instituted in good claiming money relief cannot be said to be a proceeding instituted in good faith and secondly, dismissal of writ petition on the ground that it was not an appropriate remedy for seeking money relief cannot be said to be defect of jurisdiction or other cause of a like nature" within the meaning of Section 14 of the Limitation Act. It is true that the writ petition was not dismissed by the High Court on the ground of defect of jurisdiction. However, Section 14 of the Limitation Act is wide in its application, inasmuch as it is not confined in its applicability only to cases of defect of jurisdiction but it is applicable also to cases where the prior proceedings have failed on account of other causes of li....
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....Judge Bench holding, "We have no reason to take a different view". f) The Learned counsel for the Appellant refers to the decision in Ayisu and 6 others V Saidu 6 others reported in (2015) 1 KLJ at P.755 wherein at Para 16 and 17, it is observed as under: 16. "It is crucial to note that Section 14(1) of the Limitation Act makes no reference to the pendency of suit or appeal or other proceedings in a court of law. The Legislature had used the words of general import and of widest amplitude If only pendency of a proceeding in a court would be deducted in computing the period of limitation, the time taken for issuing certified copies of the judgment which is essential to decide future course of action, has to be disregarded for the purpose of Section 14. It would certainly result in an anomaly. That time covered for taking steps absolutely necessary for initiating proceedings in a court should be included in calculating the period of limitation. The section does not make any distinction between the steps which a litigant has to take to initiate proceedings in a court and the actual pendency of those proceedings in the court. In other words, Section 14 of the Limitation Act....
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....e principal. The very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. In the present case the creditor is a banking company. A guarantee is a collateral security usually taken by a banker. The security will become useless if his rights against the surety can be so easily cut down. The impugned direction cannot be justified under Order 20 Rule 11(1). Assuring that apart from Order 20 Rule 11(1) the Court had the inherent power under Section 151 to direct postponement of execution of the decree, the ends of justice did not require such postponement". RESPONDENT'S SUBMISSIONS (Comp App(AT) (INS) No.294 & 295/2020) 38. The Learned Counsel for the Respondents submit that section 35AA of the Banking Regulation Act, 1949 makes it clear that dehors the authorization of the Central Government, the Reserve Bank of India has no power to issue directions on its own unlike section 35 of the Act. 39. The Learned Counsel for the Respondent contends that the appellant/financial creditor had admitted that the proceedings were filed before the 'Adjudicating Authority' (National Company Law Tribunal, Cuttack Bench) because of the Rese....
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....present appeals) clearly records that the proceedings shall be filed before the National Company Law Tribunal against the Company before 31.12.2017, which is also directed (vide RBI's circular dated 28.12.2017) and that the direction of the Reserve Bank of India was not only in respect of the Respondent/Company but entire class of debtors and was of a general nature and not falling within the expression 'a default' within the meaning of section 35AA of the Banking Regulation Act, 1949. 44. The Learned Counsel for the Respondent brings to the notice of this Tribunal that the demand notice prior to the filing of the proceedings before the 'Tribunal' was issued on the last date, i.e 13.12.2017, as per the direction of the Reserve Bank of India (vide Volume I of the Paper Book, Annexure A-12, pages 190-192) and that the proceedings was filed before the Tribunal in CP (IB) No.24/KB/2018 on 21 December 2017 keeping in tune with the RBI Circular/direction. 45. The primordial stand of the Respondent is that in view of the judgment of Hon'ble Supreme Court in Dharani Sugars and Chemicals case report in (2019) 5 SCC at page 480 the directions given by the Reserve Bank of India in its c....
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....aragraph 21 - 23) (3) Bijay Kumar Agarwal Vs State Bank of India and another 2020 SCC Online NCLAT (vide paragraph 22-24) 50. The Learned Counsel for the Respondent submits that the I & B Code, 2016 does not have any statutory provision for 'Review'. Also, it is projected on the side of the Respondent that the jurisdiction of 'Review' cannot be derived and in the absence of specific statutory provisions, any order of 'Review' passed would be a nullity and without jurisdiction. RESPONDENT'S CITATIONS 51. The Learned Counsel for the Respondent to lend support to the contention that in the absence of specific statutory provision, an order of 'Review' cannot be passed refers to the decision of Hon'ble Supreme Court Kalabharathi Advertising Vs Hemanth Vimalnath Narichania reported in (2010) 9 Supreme Court Cases at Page 437 at special page 445 wherein at paragraphs 12 to 14 it is observed as under: "Para 12. It is settled legal proposition that unless the statute/rules so permit, the review application is not maintainable in case of judicial/quasi-judicial orders. In the absence of any provision in the Act granting an express power of review, it is manifest th....
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....other and the new argument might be developed by new counsel from different outlook. If it is allowed, then there would be no end of the litigation. Moreover, engagement of new counsel to make his argument raising a new ground in a different view, cannot be valid ground for the purpose of review. Following such practice, the Stamp Reporter of this Court has submitted a report at the time of filing the review application. However, no explanation is available with regard to the same. The only explanation as given with regard to the condonation of delay is that as because the Supreme Court decided that matter on 29th November, 2011 directing to file the review application, therefore, there was delay on part of the applicants/petitioners in filing the same. However, no new question of fact or law is available before us." 54. The Learned Counsel for the Respondent points out the judgment of this Tribunal in Comp. App (AT) (Ins) No. 295/2017 dated 30.11.2017 in Amod Amladi Vs Sayali and others reported in MANU/NL/0189/2017 wherein at paragraph 6 it is observed as under: "6. In absence of any power of review or recall vested with the Adjudicating Authority, we hold that the....
