Kvr Industries Pvt Ltd vs Pp Bafna Ventures Pvt Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) (Insolvency) No. 626 of 2020 [Arising out of Order dated 08th June, 2020 passed by the Adjudicating Authority (National Company Law Tribunal), Amaravati Bench, Hyderabad in I. A. Nos. 41/2020, 42/2020, 51/2020, 52/2020 and 62/2020 in CP (IB) No. 204/7/AMR/2019]

IN THE MATTER OF: M/s. KVR Industries Private Limited Having its registered office at #47 -11-3, Dwarakanagar, Visakhapatnam - 532016, Andhra Pradesh, India. ...Appellant/Corporate Debtor Versus

M/s. P. P. Bafna Ventures Private Limited Having its registered office at No. 111, World Trade Centre Tower A, S. No. 1, Kharadi, H.No. 1B/2/B, Pune, Maharashtra, Rep. By Mr. Praful Bafna, Padmohan Bungalow, Plot No. 69, Vidyasagar Society, Markey yard, Pune - 411037 ...Respondent/Financial Creditor

Present:- For Appellant: Mr. Yogesh Kumar Jagia, Mr. Vikram Pooserla and Mr. Aahana Madhyala, Advocates. For Respondent: Mr. S. Niranjan Reddy, Sr. Advocate with Ms. Malvika Kalra, Mr. Pranav Sarthi and Ms. Divya Datla Raju, Advocates. JUDGEMENT

(18th December, 2020) A.I.S. Cheema, J.:

1. This Appeal has been filed by the Appellant/Corporate Debtor M/s.

KVR Industries Pvt. Ltd. against Respondent/Financial Creditor-M/s.

P.P.Bafna Ventures Pvt. Ltd. against Impugned Order dated 08.06.2020

passed by the Adjudicating Authority (National Company Law Tribunal,

Amaravati Bench) at Hyderabad in I.A. Nos. 41 of 2020, 42 of 2020, 51 of

2020, 52 of 2020 and 62 of 2020 in C.P. (I.B) No. 204/7/AMR/2019

(CP/204/2019 in short).

2. The Corporate Debtor had filed I.A. No. 51 and 52 of 2020

mentioned above seeking to initiate Criminal Proceedings against Mr.

Praful Prakash Bafna, the authorized signatory of Financial Creditor

under Section 340 read with Section 195 (1) (b) (i) of Cr. P.C. read with

Section 193 of Indian Penal Code, 1860 (Penal Code in short), after

conducting preliminary inquiry and to call Mr. Praful Prakash Bafna for

cross-examination. The Corporate Debtor claimed that the signatures on

I.A. Nos. 41 and 42 of 2020 by which Applications Financial Creditor

sought restoration of Company Petition and restoration of Interim Orders

passed earlier in the Company Petition C.P. (I.B) No. 204/7/AMR/2019

(CP/204/2019 in short) were forged.

The Adjudicating Authority accepted Memo filed by Financial

Creditor and I.A. Nos. 41 and 42 of 2020 were dismissed as not pressed;

Page 2| Company Appeal (AT) (Insolvency) No. 626 of 2020 disposed I.A. Nos. 51 and 52 of 2020 with observations that the

Corporate Debtor may approach appropriate forum for redressal; I.A. No.

62 of 2020 (which was filed by Corporate Debtor to bring on record the

report of Forensic Expert) was dismissed as infructuous; and

Adjudicating Authority suo motu restored CP/204/2019 (which had

earlier been disposed by Adjudicating Authority when Section 9

Application of an Operational Creditor M/s. Eshwar Enterprises was

admitted). CP/204/2019 earlier had been disposed asking Financial

Creditor to go and claim before IRP appointed in matter of Operational

Creditor M/s. Eshwar Enterprises. Later, the other Petition TCP (IB) No.

111/9/AMR/2019 got settled and was disposed as withdrawn. The

Adjudicating Authority thus restored CP/204/2019. Hence the present

Appeal.

3. The Appeal prays that the Impugned Orders should be set aside

and this Tribunal should pass orders deemed fit.

