Balasore Alloys Limited vs Mstc Limited

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 498 of 2024 (Arising out of Order dated 28.02.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Cuttack Bench, Cuttack in IA(IB) No.36/CB/2024 in C.P.(IB) No.36/CB/2022)

IN THE MATTER OF: Balasore Alloys Limited Having Registered Office at Balgopalpur, District Balasore, Odisha-756020 ... Appellant

Versus

MSTC Limited Having registered office at Plot No. CF 18/2, Street No. 175, Action Area 1C, New Town Kolkata-700156 ... Respondent

Present: For Appellant: Mr. Joy Saha, Sr. Advocate with Mr. Sandeep S. Ladda, Mr. Apoorv Shukla, Mr. Prabhleen A Shukla, Ms. Tanvi Luhariwala, Advocates. For Respondent: Mr. Abhijeet Sinha, Sr. Advocate with Ms. Pallavi Pratap, Ms. Muskan Jain, Mr. Saikat Sarkar, Advocates for R-1.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed by the Corporate Debtor, challenging

order dated 28.02.2024 passed by National Company Law Tribunal,

Cuttack Bench, Cuttack by which IA(IB) No.36/CB/2024 filed by the

Appellant for accepting two additional documents was dismissed.

Appellant aggrieved by the said order has come up in this Appeal.

2. Brief facts of the case necessary for deciding the Appeal are:

Company Appeal (AT) (Insolvency) No.498 of 2024 1

(i) The Appellant - Corporate Debtor and Respondent -

Operational Creditor entered into an Agreement for purchase and sale of various procurement, e.g. like low ash metallurgical coke, HR coil naptha, crude oil, coking coal etc.

(ii) The Operational Creditor issued a Demand Notice dated 05.05.2022 under Section 8 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code") with respect to outstanding amount of Rs.18,69,06,540/-. The Demand Notice was replied by the Corporate Debtor vide reply dated 16.05.2022. Company Petition - CP(IB) No.36/CB/2022 was filed under Section 9 by the Operational Creditor seeking initiation of CIRP. In Section 9 Application, Corporate Debtor filed its reply on 19.11.2022.

(iii) The Appellant issued notice dated 11.04.2023 calling upon the Respondent to pay a sum of Rs.17 crores within a period of 08 days, failing which the said notice be treated as Arbitration notice as per Clause 23 of the Agreement. The Respondent - Operational Creditor sent a reply denying all the allegations. It was further stated that outstanding is due on the Corporate Debtor and Section 9 Application is already pending before the Adjudicating Authority.

(iv) The Corporate Debtor filed Application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 before the High Court of Calcutta seeking appointment of sole Arbitrator. Vide order dated 13.09.2023, the Hon'ble High Court of Calcutta allowed the Application and appointed Arbitrator in the matter. The Operational Creditor filed a SLP (C) 25781/2023 challenging order dated 13.09.2023 passed by the High Court. The said SLP was dismissed by the Hon'ble Supreme Court making observation "we make it clear that the impugned order and conformation thereof will not affect the pending proceedings under the Insolvency and Bankruptcy Code, 2016".

Company Appeal (AT) (Insolvency) No.498 of 2024 2

(v) After the aforesaid order of the Hon'ble Supreme Court, the Corporate Debtor filed an I.A. No.36/CB/2024 before the Adjudicating Authority to bring on record arbitration petition AP/640/2023 and order dated 13.09.2023 passed by the Calcutta High Court. The Corporate Debtor also filed an MA No.107/2024 before the Hon'ble Supreme Court seeking clarification of order dated 28.11.2023, which MA was dismissed by the Hon'ble Supreme Court on 23.01.2024.

(vi) The Adjudicating Authority by the impugned order dated 28.02.2024 dismissed IA No.36/CB/2024 observing that it is not explained by the Applicant how the additional documents are just and necessary to arrive conclusion in the C.P. No.36/CB/2022. This Appeal has been filed challenging the order passed by the Adjudicating Authority IA No.36/CB/2024.

3. We have heard Shri Joy Saha, learned Senior Counsel appearing for

the Appellant and Shri Abhijeet Sinha, learned Senior Counsel appearing

for Respondent.

