Girish Baduni vs Punjab National Bank & Anr

(Arising out of order dated 20.09.2019 passed by the Adjudicating Authority, National Company Law Tribunal, Jaipur in CP No.(IB)- 205/7/JPR/2019 titled PNB Vs Atlas Alloy India Pvt Ltd)

In the matter of :

Girish Baduni S/o Mr. Gopal Dutt Baduni Ex Director, Atlas Alloy (India) Pvt Ltd, E-59, RIICO Housing Colony, Beawar, Distt. Ajmer 305901 Appellant

Vs

Punjab National Bank Plot No.4, Sector 10, Dwarka New Delhi 11075

Also at

B.O. Agrasen Market, Inside Ajmeri Gate, Beawar, Distt. Ajmer

2. Mr Satyendra Prasad Khorania IRP 402, 4th floor, OK Plus, DP Metro, Opp Pillar No.94, New Sanganer Road, Jaipur 302019. Respondent

Ms Aparna Iyer, Advocate for appellant. Mr PBA Srinivasan, Sr. Advocate with Mr. Avinash Mohapatra, Advocate for R1. Mr Amol Vyas, Advocate for R2.

Company Appeal (AT)(Insolvency) No.290/2020 2

JUDGEMENT

(27th August, 2020)

MR. BALVINDER SINGH, MEMBER (TECHNICAL)

The present appeal has been filed by the appellant under Section 61 of

the Insolvency & Bankruptcy Code, 2016 (in short "I&B Code") against the

impugned order dated 20.09.2019 passed by the Adjudicating Authority,

National Company Law Tribunal, Jaipur in CP No.(IB)-205/7JPR/2019 vide

which the Adjudicating Authority had admitted the application filed by the 1st

Respondent and initiated Corporate Insolvency Resolution Process against the

Corporate Debtor by appointing Interim Resolution Professional.

2. Being aggrieved by the impugned order dated 20.09.2019 the appellant,

ex-Director of Corporate Debtor-M/s Atlas Alloy (India) Pvt Ltd, has preferred

the present appeal.

3. The brief facts of the case are that the Corporate Debtor availed various

credit facilities from the Financial Creditor/1 st Respondent in the shape of

Cash Credit Facility, Bills Discounting, Term Loan in the year 2005 and the

said facilities were renewed and the limits have been enhanced from time to

time by the 1st Respondent as per request of the Corporate Debtor. For

availing the credit facilities the Corporate Debtor had executed various

documents such as Hypothecation Agreement dated 9.11.2011 to secure the

Term Loan. The Corporate Debtor has also executed various other loan and

security documents.

4. Since the Corporate Debtor did not maintain the financial discipline,

the account of the Corporate Debtor was classified as NPA by the 1st

Respondent on 30.09.2017 and recall notice dated 03.10.2017 was issued to

Company Appeal (AT)(Insolvency) No.290/2020 3

the Corporate Debtor and Guarantors under the SARFAESI Act, 2002 and

demanded outstanding amount of Rs.11,25,09,298.94 but the outstanding

amount was not paid. The Financial Creditor filed Original Application before

the DRT, Jaipur and is pending till the date of filing of Application before the

NCLT, Jaipur.

5. The Financial Creditor filed application under Section 7 of the

Insolvency & Bankruptcy Code, 2016 before the NCLT, Jaipur for initiating

corporate insolvency proceedings against the Corporate Debtor. Notice was

served upon the Corporate Debtor but despite receipt of notice the Corporate

Debtor did not appear before the NCLT, Jaipur and the NCLT Jaipur was

constrained to proceed exparte against the Corporate Debtor and admitted

the application of the Financial Creditor and appointed IRP.

6. Being aggrieved by the said impugned order the appellant has filed the

present appeal. The appellant has stated that the application filed under

Section 7 of I&B Code was never served on the Corporate Debtor or the

erstwhile Directors of the Corporate Debtor.

7. The appellant stated that the letter dated 26.8.2019, informing about

the filing of the application unde r Section 7 of the Insolvency and Bankruptcy

Code, 2016, was served on the wrong addresses.

8. The appellant stated that the email Id gbincoeatlas@rediffmail.com is

not the email ID of the company reflected on the MCA website and was being

used by the erstwhile employees of the Corporate Debtor. The said email ID

has not been in use since early 2018 and was never used by the erstwhile

Directors of the Corporate Debtor.

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9. The appellant stated that the email ID girishbaduni@yahoo.in was not

in use since June 2018 and the 1st Respondent was very well aware about the

said fact.