The Tortuous path; the Disputes & Findings

4. The above paragraph gives brief outline of the reasons for present

Appeal. Parties have made various grievances and filed various

Applications to counter each other before the Adjudicating Authority. The

Adjudicating Authority has referred to the developments in short. The

Appeal also refers to the various developments. It appears appropriate to

pick up the narration of developments as recorded by the Adjudicating

Page 3| Company Appeal (AT) (Insolvency) No. 626 of 2020 Authority regarding which developments there does not appear to be

dispute. The Adjudicating Authority referred to the developments before it

as under:

"2. The tortuous path the present Company Petition has traversed need a brief mention. M/s. PP Bafna Ventures Pvt. Ltd. (herein after referred to as the Financial Creditor) of M/s. KVR Industries (herein after referred to as the Corporate Debtor) filed the Company Petition under Section 7 of the Insolvency and Bankruptcy Code (the Code for short) seeking Corporate Insolvency Resolution Process (CIRP) on the allegation of default in payment of a Financial Debt. One Eshwar Enterprises, an operational Creditor (OC) of the Corporate Debtor (CD) had also filed TCP (IB) No. 119/9/AMR/2019 (the other Company Petition). The Petition was admitted by an order dated 12.02.2020 by this Authority initiating CIRP. At that stage the present Company Petition had been part-heard. Since the other Company Petition was admitted, this Authority felt that there was hardly any need to keep the present Company Petition pending. It accordingly by order dated 13.02.2020 directed the Applicant to approach the Interim Resolution Professional (IRP) in terms of Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016 for further action in the matter and disposed of the present Company Petition. The Operational Creditor M/s. Eshwar Enterprises and the Corporate Debtor reached an out of court settlement

Page 4| Company Appeal (AT) (Insolvency) No. 626 of 2020 and filed I.A. No. 37 of 2020 (in the other Company Petition) for withdrawal of the said Company Petition. This Authority by an order dated 21.02.2020 allowed the IA No. 37 of 2020 and permitted withdrawal of the other Company Petition.

3. The basis of the order dated 13.02.2020 in the present Company Petition thus having set at naught, the Financial Creditor accordingly filed IA No. 41 of 2020 seeking restoration of the present Company Petition and IA No. 42 of 2020 seeking restoration of the interim order dated 02.12.2019 of this Authority. The Respondent (CD) filed his counter to both the IAs. At the same time it also filed two applications namely, IA Nos. 51 of 2020 and 52 of 2020 alleging forgery of the signature of the Applicant(FC) in IA Nos. 41 and 42 of 2020. Counters were sought and the matter was listed for hearing. On 13.03.2020 the CD filed another application vide IA No. 62 of 2020 praying to receive the forensic examination report of the signatures (of the Applicant) appearing in IA Nos . 41 and 42 of 2020 with the admitted signature of the deponent. Counter thereto have been filed. Meanwhile because of the COVID-19 Pandemic the Court proceedings remained suspended as per the order of the Principal Bench vide letter dated 15.03.2020. The suspension of Court work was extended from time to time in tune with the lockdown promulgated by the Central and State Governments. Hearing of urgent applications were permitted to be heard through video conference as per letter dated 03.05.2020 of the NCLT Principal Bench. Accordingly,

Page 5| Company Appeal (AT) (Insolvency) No. 626 of 2020 these Applications were heard through video conferencing. Meanwhile the Applicant (FC) under the signature of Mr. Praful Prakash Bafna filed an Affidavit dated 09.05.2020 reverifying the IA. No. 41 of 2020 confirming the contents of the Application averments.

4. The Corporate Debtor vehemently objected to the IAs Nos. 41 and 42 of 2020 on the ground that the signature on the verifying affidavits (in the IAs) did not belong to Praful Prakash Bafna. It accordingly prayed to initiate criminal proceeding against Mr. Praful Prakash Bafna under Section 193 of the IPC read with Section 340 and 195 (1) (b) of the Cr. P.C. He also prayed (in I.A No. 52 of 2020) to order Mr. Praful Prakash Bafna to appear for cross-examination. It is accordingly prayed that forgery and perjury having been practiced, IA Nos. 41 and 42 of 2020 could not be allowed. While the matter was being heard, the Financial Creditor filed a memo dated 29.05.2020 (by e-mail on 30.05.2020) seeking withdrawal of the IA Nos. 41 and 42 of 2020 with liberty to file a fresh Interim Application recapitulating the contents of the Interim Application Nos. 41 of 2020.