4. Shri Joy Saha, learned Senior Counsel for the Appellant, challenging

the order contends that the Adjudicating Authority in paragraph-7 of the

order had made observation that the court should take a lenient view when

an application is made for production of the documents, however,

dismissed the Application relying on the observation of the order of the

Hon'ble Supreme Court dated 28.11.2023. It is submitted that order of

Hon'ble Supreme Court dated 28.11.2023 does not preclude the

Adjudicating Authority from taking the additional document on record. By

dismissing the Application for additional documents, the Adjudicating

Company Appeal (AT) (Insolvency) No.498 of 2024 3 Authority has completely struck off one of the defence of the Appellant.

Passing of the order by the Hon'ble Supreme Court in MA No.107 of 2024

filed by the Appellant in no manner to be an embargo on the Adjudicating

Authority from examining the aspect of pre-existing dispute, which could

have been included by the Appellant by filing the documents as prayed for.

The documents which were sought to be brought on record by the Appellant

were necessary for adjudication of Section 9 Application. The Adjudicating

Authority committed error in rejecting the Application of the Appellant

seeking permission to bring additional documents on record.

5. Shri Abhijeet Sinha, learned Senior Counsel appearing for

Respondent, refuting the submissions of learned Counsel the Appellant

submits that arbitration proceedings initiated by the Corporate Debtor

before the Hon'ble Calcutta High Court in which order dated 13.09.2023

was passed, which proceedings were initiated much after filing of Section-

9 Application by the Operational Creditor. Only two documents were

sought to be brought on record by the Corporate Debtor, i.e. (1) copy of the

arbitration petition; and (2) order dated 13.09.2023 passed by the Calcutta

High Court. Both the above documents were not related to Section 9

proceedings, since Section 9 proceedings were pending for consideration at

the time when proceeding were initiated by the Appellant in the High Court

of Calcutta. It is further submitted that in the Company Petition filed under

Section 9, all details of proceedings prior to filing of Section 9 petition were

already brought on the record. It is submitted that Hon'ble Supreme Court

while dismissing the SLP filed by the Operational Creditor had made

Company Appeal (AT) (Insolvency) No.498 of 2024 4 observation that order dated 13.09.2023 and the order of Hon'ble Supreme

Court shall not affect the pending proceedings under the Code. The Hon'ble

Supreme Court, thus, clearly indicated that arbitration proceedings, shall

not have any bearing on Section 9 Application. The Adjudicating Authority

rightly taken note of the said observation of the Hon'ble Supreme Court

while rejecting IA 36/CB/2024. It is further submitted that Adjudicating

Authority also observed in the order that it is also not explained by the

applicant how these additional documents are just and necessary to arrive

conclusion in C.P. No.36/CB/2022. The Corporate Debtor has already

filed reply to Section 9 Application and the Application filed by the

Appellant was nothing but an attempt to derail and prolong the proceedings

under Section 9, which is at the stage of final hearing.

6. We have considered the submissions of learned Counsel for the

parties and have perused the records.

7. In IA No.36/CB/2024, which was filed by the Corporate Debtor,

following prayers were made:

"A. Leave to rely on the Additional documents of the Applicant/ Corporate Debtor annexed as Annexure "A" and Annexure "B"

with this application at the time of hearing of the instant company petition and the Additional documents be taken on record;

B. Consideration of the Additional documents of the Applicant/ Corporate Debtor by this Hon'ble Tribunal at the time of hearing of the instant company petition'

C. Any other or further order(s) as this Learned Tribunal may deem fit and proper.

Company Appeal (AT) (Insolvency) No.498 of 2024 5

8. Annexure "A" which is referred in the prayer, is Arbitration Petition

No.640 of 2023 filed under Section 11 of Arbitration and Conciliation Act

and Annexure "B" is copy of order passed in the said arbitration dated

13.09.2023 by the Calcutta High Court.

9. As noted above, notice under Section 8 was issued by the Operational

Creditor on 05.05.2022, which was also replied by the Corporate Debtor.

Section 9 Application was filed being CP(IB)No.36/CB/2022 by the

Operational Creditor in the year 2022, to which reply was also filed by the

Corporate Debtor. Arbitration proceedings before the Hon'ble Calcutta

High Court under Section 11, sub-section (6) of the Arbitration and

Conciliation Act, 1996 was initiated on 31.08.2023, on which an order was

passed by the Hon'ble Calcutta High Court on 13.09.2023. Both the

Arbitration Application and order of the Hon'ble Calcutta High Court,

which were sought to be brought on record by the Corporate Debtor, were

much subsequent to filing of Section 9 Application.

