TaxTMI 
TaxTMI 
2026 (9) TMI 1219
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....se proceedings were drawn by Respondent No.2 under Section 7 of I&B Code, inter se between the parties. The petitioner had claimed himself to be the financial creditor and had initiated proceedings under Section 7 of the Code, but did not participate in the proceedings with diligence, due to, which an Order was passed on 21.07.2025, owing to, which it was mentioned in the Order of 21.07.2025, that subject to the payment of the cost, the respondent in the company petition i.e. Respondent No.1, may upload the reply within two weeks. Relevant extract of the order dated 21.07.2025 is given here under:- "This is the Company Petition filed under Section 7 of the IBC. It is seen that this Petition has been filed some time in 2024 and thrice in the past notice have been issued. However, owing to some confusion regarding placing on record the affidavit of service, vide order dated 03.06.2025, Petitioner was directed to serve upon the Respondent once again and place affidavit of service. It is seen that the directions have been complied and the Respondents have been served on 13.06.2025. In the order dated 03.06.2025, the respondents were given time to file reply. However, ld. Couns....
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....he order, the matter was directed to be proceeded even without the reply of the respondent/corporate debtor. When in the proceedings of 12.08.2025, the statement was made by the respondent in the company petition i.e. Sachin Ghayal Sugar Private Limited, the learned Tribunal while declining to accept the prayer of placing the reply on record, observed, that there had been persistent dereliction on the part of the respondent/ corporate debtor in diligently participating in the proceedings, despite of the imposition of the cost by the Order of 21.07.2025, hence the Tribunal proceeded in accordance of the Order of 12.08.2025, its this Order which is under challenge by the appellant. 5. This company appeal has got a chequered individualistic history of the appellant. The facts, as it engages consideration, are that Sachin Ghayal Sugar Private Limited, (hereinafter to be called as the corporate debtor) was shown to have been incorporated under the provisions of the Companies Act, 1956. The appellant claims, that it is a cooperative society, that has been registered as such, as per the stipulations contained under the Maharashtra Cooperative Societies Act bearing Registration No.AGR/P....
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....led for expenditures incurred by the appellant under various unforeseen heads of expenditure, the company fell into financial crisis. Since their being dearth of money and the appellant was in immediate need of financial aid to maintain the cash flow in the business of the appellant, the appellant is said to have approached the corporate debtor i.e. Sachin Ghayal Sugar Private Limited, to enter into a collaboration agreement so as to run and manage the company and to conduct its affairs. For the purposes of venturing into such collaboration agreement, it is stated by the appellant that the Maharashtra Cooperative Societies and the Cooperative Department of the Government of Maharashtra too have granted approval to the proposed collaboration vide their correspondence of 11.09.2014, which further stood amended and affirmed by its letter dated 29.01.2015. 10. Accordingly, the appellant and the corporate debtor entered into a Collaboration Agreement on 03.08.2015 (hereinafter to be called as a "collaboration agreement"). As per the terms of the collaboration agreement dated 03.08.2015, it was agreed that the working modalities would be foundationed on principal of basis and the corp....
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....esaid Article 1 Clause 1 of the Collaboration Agreement, the appellant had no role in taking any of the advances from the respondent No.2. 13. It is an admitted case that because of certain differences that stood germinated between the appellant and the corporate debtor, after execution of the Collaboration Agreement, in order to bridge over the aforesaid controversial situation, they further entered into execution of additional agreement of 28.10.2016, but still despite of the two agreements i.e. Collaboration Agreement dated 03.08.2015 and additional agreement of 28.10.2016, the dispute persisted between the corporate debtor and the appellant, it is because of which, the parties to the agreement invoked the arbitration clause as it was contemplated under Article P of the Collaboration Agreement, which prescribe for as under:- "a) This agreement shall be governed by and construed in accordance with the Indian Law. b) The parties hereby agree that in the event of there being any dispute by and between the parties hereto in respect of interpretation of any of the terms and conditions herein or in respect of any matter arising out of and/or touching upon these pr....