Copy was served on the other side and a counter running into several pages was filed. The filing of the memo by the Financial Creditor had a fresh twist to the already murky proceedings. It is contended by the Corporate Debtor that on the face of the applications seeking criminal prosecution and cross examination, the Financial Creditor can not be allowed to wriggle out of conundrum resulting from the multiple IAs as above. As if the drama was not enough the Financial Creditor filed

Page 6| Company Appeal (AT) (Insolvency) No. 626 of 2020 another IA on 01.06.2020 effectively reiterating the prayers made in IA No. 41 of 2020 which, it had sought under the memo dated 29.05.2020. Since the present IAs were pending this Authority by order dated 02.06.2020 directed not to number the IA."

5. We have seen the Appeal Memo also and above developments are

reflected in the Appeal Memo also. The Adjudicating Authority in the

chronology missed making reference that the Financial Creditor filed I.A.

No. 69 of 2020 on 05th May, 2020 with identical prayers as in I.A. Nos. 41

and 42 of 2020; and that, when Memo dated 29th May, 2020 was filed the

Financial Creditor had also filed Affidavit reverifying the contents of the

Affidavit in I.A. No. 41 of 2020.

6. It appears that the Financial Creditor claimed before the

Adjudicating Authority that by raising disputes with regard to I.A Nos. 41

and 42 of 2020 the Corporate Debtor was creating obstruction in the

restoration of CP/204/2019 with other motives with regard to the

property of the Corporate Debtor so as to defeat the claims of the

Financial Creditor. Thus, the I.A. Nos. 41 and 42 of 2020 were being

withdrawn with liberty to file fresh I.A. The Adjudicating Authority

recorded following reasons to suo motu restore CP/204/2019:

"6 The Financial Creditor made the Applications IA Nos. 41 and 42 of 2020 soon after the order dated 21.02.2020 allowing the IA No. 37 of 2020 was passed. The Order of disposal of the present Company Petition

Page 7| Company Appeal (AT) (Insolvency) No. 626 of 2020 and direction to the Financial Creditor to approach the IRP was dependent upon the order dated 12.02.2020 in the other Company Petition. That order dated 12.02.2020 was recalled consequent upon the permission to withdraw in IA No. 37 of 2020. What if, the Financial Creditor had not filed the restoration Applications in IA Nos. 41 and 42 of 2020! Would the Authority have sat upon the order dated 13.02.2020 thereby preventing the Financial Creditor from enforcement of its right available under section 7 of the Code. The answer to this question, in my considered opinion, would be no. The order dated 13.02.2020 was passed without any intervention from either of the parties. It was a suo motu order as the Authority felt that once CIRP had been initiated, no fruitful purpose would be served by keeping the present Company Petition pending. Every Applicant has the prerogative of prosecuting his application or withdrawing there from. Therefore, the memo dated 29.05.2020 could not be objected to by the Corporate Debtor. It would be for the Authority to consider it and pass appropriate orders. But by doing so, the allegations and insinuations raised as to the genuineness of the signature of the person swearing the verifying affidavit would not be washed away. Whether or not the signatures were genuine would come within the domain of the competent Criminal Court, forgery and perjury being punishable offences. In the same vein it would follow that no order of prosecution of the person verifying the affidavit can be ordered by this Authority. That would be outside the realm of the jurisdiction conferred on this Authority.

Page 8| Company Appeal (AT) (Insolvency) No. 626 of 2020 Therefore, I refrain from making any comment and passing any orders on the merits of IA Nos. 51 and 52 of 2020. That however would not preclude anybody including the Corporate Debtor to raise the matter of forgery and perjury before a competent forum. While allowing the withdrawal of IA Nos. 41 and 42 of 2020, I am not inclined to grant any liberty to the Applicant (FC) to file another application for the same prayer as in IA No. 41 of 2020. The Applicant (FC) having withdrawn from pressing the prayer therein could not be allowed to reagitate the matter by another application for whatever reasons, be it of substance or form or other technicalities. Therefore I am not inclined to grant the Applicant (FC) liberty to file another Application for the self-same prayer. Accordingly, I have no reason before me to allow withdrawal of the Application and at the same time grant liberty to file another. The withdrawal simpliciter can however be permitted. The reverifying affidavit has no bearing on the issues raised in the IA Nos. 51 and 52 of 2020. Therefore, it needs no consideration."