10. The appellant stated that the 1st respondent was aware of the functional

email ID of the erstwhile Director and the 1st Respondent had sent an email

dated 9.1.2020 directing removal of household items from one of the

immovable properties mortgaged with it.

11. That the postal receipt of the registered speed post dated 26.8.2019

and the Tracking Report in respect of the same reflect that the application

under Section 7 of the I&B Code filed by 1 st Respondent was not served on

the respective addresses.

12. The appellant stated that the impugned order has been pssed by the

Adjudicating Authority without notice to the Appellant against the principle

of rules of natural justice, as stipulated under Section 424 of the Companies

Act.

13. The appellant prayed that the impugned order dated 20.09.2019 may

be set aside and the matter may be re manded back to NCLT, Jaipur for

adjudication and the operation of the impugned order may be stayed.

14. Reply has been filed on behalf of 1st Respondent. 1st respondent stated

that the appellant has failed to establish that there is any infirmity in the

impugned order dated 20.9.2019. 1st respondent stated that the appellant

has nowhere denies about the default and also has not submitted any

documents to establish the absence of a default.

15. 1st respondent stated that the appeal is hopelessly time barr ed and the

same deserves to be rejected at the very outset.

Company Appeal (AT)(Insolvency) No.290/2020 5

16. 1st respondent stated that they have received the confirmation the from

2nd Respondent that the suspended Directors of the Corporate Debtor,

including the appellant were duly served with the copy of the order by way of

a letter to the Appellant at the registered address, as available in the records

of Ministry of Corporate Affairs, and an email was also sent by the 2 nd

Respondent on the registered email address of the Corporate Debtor. 1 st

respondent stated that the 2nd respondent had also sent an email to the

statutory auditor of the Corporate Debtor to provide information, documents

and records of the Corporate Debtor. 1st respondent stated that on 4.12.2019,

2nd Respondent filed an application under Section 19(2) of I&B Code which

was with regard to the non-cooperation of the erstwhile directors and

statutory auditors of the Corporate Debtor.

17. 1st respondent stated that since the appellant was evading service of

the Notice, he was additionally served on the address Plot No.125-128, Shree

Radhvalabh Industrial Area, Village Piplaz, Tehsil Beawar, Ajmer, Rajasthan.

18. 1st respondent stated that notices were pasted on 'Grand Batteries Pvt

Ltd' as the erstwhile Director of the Corporate Debtor also happened to be a

director in 'Grand Batteries Pvt Ltd'. 1 st respondent stated that there was

proper service of notice to the appellant. 1 st respondent further submitted

that an email was also sent to cs.shubham@gmail.com, which was mentioned

on MCA website as the email of erstwhile Director of Grand Batteries Pvt Ltd.

1st respondent also submitted that One Time Settlement (OTS) was received

from the appellant.

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19. 1st respondent stated that after passing of the impugned order dated

20.09.2019, five meetings of Committee of Creditors have been held and the

appellant has attended the 3rd, 4th and 5th Meeting of Committee of Creditors.

20. 1st respondent stated that the prayers made by the appellant may be

disallowed.

21. Reply on behalf of 2nd Respondent has been filed. 2nd Respondent

stated that the appeal is not within limitation. 2 nd respondent stated that he

has served copy of the impugned order as well as the minutes of CoC Meeting

to the suspended Directors on the email given on MCA portal as well as on

the personal mail ID of the suspended Directors. 2 nd respondent stated that

the statutory auditors of the Corporate Debtor became aware of the order of

the insolvency in the month of November, 2019, therefore, there is no force in

the contention of the appellant that they became aware of the impugned order

dated 20.09.2019 only in the month of January, 2020.

22. 2nd respondent stated that various email were sent to appellant to

provide complete record whether electronic or manual, books of accounts

details regarding assets, finances and operation of the Corporate Debtor,

however, the appellant has not co-operated with the 2nd Respondent,

therefore, the 2nd Respondent/Resolution Professional having been left with

no alternative filed an application under Section 19(2) of I&B Code and the

same is pending.

23. 2nd respondent has stated that they have incurred a sum of

Rs.11,98,144/- as CIRP expenses till the date of filing his re ply i.e.

24.06.2020.

