J.B. Tiwari vs Biostadt India Ltd. & Anr

[Arising out of Order dated 02.05.2018 passed by National Company Law Tribunal, Mumbai Bench in C.P. No.1479/I&BC/2017]

IN THE MATTER OF:

J.B. Tiwari S/o Dr. Tarkeshwar Tiwari, R/o B/3704, D.B. Woods, Gokuldham, Goregaon (East), Mumbai - 400063 ...Appellant (M.D. of Respondent No.2 - Corporate Debtor)

Versus

1. Biostadt India Limited 602-A, 6th Floor, A Wing, Poonam Chambers, Dr. A B Road, Worli, Mumbai - 400018 ...Respondent No.1 (Original Applicant - Operational Creditor)

2. Sonachi Industries Limited Through Sh. Syamal Baran Bhattacharya (Interim Resolution Professional) A-38, 2nd Floor, Raj Industrial Complex, Military Road, Off-Marol Maroshi Road, Andheri (East), Mumbai - 400063 ...Respondent No.2 (Original Respondent - Corporate Debtor)

For Appellant: Shri Anando Mukherjee, Advocate

For Respondents: Shri Samir Tandon, Advocate (Respondent No.1)

Company Appeal (AT) (INS) No.268 of 2018 2

JUDGEMENT

(30th November, 2018)

A.I.S. Cheema, J. :

1. The Appellant is Managing Director of Respondent No.2 - Sonachi

Industries Limited, the Corporate Debtor against whom Respondent

No.1 - Biostadt India Limited, the Operational Creditor filed Application

- C.P. 1479/I&BC/2017 under Section 8 read with Section 9 of the

Insolvency and Bankruptcy Code, 2016 (hereafter referred as 'Code') and

which has been admitted by the National Company Law Tribunal,

Mumbai Bench ('NCLT', in short) acting as Adjudicating Authority under

the Code, on 2nd May, 2018 and Moratorium Order has been passed with

other directions.

2. The Appellant has filed this Appeal being aggrieved by the

admission of the Application.

3. The main ground raised by the Appellant is that the Orders passed

by the Adjudicating Authority were ex-parte and the Adjudicating

Authority itself, through its Registry did not serve Notice on the

Corporate Debtor and violated principles of Natural Justice and thus the

Order deserves to be set aside.

4. The Appeal states that between the two Companies, there was

agreement regarding supply of material. The Corporate Debtor had

placed purchase orders with the Operational Creditor. The Operational

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Creditor had raised invoices, which have been referred in the Appeal.

According to the Appellant, the material supplied did not meet the

quality standard and the same was reported to the Operational Creditor

over telephone. The Appeal refers to the payments made and it is stated

in para - XVIII as under:-

"(XVIII) That it is also stated that the Corporate Debtor is a solvent company and ready and willing to clear its debt so far as the undisputed amount of Rs.1,14,41,776.61/- is concerned. Had notice been issued, the said fact would have been brought to the notice of the Ld. Adjudicating Authority. In fact, the Appellant is still in talks with the Respondent No.1 and want to maintain good professional relation and further clear the debt."

5. The Appeal accepts that the Operational Creditor had sent legal

Notice dated 22.06.2016 and 19.09.2016 (copies of which have been

filed by the Respondent No.1 with Diary No.6743). It is also accepted

that the Operational Creditor had sent legal Notice dated 06.06.2017

(copy of which is at Page - 68 of the Appeal). According to the Appellant,

the Appellant had been informed by the Operational Creditor regarding

amounts of Rs.1,14,41,776.61 paise remaining outstanding on the

invoices issued. According to the Appellant, he had met Mr. Suresh Nair

- the representative of Respondent No.1 and discussed the matter as the

Appellant expected reduction in outstanding considering that materials

supplied were of low quality. According to the Appellant, an e-mail was

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sent on 25.04.2016 to the Operational Creditors seeking additional time

to clear pending bills as the company was facing financial stress.

6. The Counsel for Operational Creditor has pointed out copies of e-

mails sent by the Appellant, which are at Annexures B-10 and B-12, on

22.07.2016 to submit that by these e-mails, the Appellant accepted that

the outstanding amounts would be cleared but no dispute regarding

quality of the goods supplied was raised and thus no dispute had been

raised.

7. The Appeal claims and the counsel for Appellant argued that the

Notice dated 6th June, 2017 (Page - 68) had been replied by the

Corporate Debtor on 08.07.2017 (copy of which is at Page - 75) and in

which dispute had been raised regarding quality. We find that this Notice

dated 08.07.2017 (copy of which is at Annexure - A-7 in the appeal)

although the date has been put as "08.07.2017", the postal receipt

printed on the same document shows that the Notice was booked only

on 20.07.2017 which is after the Annexure-A8 - Section 8 Notice dated

13.07.2017 was sent by the Operational Creditor by e-mail and speed

post. Receipt of such Notice under Section 8 has not been denied. Thus,

no existing dispute has been shown and the paragraph extracted (supra)

from the Appeal itself shows that the amount outstanding was not

disputed. At the time of arguments, learned Counsel for the Appellant

tried to refer to various invoices relating to supplies to show the

payments made as adjusted towards certain invoices and not the

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invoices stated by the Operational Creditor. We find that this is not

material as the basic amount of default of outstanding dues, i.e.

