TaxTMI 
TaxTMI 
2021 (10) TMI 895
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..../2021(filed by the First Respondent/Union of India) on the file of the 'National Company Law Tribunal', Court No.1, Mumbai Bench, Mumbai have preferred these two 'Appeals' before this 'Tribunal' as 'Aggrieved persons' being dissatisfied with the impugned order dated 31.08.2021 passed in CP No.294/MB/2021 by the 'National Company Law Tribunal', Mumbai Bench. 2. Earlier, the 'National Company Law Tribunal', Mumbai Bench by means of an impugned order in CP No.294/MB/2021 (filed by the First Respondent /Union of India) had attached and froze the moveable and immoveable properties of the Appellants including Bank Accounts, Lockers, Demat Accounts including the jointly held properties. Appellants' Submissions 3. Challenging an 'Ex-parte' interim order passed by the 'Tribunal' ('National Company Law Tribunal', Mumbai Bench) dated 31.08.2021 in CP No.294/MB/2021, the Learned Counsel for the Appellant/11th Respondent submits that the order of the 'Tribunal' in directing the Freezing of Assets and 'Bank Accounts' of the Appellant without providing a single 'Opportunity of Hearing' is per se an illegal one, because of the fact that the said ''order'' had affected the livelihood of th....
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.... Application'. 9. Advancing his arguments, the Learned Counsel for the Appellants comes out with a plea that even in the instant Company Petition No.294/MB/2021 as well as in the ''Application'' for arraying the ''Appellants'' as 'Party Respondents', there is no averment/allegation that any business of the Second Respondent was conducted wrongfully, within the knowledge of the ''Appellants'' and as such, there was no justification on the part of the 'Tribunal' to pass an 'impugned'' order against the 'Appellants'. 10. The Learned Counsel for the Appellants contends that the ''Appellants'' had demitted the office of the Second Respondent w.e.f. 31.03.2017 and later, had no control in respect of ''Affairs of the Second Respondent''. Apart from this, it is projected on the side of the ''Appellants'' that the whole issue revolves around the ''Writing Off from the Net Receivable'' of INR 21.18 crores from the Books of the Accounts of ''Corporate Debtor'' which was supposedly effected on 31.05.2018 (vide Note of Approval). Moreover, it is brought to the notice of this 'Tribunal' that the Appellants had resigned from the employment of the Second Respondent on 31.03.2017. Therefore, ....
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....ect as to whether the ''Appellants'' was a ''necessary'' or 'proper' party. At this juncture, the Learned Counsel for the Appellants points out that the Appellants' case is squarely covered by an order dated 13.11.2018 passed by the Hon'ble Supreme Court of India in the matter of Gopal Krishna Karunakar Nair Vs Union of India (vide Civil Appeal No. 7282-83 of 2018) and connected matters wherein likewise orders of the 'Tribunal' was stayed, in so far as the 'Officers' who had resigned from the Company in issue. 16. The Learned Counsel for the Appellants refers to the order of the Hon'ble Supreme Court dated 14.9.2018 in Sujal Anil Shah Vs Union of India (Civil Appeal No.8731-8732 of 2018) wherein, while admitting the 'Civil Appeal', in the meanwhile, an 'order of stay' of operation of the impugned judgement and order of the 'National Company Law Tribunal', New Delhi was granted and the matter was directed to be tagged with C.A. No.7282-7283 of 2018. 17. The other argument raised by the Learned Counsel for the Appellants is that the impugned order is like an order of 'Attachment Before Judgement' as per 'Order 38 Rule 5 of Civil Procedure Code'. Furthermore, the conditions prec....