24. Lastly the 2nd Respondent prayed that the appeal may be dismissed.

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25. Learned counsel for the appellant argued that the 1 st respondent did

not serve the application filed under Section 7 of I&B Code and/or the notice

at the correct address of the erstwhile directors of Corporate Debtor. Learned

counsel for the appellant further argued that the 1 st respondent deliberately

made service by way of email to gbincocatlas@rediffmail.com which email was

being used by the erstwhile employees of the Corporate Debtor. Learned

counsel for the appellant argued that the postal receipts of the registered

speed-post dated 26.8.2019 and the Tracking Report establishes that the

application were even otherwise not served on the respective addresses.

Learned counsel for the appellant argued that the Respondent No.1 has

concealed the factum of the One Time Settlement (OTS) proposed by the

Corporate Debtor before the Adjudicating Authority. Learned counsel for the

appellant argued that the impugned order passed being vioaltive of principle

of natural justice and is liable to be set aside.

26. Learned counsel for the 1st respondent argued that the appellant has

admitted that the notice pertaining to the proceedings before the NCLT Jaiput

was duly served upon the email address gbincoeatlas@redifmail.com.

Learned counsel for the 1st respondent further argued that the nowhere the

appellant has denied the knowledge pertaining to the service of the notice of

the proceedings before the NCLT Jaipur. Learned counsel for the 1 st

respondent argued that the appellant has merely made a vague argument that

the said email was used by the erstwhile employees of the Corporate Debtor.

Learned counsel for the 1st respondent argued that the appellant has not

placed an affidavit of the said employee to substantiate his claim. Learned

counsel for the 1st respondent argued that the Notice dated 25th August, 2019

Company Appeal (AT)(Insolvency) No.290/2020 8

was also sent to email ID cs.shubham@gmail.com. The said email

cs.shubham@gmail.com is mentioned on MCA website as the email of

erstwhile Director of 'Grand Batteries Pvt Ltd'. Learned counsel for the 1 st

Respondent argued that the NCLT, after satisfying itself, has also recorded in

its impugned order dated 20.09.2019 that the Corporate Debtor was duly

served. Learned counsel for the 1st respondent argued that notices were also

pasted on the premises of 'Grand Batteries Pvt Ltd' in which the appellant

happened to be Director. Learned counsel for the 1 st respondent further

argued that the Notice under Section 13(2) of SARFEASI Act was served upon

the Corporate Debtor and its sister concern, M/s Nihan Batteries Ltd, (Page

86 and 94 of Appeal Paper Book) at the common address. Learned counsel

for the 1st respondent further argued that the appellant was aware of

publication dated 26.8.2019 of theft in the registered address of the Corporate

Debtor but the argument of the appellant that he was unaware with regard

to commencement of Corporate Insolvency Resolution Process of the

Corporate Debtor is not acceptable. Learned counsel for the 1 st respondent

argued that the appeal is hopelessly time barred. Lastly learned counsel for

1st respondent prayed that the appeal may be dismissed and impugned order

dated 20.09.2019 may be upheld.

27. Learned counsel for 2nd Respondent/RP argued that the copy of the

order as well as minutes of the COC Meeting were served to the suspended

Directors on the email given on MCA portal as well as on the personal email

ID of the suspended Directors. 2nd respondent further argued that the

statutory auditors of corporate debtor was first informed about the initiation

of CIRP on 23.9.2019 when IRP sent him an email and thereafter reminders

Company Appeal (AT)(Insolvency) No.290/2020 9

have been sent on 18.10.2019, 22.10.2019 and 01.11.2019 and the IRP

sought information with regard to books of accounts and other records of the

Corporate Debtor. 2nd Respondent further argued that the statutory auditor

of corporate debtor replied to the aforesaid email on 04.11.2019 and the

statutory auditors sent ITR IV, computation income audit report and has

audit report. 2nd respondent argued that the fact of Statutory Auditor being

informed of initiation of CIRP in first week of November, 2019 has not been

controverted by the Appellants. 2nd Respondent argued that due to non-

cooperation of the corporate debtor and its suspended director, the RP filed

an application under Section 19(2) of I&B Code before the Adjudicating

Authority. 2nd Respondent further argued that in reply to application under

Section 19(2) of I&B Code, the appellant himself has annexed minutes of COC

Meeting dated 17.10.2019 wherein "Any other Matter" category the fact of

sending of email to the auditor has been mentioned. 2 nd respondent further

argued that it is difficult to believe that the statutory auditor of corporate

debtor informed the appellant only in January, 2020, when the records clearly

shows that the auditor became aware of the CIRP proceedings on 4.11.2019.

