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2024 (11) TMI 553
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....t - Central Bank of India. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are: (i) Central Bank of India sanctioned Cash Credit Facility of Rs.75 crores to the Corporate Debtor - M/s. Parekh Aluminex Ltd. A restructuring package to the Corporate Debtor was approved by the Corporate Debts Restructure ("CDR") Empowered Group on 24.06.2013 and 25.07.2013 and consequently the Appellant sanctioned Working Capital Facilities to the Corporate Debtor. A Master Restructuring Agreement dated 23.09.2013 was executed. On 30.09.2013, the Appellant approved the CDR package for credit facilities of the Corporate Debtor of Rs.134.74 crores. The Respondent - Personal Guarantor executed a Deed of Guarantee dated 10.04.2014 and guaranteed the repayment of the credit facility availed by the Corporate Debtor from the Appellant as well as the other lenders. (ii) Corporate Debtor committed default in repayment, hence, the Appellant classified loan account of the Corporate Debtor as NPA on 31.12.2015. The Respondent claimed to have resigned as a Director of the Corporate Debtor on 28.04.2016. (iii) On 23.11.2017, the Adjudicating Authority admitted....
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....23 on the merits of the application, which was not the stage of adjudication. In Section 95 application filed by the Appellant, the Adjudicating Authority was required to appoint a Resolution Professional ("RP") under Section 97 of the IBC and without appointing the RP and without giving an opportunity to RP to submit a Report as contemplated under Section 99 of the IBC, the Adjudicating Authority ought not to have proceeded to adjudicate various issues raised by the Personal Guarantor. It is submitted that IA No.5501 of 2023 was filed by the Personal Guarantor on 27.11.2023, i.e., subsequent to judgment of the Hon'ble Supreme Court in Dilip B. Jiwrajka v. Union of India - (2024) SCC 5 SC 435 decided on 09.11.2023. The Hon'ble Supreme Court in Dilip B. Jiwrajka's case has laid down that adjudicatory issues in Section 95 application had to be undertaken by the Adjudicating Authority only at the stage of hearing of the application of Section 100. The provisions of Section 95 to 100 have been elaborately dealt by the Hon'ble Supreme Court. The process adopted by the Adjudicating Authority, while rejecting Section 95 application filed by the Appellant is clearly contrary to the law lai....
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....ication under Section 95 was filed by the Appellant on 14.12.2021 and direction was passed on 25.09.2023 by the Adjudicating Authority to the Appellant to serve copy of the petition on Respondent and matter was adjourned to 30.10.2023. On 30.10.2023, the Respondent appeared. The Adjudicating Authority passed following order on 30.10.2023: "1. Mr. V. K. Nair, Advocate appeared for the Petitioner. 2. Mr. Rohit Gupta, Advocate a/w Ms. Nikita Vardhan, Mr. Vishal Tiwari, Advocates i/b Kanga & Co. appeared for the Respondent. 3. Learned Counsel for the Personal Guarantor seeks some time to contest this petition on the limitation aspect. 4. Time granted. 5. List this matter on 04.12.2023 for hearing." 8. Before the matter could be heard on next date, the Hon'ble Supreme Court passed judgment in Dilip B. Jiwrajka's case on 09.11.2023. On 27.11.2023, IA No.5501 of 2023 was filed by the Personal Guarantor before the Adjudicating Authority praying for dismissal of Company Petition. In IA No.5501 of 2023, following prayers were made: "a) That this Hon'ble Tribunal be pleased to pass an Order dismissing the Company Petition filed by the P....
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.... Section 95. Section 95 of the IBC provides for an application by a creditor to initiate insolvency resolution process. Section 96 provides for interim- moratorium and Section 97 deals with appointment of RP. Section 97 of the IBC is as follows: "97. Appointment of resolution professional. - (1) If the application under section 94 or 95 is filed through a resolution professional, the Adjudicating Authority shall direct the Board within seven days of the date of the application to confirm that there are no disciplinary proceedings pending against resolution professional. (2) The Board shall within seven days of receipt of directions under sub-section (1) communicate to the Adjudicating Authority in writing either - (a) confirming the appointment of the resolution professional; or (b) rejecting the appointment of the resolution professional and nominating another resolution professional for the insolvency resolution process. (3) Where an application under section 94 or 95 is filed by the debtor or the creditor himself, as the case may be, and not through the resolution professional, the Adjudicating Authority shall direct the Board, within....