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....e Company. On 14.09.2018, Civil Appeal Nos 8731-8732 of 2018 (Sujal Anil Shah Vs Union of India & Ors) we admitted the petition and stayed the operation of the impugned judgment and order of the NCLT, New Delhi. We clarify that this stay order will operate only in the case of Sujal Anil Shah." 21. The Learned Counsel for the Appellants refers to the order dated 02.08.2021 of the Hon'ble High Court of Delhi in B D Pawar V Union of India through the Ministry of Corporate Affairs & Anr. wherein it is observed as under: "1. Learned senior counsel for the petitioner states that the question of law, which arises in the present petition is still pending consideration before the Hon'ble Supreme Court of India. 2. At request, list on 18th November, 2021. 3. Interim order to continue." 22. The learned Counsel for the Appellants refers to the judgment of this Tribunal in Union of India, Ministry of Corporate Affairs vs. Gitanjali Gems Ltd. and Ors. reported in (2018) SCC Online NCLAT 307 wherein at paragraph 11 it is observed as under: 11. "The following reason was shown to pass restraint order: 24. But at the same time, it ....
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..... However, as a matter of practice, the banking companies do approach Reserve Bank for permission, before utilising their reserves, for writing-off the bad debts and Reserve Bank grants approval, if it is in order, on considering their financial position and other related facts as stated above." First Respondent's Contentions: 24. According to the First Respondent/ Union of India, the Applicant/ State Bank of India, preferred a petition in terms of Section 7 of the 'I&B' Code, 2016 against the 'Videocon Telecommunication Ltd.', which was admitted by the 'Adjudicating Authority' in which an 'Interim Resolution Professional' was appointed. Moreover, a 'Group Insolvency' order dated 08.08.2019 was passed in respect of the 'Videocon Group'. 25. It is represented on behalf of the First Respondent that a reading of the 'Avoidance Transactions' pointed out in the 'Transaction Audit Reports' conducted during 'CIRP' of 'Videocon Telecommunications Ltd.' and other Group Companies exhibit and 'Avoidance Transactions', amounting to INR 5991 crores. Besides this, in terms of the 'Approved Resolution Plan' the total realization of the 'Financial Creditors' is INR 200 crores upfront cash....
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....tion'. 29. The submission made on behalf of the First Respondent/ Union of India is that the Appellant (1) Arvind Bali (2) Satpal Bansal were serving as 'Chief Executive Officer' and 'Chief Financial Officer' and they were the 'Key Managerial Personnel' as per definition of Section 2(51) of the Companies Act, 2013, which reads as under: Section (51) "Key managerial personnel", in relation to a company, means - (i) the Chief Executive Officer or the managing director or the manager; (ii) the company secretary; (iii) the whole-time director; (iv) the Chief Financial Officer; and (v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and (vi) such other officer as may be prescribed." 30. It is the contention of the First Respondent that a Company/ an artificial person can act/ function through natural persons like (i) 'promoters', (ii) Board of Directors, (iii) Manager or Key Managerial Personnel and these individuals, are the 'mind and will of the company'. Furthermore, an argument is raised on behalf of the First Resp....
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....long with other recoverable and payables of QTL. The note was not put in system and not booked in SAP. 6. 11/06/2018 Commencement of CIRP 33. The clear cut stand of the First Respondent is that the 'Appellants' had admitted that they had served/working as 'Key Managerial Personnel' in respect of the period of 'Audit Review' and they resigned on 31.03.2021 i.e. during the period of 'Transaction Audit Review' and hence they are necessary and proper party to the litigation before the Tribunal because of the 'inadvertent error' the Appellants (in two Appeals) were left out and this was sought to be corrected by filing of CA No. 275/2021, to array them as 'Respondents', by the First Respondent/ Applicant, before the 'Tribunal'. 34. The Learned Counsel for the First Respondent adverts to the order of the 'Tribunal' dated 08.08.2019 in the matter of State Bank of India vs. Videocon Industries Limited. (vide C.P. 02 of 2018) wherein at paragraph No.17, the learned Counsel had inter-alia stated as under: "The Ld. Counsel for SBI Mr. Ravi Kadam submits that since the Corporate Debtor have been running their business and operations as if they were a single entity and a....