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....f the said Act is very limited and limited to the extent of the cause of action pleaded in the suit in relation to the arbitration clause or agreement. If the subject dispute is covered by an arbitration agreement, it is imperative on the Court to refer the parties to arbitration instead of venturing to proceed to decide the suit on merit. If an express embargo created under the statute, the Court cannot travel beyond it. The Court cannot pass such a direction which is not contemplated under Section 8 of the said Act and, therefore, the direction as sought for in the instant application is beyond the legal competence of the Court who was in seisin of the suit and was exercising jurisdiction within strict parameters of section 8 of the said Act. " 58. The Learned Counsel for the Respondent refers to the decision of Hon'ble Supreme Court Manohar Shankar Nale and Others v. Jaipal Singh A/o.Shivlal Singh Rajput (2008) 1SCC Pg.520 at spl.Pg. 522 wherein , it is observed as under : ." it is one thing to say that the respondent was entitled to file an application for review in terms of Section 114 read with Order 47 Rule 1 CPC, but it is another thing to say that the decree pa....
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....e Fitz Ex parte Robson (1905) 1 KB 462.) 63. The Learned Counsel for the Appellant puts forward a plea that just because the 'Corporate Guarantor' has gone into Liquidation, the same would not in any way affect the vital obligation of the Respondent towards the Bank. Continuing further, it is the contention of the Appellant that the judgment of Piramal's case of this tribunal, is assailed before the Hon'ble Supreme Court of India in Civil Appeals No. 878 of 2019 and 1678 of 2019, which are pending for determination, together with 8 other Appeals. Also that the Civil Appeal No. 2807 of 2020 on the file of Hon'ble Supreme of Court of India in Shabad Khan v Nisus Finance and Investment case is tagged with bunch of cases relating to the issues involved in Piramal's judgment. 64. The Respondent/Corporate Debtor had filed an IA/21/CTB/2019 in CP (IB) No.24/KB/2018 on the file of Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) and prayed for the issuance of necessary direction in dismissing CP (IB) No. 24/KB/2018 (filed by the Appellant/Financial Creditor/Bank) as the same as become non-est etc. 65. The main plea of the Respondent/Corporate debtor before the....
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....or approval/or consent of the Central Government. 68. In view of the above, according to the Respondent/petitioner/Corporate Debtor, the IA No. 21 of 2019 falls squarely under the ambit of the judgment passed by the Hon'ble Supreme Court of India in Dharani Sugars and Chemicals case and hence the main proceedings filed by the Appellant/Respondent/Financial Creditor had become non-est and was to be dismissed. 69. The Respondent/Appellant/Financial Creditor it is reply to the Interlocutory Application No. 21 of 2019 filed by the Respondent/Petitioner/Corporate Debtor had stated that the Hon'ble Supreme Court in Dharani Sugars and Chemicals Limited case had set-aside the circular dated 12.02.2018 of the Reserve Bank of India stating that the same was not in accordance with section 35AA of the Banking Regulation Act, 1949 and the Hon'ble Supreme Court had not passed any orders on the circulars issued by the Reserve Bank of India prior to 12.02.2018. Furthermore, the Respondent/Appellant/Petitioner had initiated the 'CIRP proceedings' against the Corporate Debtor because of the default committed by it and further that the IA No 21 of 2019 filed by the Respondent/Petitioner/Corpora....
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....companies so as to see that there is proper recovery of public money or for any other such purpose. As a matter of fact, Section 3(11) definition of Insolvency & Bankruptcy Code, deals with 'debt' meaning a 'liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt'. 74. Any sum which is due and payable by the borrower/Corporate Debtor to the Bank is a 'Financial Debt' within the meaning of Section 5(8) of the Code. The 'CIRP' is to be initiated when a default is made in regard to the payment of 'Debt' by the 'Corporate Debtor'. In Law, a 'Creditor' is not to be restrained from filing such application in accordance with 'Law'. The trigger for initiating 'Insolvency Process' is the occurrence of 'default' by the 'Debtor'. 75. At this juncture it is worthwhile to recall and recollect the decision of the Hon'ble Supreme Court in Dharani Sugar and Chemicals Limited vs Union of India (2019) 5 SCC at special page 518 wherein it is observed and laid down as follows: 42. ... "If a specific provisions of the Banking Regulation Act makes it clear that RBI has a specific power to direct banks to move under the ....
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....21/CGTB/2018 filed by the Respondent/Petitioner/Corporate Debtor is dismissed. The Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) is directed to restore CP (IB) No. 24/KB/2018 (TP No. 40/CTB/2019) to its file and to proceed further, of course, in the manner known to Law and in accordance with Law and to dispose of the same on merits, after providing adequate opportunities of hearing to the respective parties. Liberty is granted to both sides to raise factual and legal pleas (including the plea of maintainability/non maintainability of 'CIRP Process' under section 7 of the I & B Code, 2016) APPRAISAL: ( Comp. App. (AT) (Ins) No. 295/2020) 79. Be it noted, that before the Hon'ble High Court, Orissa, Cuttack, in Miscellaneous case No. 2216 of 2018 in WP (C) No. 2511 of 2018 filed by the Respondent/ VISA Steel Limited (As petitioner) against the (1) Reserve Bank of India, Mumbai and the Appellant/State Bank of India, an order of stay of further proceeding of C. P (IB) 24/KB/2018 pending before the National Company Law Tribunal, Kolkata Bench was granted on 15.03.2018 till the next date of hearing . Moreover, on 02.05.2018 the Hon'ble High Court of Orissa, C....