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....s the requirements set out in section 94 or 95; (b) the applicant has provided information and given explanation sought by the resolution professional under sub- section (4). (7) After examination of the application under sub-section (6), he may recommend acceptance or rejection of the application in his report. (8) Where the resolution professional finds that the debtor is eligible for a fresh start under Chapter II, the resolution professional shall submit a report recommending that the application by the debtor under section 94 be treated as an application under section 81 by the Adjudicating Authority. (9) The resolution professional shall record the reasons for recommending the acceptance or rejection of the application in the report under sub-section (7). (10) The resolution professional shall give a copy of the report under sub-section (7) to the debtor or the creditor, as the case may be." 13. Section 100 provides for admission or rejection of application, which provision is as follows: "100. Admission or rejection of application. - (1) The Adjudicating Authority shall, within fourteen days from the date of submission....
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....sdiction of the Adjudicating Authority to be exercised in proceedings of personal insolvency. The judgment in Dilip B. Jiwrajka was delivered by the Hon'ble Supreme Court in a batch of writ petitions, in which writ petitions, various provisions of the IBC from Sections 95 to 100 were challenged. In the above context, the Hon'ble Supreme Court had occasion to deal with scheme of the IBC; the submissions made on behalf of the parties and analysis of IBC and principles of natural justice. The arguments advanced before the Hon'ble Supreme Court in the writ petitions that at the time when Adjudicating Authority appoint the RP under Section 97, sub-section (5), the Adjudicating Authority should be required to decide the jurisdictional questions. The said argument has been noticed by the Hon'ble Supreme Court in paragraph 68 of the judgment, which is as follows: "68. The submission which has been urged on behalf of the petitioners, however, is that Section 97(5) contemplates a role for the adjudicating authority in the appointment of a resolution professional anterior to the stage which is contemplated during the course of adjudication under Section 100. It has been urged that wh....
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....hanically accept or reject applications based solely on the resolution professional's report. Instead, it must actively engage in a fair process, affording the debtor a fair opportunity to present their case. The adjudicating authority arrives at its determination by considering arguments supported by relevant material particulars. In essence, the adjudicating authority conducts an independent assessment, not solely relying on the resolution professional's report, to decide the fate of applications under Section 94 or 95 IBC. 74. The true adjudicatory function of the authority commences under Section 100 after the submission of the report. Another reason why we are not inclined to accept the submission is that what is described as a jurisdictional question by the petitioners may not be a simple matter to be decided as a question of law. The jurisdictional questions of the nature which have been suggested by the petitioners, namely, on whether there is a subsisting debt or whether the relationship of debtor and creditor subsists, would involve a decision on mixed questions of law and fact. The entire scheme of Sections 99 and 100 implicates timelines which have been....
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....and before even any Report could be called. The objections raised by Personal Guarantor in its IA No.5501 of 2023 were considered and findings has been returned by the Adjudicating Authority under the headings 'Findings and Observations of this Bench' from paragraphs 3.6.7 to 3.6.9 are as follows: "Findings and Observations of this Bench: 3.6.7. Clause 12 r/w Clause L of the recital of the Deed of Guarantee dt. 10.04.2014 makes it clear that this Guarantee was to come into force only upon implementation of CDR package in full and signed by all the lenders in terms of LOA issued. Ld. Counsel for the Personal Guarantor place on record a letter dt. 23.03.2016 having reference No BY.CDR(DAP)No. 749/2015-16, stating that the Company M/s Parekh Aluminex Limited stands exited from the CDR mechanism as failure. 3.6.8. As regards contention that the said Petition is time barred, we find that the Financial Creditor invoked the Guarantee on 18.05.2016 by Notice u/s 13(2) of SARFAESI Act, 2002 and the Corporate Debtor came to be admitted into CIRP on 01.02.2019. Since, we have already returned the finding that this Guarantee had not become effective on account of fai....
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....to us that keeping principles of natural justice in view, limited notice of the application should be given to the Personal Guarantors of the Corporate Debtors. The limited notice has to be only to secure presence of the Personal Guarantor referring to the Interim Moratorium which has commenced. Before appointment of the Resolution Professional no hearing as such is contemplated and before appointment of the Resolution Professional the Debtor cannot be allowed to raise disputes for which the stage would be Section 100. Under NCLT Rule 11, Adjudicating Authority is duty bound to pass orders to prevent abuse of process. As such, limited notice to appear may be given to the Personal Guarantors so that when Resolution Professional is appointed, he may provide material as per Section 99(2) of IBC. Till the stage of Section 100, the process is of collecting necessary evidence. 46. The Appellant is himself criticizing the impugned order claiming that the Adjudicating Authority has already recorded finding that the Personal Guarantor has committed a default and thus the Resolution Professional cannot while examining the application under Section 99 give a contrary opinion. At the ....