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....l Company Law Tribunal, New Delhi transferring the case from Principal Bench, National Company Law Tribunal, New Delhi to NCLT Chennai and the relevant portion of paragraph 25 and 26 of the judgment reads as under: "25. Section 434(a) read with sub-section (1) of Section 419 of Companies Act, 2013 and Notification dated 1st June, 2016 issued by the Central Government under sub-section(1) of Section 419 and Rule 64 of NCLT Rule it is clear the Benches, including Principal Bench have territorial jurisdiction on the companies exclusively on the basis of location of the registered office of such company. In fact, this law is also being followed by the Principal Bench of NCLT, New Delhi for placing all the petitioners before one or other Bench and that Section 488-B of Act, 1956, cannot be exception of the same. 26. For the reasons aforesaid we set aside the impugned order dated 6th December 2016 passed by the "Principal Bench" of NCLT, New Delhi in C.P. No.01/2015 with the direction to the Registry, if the Principal Bench, NCLT, New Delhi to transfer the C.P. No.01/2015 to the NCLT Bench at Chennai, where registered office of the appellant company is situated." 38.....
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....sion of the Hon'ble Supreme Court in the case of Union of India v. J.N. Sinha and Ors. reported in AIR 1971 Supreme Court 40, wherein at paragraph 8 it is observed as under: 8. "Fundamental Rule 56(j) in terms does not require that any opportunity should be given to the concerned government servant to show cause against his compulsory retirement. A government servant serving under the Union of India holds his office at the pleasure of the President as provided in Article 310 of the Constitution. But this "pleasure" doctrine is subject to the rules of or law made under Article 309 as well as to the conditions prescribed under this Article 311. Rules of natural justice are not embodied rules nor can they be elevated to the position of fundamental rights. As observed by this Court in Krapak and Ors. V. Union of India MANU/Sc/0427/1969: [1970]1SCR457 "the aim of rules of natural justice is to secure justice or to put negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law but supplement it. "It is true that if a statutory provision can be read consistently with the pri....
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....cluding immovable properties and fixed assets till the matter is disposed of by the Company Law Board. However, the appellant company will be entitled to deal with, sell and dispose of the stock in trade, raw material and finished products in usual course of business. This interim order will be subject to the rights of the secured creditors and also subject to order(s) passed by Debt Recovery Tribunal." 43. It is represented on behalf of the First Respondent/ Union of India that on 27.09.2021 the Hon'ble High Court of Bombay in W.P. No.21058 of 2021 between Chandrashekhar Ashok Nagarkar v. Union of India and in Major General Sudhir Chintamani Nilakanth Jathar v. Union of India in W.P. No.20882 of 2021 had sustained the interim order dated 31.08.2021 of the 'Tribunal'. Second Respondent's Decision (in Both Appeals) 44. On behalf of the Second Respondent, a reference to the order of the Hon'ble High Court of Bombay dated 27.09.2021 in the matter of Major General Sudhir Chintamani Milkanth Jatar & Ors. V. Union of India & Ors. in W.P.(L) No. 20882 of 2021 is made wherein at paragraph 12 to 21 it is observed as under: - 12. "We have already noted the reliefs claimed b....
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....cial system which we follow that before adverse order is passed against a party it is required to be duly served and a reasonable opportunity of hearing should be granted to it. Failure to do so will strike at the very root of the justice delivery system. 19. That being the position, we are of the view that it is a case for remand. 20. We make it clear that we have not expressed any opinion on the merits of the matter. All that we have stated is that the Petitioners were entitled to a fair hearing which they have complained they were not afforded. In such circumstances relegating the Petitioners to the forum of alternative remedy of appeal would not be just and proper. 21. Consequently and having regard to fact that the order dated 31/08/2021 is interim in nature, we direct the Tribunal to hear the Petitioners afresh and thereafter pass appropriate order (s) in accordance with law. Order dated 31/08/2021 qua the Petitioners would be subject to such decision that the Tribunal may arrive at after hearing the Petitioners. As stated above, all contentions are kept open. Tribunal shall pass appropriate order (s) after hearing the Petitioners within a period of....
