Krystal Stone Exports Limited vs Streesed Assets Stabilization Fund

In the matter of: Krystal Stone Exports Ltd. ....Appellant Vs. Stressed Assets Stabilization Fund ...Respondent For Appellant Mr. Peeyoosh Kalra, Mr. Shashank Deo Sodh, Mr. Rohan J. Kapoor, Mr. Yashwant Singh Baghel, Advocates. For Respondent Mr. Mohit Nandwani, Advocate.

ORDER

(Hybrid Mode)

19.03.2024: Heard Learned Counsel for the Appellant and Learned

Counsel for the Respondent.

2. This Appeal has been filed against the order dated 01.03.2024 passed

by Principal Bench, by which order the President of the Principal Bench has

rejected the transfer application No. 07 of 2024. Against the order rejecting

the transfer application, this Appeal has been filed.

3. Learned Counsel for the Appellant challenging the order contends that

the proceedings were initiated by the Financial Creditor under Section 7 which

proceedings were initially admitted and the application to recall the said order

was rejected. Appellant filed a Company Appeal (AT) (Insolvency) No. 879 of

2023 which was allowed on 26.09.2023 setting aside the orders passed by the

Adjudicating Authority dated 24.09.2019 as well as 21.06.2023 and Company

Petition was revived before the Adjudicating Authority to be heard. After order 2

dated 26.09.2023, the proceedings proceeded before the Adjudicating

Authority i.e. NCLT Mumbai, Court No.1.

4. Appellant's case is that the Appellant has filed an IA No. 4676 of 2023

in which application Appellant has prayed for dismissing Section 7 petition as

barred by time which application was dismissed on 18.10.2023 and thereafter

the matter proceeded. Learned Counsel for the Appellant has submitted that

the order on the said application needs to be recalled and the application be

heard. It is submitted that the matter was thereafter heard and on 04.01.2024,

the rejoinder which was by the Financial Creditor was objected by IA No.5639

of 2023 and the Adjudicating Authority heard the parties and noted the

submissions of the Appellant that IA No.4676 of 2023 be restored. Considering

the insistence of the counsel for the Appellant, Court adjourned the matter on

11.01.2024 and granted liberty to the Appellant to move an application for

restoration of IA No.4676 of 2023.

5. On 11.01.2024, when the matter was taken up by the Adjudicating

Authority for further hearing, the Adjudicating Authority was informed that

the Appellant has filed the transfer petition before the Principal Bench.

Considering the aforesaid submission, the Adjudicating Authority adjourned

the matter on 01.02.2024. Principal Bench heard the application which was

filed vide transfer application and after hearing both the parties, by impugned

order rejected the application.

6. Learned Counsel for the Appellant challenging the order submits that

the proceedings which has been undertaken before the Adjudicating Authority

indicate apprehension of bias due to which Appellant has filed application for

Company Appeal (AT) (Insolvency) No. 551 of 2024 3

transfer. It is submitted that the order rejecting IA No.4676 of 2023 by which

Appellant was prayed for dismissal of the petition as barred by limitation was

required to be considered and which was closed giving wrong reasons in the

order. It is further submitted that in the rejoinder, the Financial Creditor

brought new additional facts which were opposed but the Adjudicating

Authority accepted the rejoinder. It is further submitted that by order dated

04.01.2024, the Adjudicating Authority has given 10 minutes' time on the next

date to the Appellant to argue the matter which all indicate apprehension of

bias, hence, application for transfer was filed. It is submitted that the order of

liquidation dated 07.09.2023 had been uploaded on 10.10.2023 and the said

fact was not brought before the Appellate Tribunal when the Appeal was

decided. He submits that the said order was passed subsequent to the order

by the Appellate Tribunal.

7. Learned Counsel for the Respondent refuting the submissions of the

Counsel for the Appellant submits that the present is a case where Financial

Creditor has not been able to recover its dues from 2002. There have been

proceedings before the BIFR which continued and ultimately AIFR rejected the

Appeal of Appellant and imposed cost. Subsequently Section 7 application was

filed. It is submitted that the Adjudicating Authority proceeded to hear

application under Section 7 and had given opportunity to both the parties, on

IA No.4676 of 2023 which was filed by the Appellant for seeking dismissal of

the application on the ground of limitation. Adjudicating Authority has

observed that the Appellant will be heard on the limitation as well as on the

merits and actually the parties were heard on 04.01.2024 both on merits and

limitation which was recorded in the order. It is submitted that in the rejoinder Company Appeal (AT) (Insolvency) No. 551 of 2024 4

affidavit, the financial creditor has only brought balance sheets and OTS

submitted by the Corporate Debtor, hence, the same was accepted by the

Adjudicating Authority and no such bias or any wrong procedure can be

imputed. It is further submitted that the Adjudicating Authority having

already heard the parties on 04.01.2024 has further granted opportunity to

the Appellant on 11.01.2024 and hence, no bias can be imputed nor there is

any apprehension of bias. Merely because the application IA No.4676 of 2023

is not separately heard will not cause any prejudice. With regard to order dated

07.09.2023, it is submitted that in addition to order of application several

other applications were heard and disposed of the fact that order was uploaded

on 10.10.2023 has no effect on order.