Rs.1,14,41,776.61 paise and which was claimed in Notice under Section

8 and for which proceeding was filed before the Adjudicating Authority

in Form - 5 invoking Section 9, is same, and even the Appeal admits

that this was the outstanding amount.

8. Learned Counsel for the Appellant relied on Judgements of this

Tribunal in the matter of "M/s. Starlog Enterprises Limited Versus

ICICI Bank Limited 2017" reported in SCC OnLine NCLAT 13 and

"Mass Metals Pvt. Ltd. Versus Sunflag Iron & Steel Co. Ltd." reported

in 2017 SCC OnLine NCLAT 504 to submit that no Notice was issued

and served by Adjudicating Authority itself and thus principles of

natural justice were violated. It is argued that it was necessary that

Registry of the Adjudicating Authority should have served the Notice

before Adjudicating Authority admitted the application under Section 9.

The learned Counsel for Respondent No.1 - Operational Creditor

submitted that the Operational Creditor filed the proceedings before the

Adjudicating Authority and when Adjudicating Authority issued

directions to the Operational Creditor to serve Notice, the Notices were

served and received by the Corporate Debtor but still Corporate Debtor

did not choose to come forward before the Adjudicating Authority. The

list of dates of the Appeal show particulars and it has also been argued

by the learned Counsel for the Appellant that as per Orders of the

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Adjudicating Authority, the Corporate Debtor - Respondent No.2 was in

receipt of letter dated 13.11.2017 issued by Veritas Legal, Advocates &

Solicitors informing that the matter will be listed before NCLT, Mumbai

Bench on 20.11.2017 and where Respondent No.2 may remain present

for hearing, if so desired. The argument of the learned Counsel for

Appellant is that Veritas Legal was not the filing authority of the

application in NCLT and nor was it authorised by any Board Resolution

to act on behalf of the Operational Creditor and thus, such Notice by

Veritas Legal could not be said to be proper service of Notice. The

Appellant has accepted that another e-mail was sent through one Areez

Gazdar of the said Veritas Legal on 15.11.2017 to the Corporate Debtor

stating that Notice of hearing is attached to the mail and physical copy

of the application was being forwarded. Even in this regard, it has been

argued for Appellant that it was not stated in the e-mail that it was being

sent in view of the Orders of the Adjudicating Authority. Perusal of

Annexure A-11, the email sent by Areez Gazdar for Veritas Legal, shows

that the Appellant did receive the Notice and forwarded the same on

15.11.2017 itself to one Mr. Anil informing him to meet the Advocate

and discuss and that they have to fight the case. Clearly and apparently,

the Corporate Debtor and the Appellant had knowledge of the legal

proceedings and also of the Notice. When the Advocate sends the Notice,

it is on instructions from the client and the same cannot be ignored by

saying that the Advocate should also forward authority and Resolution

of the Company. From the material available, it is apparent that the

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Corporate Debtor - Appellant had received Notice served by the

Advocate. The grievance of the Appellant is that the Notice should have

been sent by the Adjudicating Authority through its Registry as required,

if the Judgements referred are perused. No doubt, it would have been

appropriate if the Adjudicating Authority had also sent the Notice

through its own mechanism. We have considered whether we should

send back the matter for want of such procedure being followed by the

Adjudicating Authority. However, we have also heard the Appellant in

details to consider if the Appellant has any grounds or material because

of which, if the same had been shown to the Adjudicating Authority, the

result of the proceeding under Section 8 and 9 of the Code could have

been different. Looking to the admitted facts in this matter and where

we find that there is no dispute regarding the amount due and as we

find that the Appellant is unable to demonstrate that before Section 8

Notice was issued any dispute existed, we find no propriety in sending

back this matter to the NCLT. The Appellant in spite of having Notice

and knowledge of the proceeding cannot sit on the hedge to take

advantage of the technical requirement of Adjudicating Authority

sending a Notice through its mechanism. The Appellant had

sufficient Notice and still chose not to appear before the Adjudicating Authority. We do not find that remitting back the matter will serve any purpose. The application has been rightly admitted by Adjudicating Authority.

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There is no merit in this Appeal and we do not find any reason to

interfere with the Impugned Order.

The Appeal is rejected. No Orders as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

[Balvinder Singh] Member (Technical)

/rs/nn

Company Appeal (AT) (INS) No.268 of 2018