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....an impleadment of parties can be ordered, by a 'Tribunal'. 51. It cannot be brushed aside that the 'Tribunal' has the requisite power to add not only 'persons' who are 'necessary parties' on the date of filing of the 'main petition' but also persons who will be subsequently added (as necessary parties) for the purpose of final adjudication and they were originally / initially were omitted to be impleaded in the main petition. Even at a belated stage of a 'given proceeding' or at an 'Appellate stage', a proper party can be arrayed as a Respondent, in the considered opinion of this Tribunal. The Government's power (To notify) 52. The Government's power to notify any other individual in the category of 'Key Managerial Personnel' rests with the Government. In fact, Section 170 of the Companies Act, 2013 requires that every Company shall keep at its registered office of the Company, a register containing such particulars of its Directors and 'Key Managerial Personnel' as may be prescribed. 53. In terms of Section 189(2) of the Companies Act, 2013, the 'Key Managerial Personnel' within a period of 30 days of his appointment or relinquishment of his Office are required to disc....
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....ng and such reply and copies of documents shall form part of the record." 57. Further, Rule 38 of the 'National Company Law Tribunal Rules', 2016 pertains to 'Service of notices and processes'. Rule 39 deals with 'production of evidence by affidavit'. Rule 40 pertains to 'production of additional evidence before the Bench'. Rule 41 provide for 'filing of reply' and other documents by the Respondents'. Rule 42 concerns with filing of rejoinder. 58. Apart from the above, Rule 44 of the 'NCLT' Rules, 2016 pertains to hearing of petition or applications. Rule 45 deals with 'rights of a party to appear before the Tribunal'. Rule 49 speaks of Ex parte hearing and disposal. Rule 51 refers to 'Power to regulate the procedure'. Rule 55 says that 'No pleadings subsequent to the reply, shall be presented except by the leave of the Tribunal upon such terms as the Tribunal may think fit. 59. There is no two opinion of a primordial fact that the 'Tribunal' in a given case is not to pass an order in a flurry manner and of course, it is to pass an order with utmost care, caution and circumspection. Ordinarily, no man shall be condemned without being heard. 'Notice' is the initial element ....
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....t / prejudice of the 'opposite side'. However, by such determining, the merits of the claims of the parties are not decided. Viewed in that perspective, and also bearing in mind that some parties are omitted to be added or arrayed in the main company petition (at the time of its filing) and later, when they were sought to be arrayed through an application in a 'Bonafide Manner', for the purpose of effectively and completely adjudicating the controversies involved, then, the same may not be fatal, to save an honest and bonafide petitioner on technical ground. 65. After the impleadment of the Appellants as Respondent No. 11 and 12, in main CP 294/MB/2021 on the file of the National Company Law Tribunal, Mumbai, they are necessarily to be permitted to file the Reply/Response/Counter, in the considered opinion of this Tribunal. 66. In the main CP 294/MB/2021 (filed u/s 241(2) r/w 242(2)(m) r/w Section 246 r/w 339 of the Companies Act, 2013) by the First Respondent/Union of India, against the Videocon Telecommunications Ltd., Aurangabad, Maharashtra & Ors., as main relief, an attachment of moveable and immoveable properties of Respondent No. 2 to 10 therein is sought for an encash....
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....wer of a Tribunal. Section 242 of the Companies Act is verbatim similar to that of Section 402 of the Companies Act. As per Section 242(m) of the Companies Act, 2013, the Tribunal, for any other matter, in its opinion it is just and equitable that a provision should be made can pass orders on just and equitable ground. 69. Be that as it may, keeping in mind of the fact that the impugned order dated 31.08.2021 in Company Petition No.294/MB/2021 on the file of 'National Company Law 'Tribunal' (Mumbai Bench) is an interim one, the Appellants (Respondent No. 11 and 12) are permitted by this Appellate Tribunal to file their Reply/Response to the main Company petition filed by the First Respondent / Union of India and that the 'National Company Law Tribunal', is directed to pass necessary fresh recent orders in a fair, just, dispassionate manner on merits, afresh (because of the fact that there was a 'negation of principles of natural justice' in not adhering to the 'National Company Law Tribunal' Rules, 2016, in so far as the Appellants/Respondents 11 and 12 are concerned) within a period of five weeks from the date of receipt of the order, of course, in the manner known to Law and i....