8. We have considered the submissions of the Counsel for the parties and

perused the record.

9. The facts indicate that the order of admission of the CIRP and the order

rejecting the application of the Corporate Debtor for recall of the order was set

aside by this Tribunal on 26.09.2023 and thereafter Section 7 proceedings

revived before the Adjudicating Authority to be proceeded and decided in

accordance with law.

10. The first grievance which was raised by the Appellant is that the

Appellant has filed an IA No. 4676 of 2023 where it was prayed that the

application be dismissed as barred by time which was rendered infructuous

by order dated 18.10.2023. It is submitted that the Appellant had right to file

the application and press the same. The order dated 04.01.2024 notices earlier

order dated 18.10.2023 as well as IA No.4676 of 2023. In paragraphs 4 and 5

Company Appeal (AT) (Insolvency) No. 551 of 2024 5

of the order dated 04.01.2024, following was observed by the Adjudicating

Authority:-

"4) Heard both sides extensively for a considerable time. However, Ld. Counsel for the Corporate Debtor submits that earlier he had filed an Applicant bearing IA No. 4676 of 2023, challenging the tenability of the Company Petition on Limitation Ground, and further submits that this Bench inadvertently, dismissed the same on 18.10.2023; thus, the Counsel orally prays for restoration of that Application. However, this Bench finds that the said application was disposed of in concurrence of both the parties on the proposition that the Limitation aspect can be argued in the reply to the main Application itself by the Corporate Debtor and its right to contest the main Application on ground of Limitation does not get prejudiced. Accordingly, this Bench persuaded the Ld. Counsel for the Corporate Debtor to argue on Limitation as well as Merits, however he remained adamant that he would press for restoration of the IA 4676 and shall argue on Limitation ground under that only. This Bench cannot comprehend the intent behind this insistence. However, Both the Counsel argued the matter on limitation also and on its merit.

5) Nonetheless, considering the insistence of Ld. Counsel for the Corporate Debtor, this Bench considers it appropriate to adjourn this matter to 11th January, 2024 so that he can move

Company Appeal (AT) (Insolvency) No. 551 of 2024 6

appropriate application for restoration of IA No. 4676 of 2023, thereby mentioning all the facts.

No further time shall be granted."

11. The Adjudicating Authority by the said order had granted liberty to the

Appellant for restoration of IA No.4676 of 2023 and 11.01.2024 was next date

fixed, the order dated 04.01.2024 indicate that the parties were heard on

merits as well as limitation.

12. 11.01.2024 as the next date fixed by the Adjudicating Authority on

which date the Appellant pointed out the court that he has already filed an

application for transfer, hence, the Adjudicating Authority adjourned the

matter. Further submission of the Appellant is that the rejoinder affidavit has

been taken by the Adjudicating Authority despite opposition by the Appellant.

Treatment of IA No.4676 of 2023 by the Adjudicating Authority as well as the

acceptance of the rejoinder cannot be said to show any bias or apprehension

of bias. By application IA No.4676 of 2023, Appellant has prayed that Section

7 petition be dismissed as barred by time which submission has been heard

and are permitted to be raised by the Adjudicating Authority which is apparent

from the order dated 04.01.2024. Whether the said order was passed in IA

No.4676 of 2023 or on the Company Petition does not make any difference in

the legal position or in the efficacy of the order. When the Corporate Debtor

has filed the reply, all the issues have to be decided after hearing the parties.

Insofar as the submission of the Appellant that by order dated 04.01.2024, 10

minutes time was granted to the Appellant, we see that in paragraph 21 of the

impugned order, President has issued following observations:-

Company Appeal (AT) (Insolvency) No. 551 of 2024 7

"21. With this observation, the request for transfer is declined. The present Transfer Application stands disposed of with a direction to the Court-1, Mumbai Bench, NCLT to give sufficient opportunity to the parties."

13. The grievance of the Appellant that he has to be given sufficient

opportunity has also been addressed in paragraph 21 of the order. Counsel

for the Appellant has relied on the judgment of the Delhi High Court in "Kinri

Dhir vs. Veer Singh- 2022 SCC OnLine Del 1096". He has referred to

paragraphs 37, 43, 44 & 45 of the judgment. There can be no dispute to the

preposition of law that mere apprehension of bias is sufficient for transfer of a

proceeding. The question is as to whether the facts and sequence of the events

in the present case reflect any apprehension of bias. We having adverted to

the submission and facts and sequence are fully satisfied that neither there is

bias reflected nor any apprehension of bias which can be imputed the Bench

hearing the matter. In the impugned order, Hon'ble President has looked into

the submission and has rejected the application for transfer in which we do

not find any error. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

Anjali/nn

Company Appeal (AT) (Insolvency) No. 551 of 2024