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....e the Adjudicating Authority, the Appellant can very well rely on the judgment in the present Appeal, which has been filed challenging the impugned order. 23. Shri Krishnendu Datta, learned Senior Counsel for the Personal Guarantor has vehemently argued that Appellant having not raised any objection at the time of hearing of application IA No.5501 of 2023 before the Adjudicating Authority and having taken chances, cannot be allowed to contend that Adjudicating Authority ought not to have proceeded to hear the objections raised by the Personal Guarantor at the present stage. It is submitted that in the reply, which was filed in IA 5501 of 2023, no objection was raised by the Appellant that Adjudicating Authority ought not to hear the objections at that stage. It is submitted that Appellant has once waived its right to raise any objection and on principle of waiver, he cannot be allowed to raise this objection in the present Appeal to challenge the jurisdiction of the Adjudicating Authority to decide the question on merits. 24. In the present case, there is no question of lack of jurisdiction by Adjudicating Authority to decide the application under Section 95. It is the Adjudi....
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....ning the necessary leave of the High Court under clause 12 of the Letters Patent. Whether the leave obtained had been rightly obtained or wrongly obtained is not a matter which can be agitated at the execution stage. The validity of a decree can be challenged in execution proceedings only on the ground that the court which passed the decree was lacking in inherent jurisdiction in the sense that it could not have seisin of the case because the subject-matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject-matter of the suit or over the parties to it. But in the instant case there was no such inherent lack of jurisdiction. The decision of the Privy Council in the case of Ledgard v. Bull [13 Indian Appeals 134] is an authority for the proposition that consent or waiver can cure defect of jurisdiction but cannot cure inherent lack of jurisdiction. In that case, the suit had been instituted in the Court of the Subordinate Judge, who was incompetent to try it. By consent of ....
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....ient to dispose of the appeal. It is not, therefore, necessary to determine the other points in controversy, including the question whether the Decrees and Orders Validating Act, 1936 (Act 5 of 1936) had the effect of validating what otherwise may have been invalid." 26. The above judgment was a case where there was an issue raised regarding the lack of jurisdiction by the Court granting the decree. The present is not a case where either of the parties are raising any issue regarding lack of jurisdiction of the Adjudicating Authority in deciding Section 95 application. The Adjudicating Authority has jurisdiction to decide Section 95 application as per the scheme of the IBC. The question of waiver with regard to jurisdiction of Adjudicating Authority to decide the application cannot be pressed into service in the present case. 27. The learned Senior Counsel for the Respondent relied on another judgment of the Hon'ble Supreme Court in (2004) 8 SCC 229 - Krishna Bahadur vs. Purna Theatre and Ors. In the above case, the question of principle of waiver was examined in reference to proceedings initiated before the Industrial Tribunal. In the above context, following was laid down b....
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....tor has not abandoned any of its rights either by a conduct or by any writing. 30. Another judgment relied by learned Senior Counsel for the Respondent is (2022) 2 SCC 221 - Arce Polymers Pvt. Ltd. vs. Alphine Pharmaceuticals Pvt. Ltd. and Ors. The Hon'ble Supreme Court in the above case has held that waiver is an intentional relinquishment of a known right. In paragraph 16 of the judgment, following has been laid down: "16. Waiver is an intentional relinquishment of a known right. Waiver applies when a party knows the material facts and is cognizant of the legal rights in that matter, and yet for some consideration consciously abandons the existing legal right, advantage, benefit, claim or privilege. Waiver can be contractual or by express conduct in consideration of some compromise. However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision. The fact that the other side has acted on it, is sufficient consideration." 31. Waiver is always related to some consideration on the basis of which a party consciously abandons the existing legal right. In the present case, neither any consideration is proved, n....
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....her manner than that which has been prescribed. The principle behind the rule is that if this were not so, the statutory provision might as well not have been enacted. A Magistrate, therefore, cannot in the course of investigation record a confession except in the manner laid down in Section 164. The power to record the confession had obviously been given so that the confession might be proved by the record of it made in the manner laid down. If proof of the confession by other means was permissible, the whole provision of Section 164 including the safeguards contained in it for the protection of accused persons would be rendered nugatory. The section, therefore, by conferring on Magistrates the power to record statements or confessions, by necessary implication, prohibited a Magistrate from giving oral evidence of the statements or confessions made to him." 34. Another judgment relied by the learned Counsel for the Appellant is (2015) 11 SCC 628 - Tata Chemicals Ltd. vs. Commissioner of Customs (Preventive) Jamnagar. The Hon'ble Supreme Court in the above judgment has laid down that there can be no estoppel against law, if the law requires that something be done in a particular....