2nd Respondent argued that the present appeal has been filed by the appellant

only after application under Section 19(2) was filed before the Adjudicating

Authority. 2nd Respondent further argued that the IRP made a public

announcement and thereafter Form G was published on 1.11.2019 and

thereafter on 21.12.2019. 2nd Respondent argued that the appellant has not

approached this Appellate Tribunal with clean hands and has not been able

to explain the day to day delay caused in filing of the appeal and therefore,

the appeal deserves to be dismissed on the issue of limitation.

Company Appeal (AT)(Insolvency) No.290/2020 10

OUR OBSERVATIONS/CONCLUSION

28. It is not in dispute that the Corporate Debtor availed credit facilities

and could not maintain financial discipline and there is litigation between the

parties and the Corporate Debtor admitted that they sent OTS proposal to

Financial Creditor which proves that there is 'debt' and 'default'.

29. The main issue raised by the appellant is that the application filed by

the Financial Creditor is not served on the correct address and the notice has

also been served upon him. We have heard the parties on this issue and

perused the record. We have observed from the Appeal at Pages 292 to 300

and note that the email ID gbincoeatlas@redifmail.com is printed on the

letterhead of the Corporate Debtor, therefore, there is no force in the argument

of appellant that the said Email ID was used by the staff. This is an after

thought. Further it is the duty of the Corporate Debtor to access to his emails

and can not take excuse that the same was not in use. Financial Creditor

has duly served the Corporate Debtor. We also not e that the Notice dated 25th

August, 2019 (Page 27 of Reply of Respondent No.1) was also sent to email ID

cs.shubham@gmail.com in addition to email ID gbincoeatlas@redifmail.com

of appellant. We note that the email cs.shubham@gmail.com is the email of

erstwhile Director of 'Grand Batteries Pvt Ltd'. We also note notices were also

pasted on the premises of 'Grand Batteries Pvt Ltd' in which the appellant

happened to be Director. We also note that Notice under Section 13(2) of

SARFEASI Act was served upon the Corporate Debtor and its sister concern,

M/s Nihan Batteries Ltd, (Page 86 and 94 of Appeal Paper Book) at the

common address. We also note that the appellant was aware of publication

dated 26.8.2019 of theft in the registered address of the Corporate Debtor.

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Thus the argument of the appellant that he was unaware about

commencement of Corporate Insolvency Resolution Process of the Corporate

Debtor is not credible and has no force.

30. We also note that Corporate Debtor and suspended directors were

served by IRP on the email given on MCA portal as well as on the personal

email ID of the suspended Directors. We also note that the 2 nd respondent

sent an email to statutory auditors and thereafter sent reminders on

18.10.2019, 22.10.2019 and 01.11.2019 and the IRP sought information with

regard to books of accounts and other records of the Corporate Debtor. We

note that that the statutory auditor of corporate debtor replied vide email

dated 04.11.2019 and the statutory auditors sent ITR IV, computation income

audit report and has audit report to the IRP and this has not been denied by

the appellant. We also note that 2 nd Respondent has to file an application

under Section 19(2) of I&B Code before the Adjudicating Authority due to non-

cooperation of the corporate debtor and its suspended director. We note that

the IRP made a public announcement on 1.11.2019 as per Rule 6 of

Insolvency and Bankruptcy Board of India (Insolvency Resolution for

Corporate Persons) Regulations, 2016. In this Public Announcement the

name of the Corporate Debtor, Insolvency commencement date in respect of

corporate debtor, Corporate Identification No. of corporate debtor etc. is given.

This public announcement is for public at large. Even if it is presumed that

the appellant was not served at the correct address or at the correct email,

this public announcement is made known to each and every citizen of country

and the appellant cannot deny it. Therefore, the appellant should have filed

the appeal within 45 days from the date of public announcement i.e.

Company Appeal (AT)(Insolvency) No.290/2020 12

1.11.2019. But the appellant has not done this and taking the irrelevant

pleas that the email if not being used by them for the last three years or the

email was for the staff etc. We find no force in his arguments. All the above

establishes that the Corporate Debtor was duly served, as also observed by

the NCLT Jaipur, but did not appear before the NCLT Jaipur and also

deliberately filed the appeal before this Appellate Tribunal after a delay of 110

days to delay the process of insolvency of corporation debtor. Further the

appellant has also not disclosed that they have attended the 3 rd, 4th and 5th

COC Meeting.

31. In view of the aforegoing discussions and observations we find no merits

in the appeal and it is accordingly dismissed. No order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Mr. V.P. Singh) Member (Technical) New Delhi

Bm

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Company Appeal (AT)(Insolvency) No.290/2020