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....licenses as per provisions contained under Section 89A and Section 78A of the Maharashtra Cooperative Societies Act of 1960. However, in relation to the subjects:- i. The duration of the Collaboration Agreement under which the factory was to be operated within 18 crushing seasons; ii. The liability of payment of tax and duties including the excise duties etc.; iii. The amount payable to the employees of the applicant i.e. the appellant herein, more particularly, pertaining to the salary of the seasonal employees of the applicant for the Month of January, 2016 and salary of permanent employees of the applicant for the month of February and March, 2016 totalling to Rs.104.02 lakhs. 16. The learned Arbitrator, while considering the corresponding liability, which was payable to the Government of Maharashtra, the Arbitrator proceeded to pass a compromise Order and as a consequence thereto, the following decisions were taken:- "9. The Applicant is a Sugar Factory, a resolution is passed in the meeting of Board of Directors, dated 28.07.2018 deciding to enter into this compromise and chairman of the applicant factory Shri. Tushar Kashinathrao Shisode....
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....tor i.e. Respondent No.1. It is argued by the appellant, that it was a collusive proceedings, so as to deprive the appellants of its legitimate legally enforceable right particularly under the award, when the compromise order was containing an indemnification Clause 8F that has been extracted above. The appellant submitted, that filing of Section 7 application under the Code, was with an oblique motive to deprive the rights of 18,000 farmers who had interested and had invested their hard earned money in establishing the factory of the appellant. Hence, it was contended by the appellant that if section 7 proceedings filed by the respondent No.2, as against respondent No.1 to the company appeal, and if any orders are passed on the same, the appellant's rights would be affected, as it would be having a direct and dire consequences as against the appellant and such other stakeholders. Because of the fact, that the corporate debtor by virtue of the Collaboration Agreement does not become the owner of the sugar factory of the appellant and because of that, since the corporate debtor in itself does not have any other asset, in all probability its indirectly, the asset of the appellant....
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....ng to use the property of the appellant by treating it as to be the property of the corporate debtor by placing it to the proceedings under Section 7 of the Code, as drawn by respondent No.2. It was contended that the corporate debtor in fact had rather colluded, because despite of various opportunities granted by the learned Tribunal, on as many as on 9 dates, the corporate debtor had deliberately not filed the reply and had avoided to contest the proceeding on merits and this avoidance of contest to the proceedings, by corporate debtor in itself would lead to a situation where the appellant's property is likely to be taken for the purposes of satisfying the dues under default of Respondent No.2, in a proceeding under Section 7 of the code. 22. In fact, by virtue of the impugned order, what could be seen is that the entire proceedings had been intentionally not contested by the corporate debtor, attempting to maliciously permit the initiation of CIRP Process to succeed as against the corporate debtor, so as to prejudice the rights of the appellant, so far it relates to its establishment of the sugar factory and its probable usurpation, the proceedings are apparently seem to be ....
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....case of the appellant that the day when the matter was listed on 25.09.2025 before the learned Tribunal, the appellant did point out to the about filing of an application under Section 60(5) of Code, and seeking for an opportunity to be heard before considering the company petition, but it is submitted that, by the Impugned Order, the learned Tribunal in utter violation of the principal of natural justice, has even without considering the appellant's application despite of the request being made of filing of the I.A. for dropping the proceedings of Section 7 of Code, had proceeded to hear the company petition on merits. 25. Looking to the peculiar facts and circumstances of the instant case, we feel that an exception is required to carved out in the instant case before any material prejudice is caused to the parties to the proceedings due to final determination of the proceedings under Section 7 of the Code, if at all the apprehension expressed by the appellant that the proceedings under Section 7 of the Code was drawn by respondent No.2 as against respondent No.1 was collusive. In all judicial fairness, it was expected that the Tribunal by virtue of the Impugned Order, before c....