10. It is further relevant to notice that against the order dated

13.09.2023 passed by the Hon'ble Calcutta High Court, appointing an

Arbitrator, the Operational Creditor filed an SLP before the Hon'ble

Supreme Court being SLP No.25781/2023, in which the Hon'ble Supreme

Court while dismissing of the SLP vide order dated 28.11.2023, noted as

follows:

"No case for interference under Article 136 of the Constitution of India is made out.

Company Appeal (AT) (Insolvency) No.498 of 2024 6 However, it will be always open for the petitioner to raise all permissible objections/contentions before the Arbitral Tribunal in accordance with law.

The Special Leave Petition is accordingly dismissed.

We make it clear that the impugned order and confirmation thereof will not affect the pending proceedings under the Insolvency and Bankruptcy Code, 2016.

Pending application, if any, also stands disposed of."

11. The observation of the Hon'ble Supreme Court to the effect "We make

it clear that the impugned order and confirmation thereof will not affect the

pending proceedings under the Insolvency and Bankruptcy Code, 2016",

makes it clear that Section 9 Application were to be heard without the

arbitration proceedings having any effect on the Section 9 Application. It

is further relevant to notice that Corporate Debtor also filed MA No.107 of

2024 before the Hon'ble Supreme Court for clarification of order passed by

Hon'ble Supreme Court on 28.11.2023, which was dismissed by the

Hon'ble Supreme Court on 23.01.2024.

12. The observation of the Hon'ble Supreme Court in order dated

28.11.2023 as noted above, clearly indicate that arbitration order passed

in the arbitration proceedings shall not affect proceedings in Section 9

Application under the Code, which was filed by the Operational Creditor.

By IA No.36/CB/2024, the Corporate Debtor prayed to bring order dated

13.09.2023 on the record, which has rightly been refused to be accepted

by the Adjudicating Authority by the impugned order. The arbitration

application, on which order dated 13.09.2023 was passed, was also not

Company Appeal (AT) (Insolvency) No.498 of 2024 7 relevant for Section 9 proceedings, since, the arbitration application was

filed by Corporate Debtor before the High Court on 31.08.2023, i.e., much

after the initiation of proceedings under Section 9. The learned Counsel

for the Appellant has referred to paragraph-7 of the Adjudicating Authority,

where Adjudicating Authority made following observation:

"7. In general, we used to adopt liberal approach in this kind of application, because this is an Authority of first instance. It is settled principle of law that the court should take a lenient view when an application is made for production of the documents. However, this application is concern, it is wholly unwanted application."

13. The observation made by the Adjudicating Authority in paragraph-7

are observation, which required adoption of liberal approach in Application

for production of documents. However, in paragraph-7 itself, the

Adjudicating Authority observed that in the present case, the Application

was wholly unwanted. Further, reasons have been given in paragraph-8

by the Adjudicating Authority, which is to the following effect:

"8. The documents intend to be received are emerged after filing of the main C.P.No.36 /CB/2022. The documents need to be received arc arbitration application and order passed on the arbitration application. When the respondent preferred an appeal before the supreme court against the Arbitration order dated 13.09.2023, the Hon'ble Supreme Court of India by its order dated 28.11.2023 clearly mentioned that the impugned arbitration order will not affect this pending proceeding. In spite of specific observation made by the Apex court, the applicant preferred this application. If this request of applicant is conceded then it will go against the observation made by the Apex Court. It is also not explained by the

Company Appeal (AT) (Insolvency) No.498 of 2024 8 applicant how these additional documents are just and necessary to arrive conclusion in the C.P. No. 36/CB/2022. In these circumstances, this application IA(IB) No, 3 6 / CB / 2024 is DISMISSED."

14. In view of the aforesaid, we do not find any error in order of the

Adjudicating Authority rejecting IA(IB) No.36/CB/2024 filed by the

Appellant to bring on record two documents as noticed above. There is no

merit in the Appeal. The Appeal is dismissed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

8th April, 2024

Ashwani

Company Appeal (AT) (Insolvency) No.498 of 2024 9