7. The Adjudicating Authority recorded further reasons that the

Financial Creditor could not be left without remedy as there was no

negligence on the part of the Financial Creditor, when the Company

Petition was disposed because the other Petition of M/s. Eshwar

Enterprises was admitted. The Adjudicating Authority recorded that the

Financial Creditor had a right to file the Company Petition and was

entitled to get the same decided on merits. Relying on the dicta that

Page 9| Company Appeal (AT) (Insolvency) No. 626 of 2020 procedure is the handmaiden of Justice the Adjudicating Authority

granted the relief suo motu.

8. The Adjudicating Authority observed that although the Applications

(I.A. No. 41 and 42 of 2020) are not pressed the Petitioner can not be left

without remedy and for reasons recorded restored the Company Petition

to file and relegated the same to date of hearing as on 11th February,

2020. The Corporate Petition was posted to 06.07.2020 for hearing and

further Orders.

9. With regard to the allegations raised of forgery and perjury in I.A.

Nos. 51 and 52 of 2020 we have seen (in above Paragraph 6 reproduced)

the Adjudicating Authority was of the view that it could not order

prosecution of the person verifying the affidavit. The Adjudicating

Authority further observed in Paragraph 11 of the Impugned Order that

by the Impugned Order the allegations of forgery and perjury shall not be

affected and the Corporate Debtor may approach appropriate authority

for redressal of grievances raised in the I.A. Nos. 51 and 52 of 2020. The

Adjudicating Authority observed, it would be venturing into jurisdiction

of Criminal Court. Thus, the Adjudicating Authority disposed of the I.A.

Nos. 51 and 52 of 2020 with observations that the Corporate Debtor may

approach appropriate forum for redressal.

P a g e 10 | Company Appeal (AT) (Insolvency) No. 626 of 2020 The Arguments in short

10. The Learned Counsel for the Appellant in the course of the

arguments before us submitted that the Interlocutory Applications

bearing I.A. Nos. 41 and 42 of 2020 were filed allegedly under the

signature of Mr. Praful Kumar Bafna for the Financial Creditor and the

Corporate Debtor found that the signatures were forged and fabricated.

I.A. No. 51 of 2020 was filed under Section 193 of Penal Code read with

Section 195 (1) (b) (i) of Cr. P.C. read with Section 340 of Cr. P.C. to hold

preliminary inquiry and initiate Criminal Proceedings for perjury and

fraud. I.A. No. 52 of 2020 was filed so as to call Mr. Praful Kumar Bafna

for cross-examination with regard to the signatures in I.A. Nos. 41 and

42 of 2020. I.A. No. 62 of 2020 (Annexure P8 Page 141) was filed with

prayer to place on record forensic document which was report dated 2nd

March, 2020. The Learned Counsel has stated that the Adjudicating

Authority erred in suo motu restoring CP/204/2019 permitting

withdrawal of forged applications bearing I.A. Nos. 41 and 42 of 2020.

According to him, the Adjudicating Authority also erred in directing the

Corporate Debtor to approach appropriate forum for filing complaint

without the Adjudicating Authority itself holding preliminary inquiry and

taking action under Section 340 of Cr. P.C. It is argued that in the matter

of "Narendra Kumar Srivastava Vs. State of Bihar" ((2019) 3 SCC 318) it

has been held that for offence under Section 193 of the Penal Code,

procedure under Section 340 read with Section 195 (1)(b)(i) of Cr. P.C.

P a g e 11 | Company Appeal (AT) (Insolvency) No. 626 of 2020 has to be followed. It is argued that submitting forged affidavit means to

giving forged evidence under Section 193 of IPC. For offence of perjury,

the Judicial Proceeding has to be initiated by the same Court and

according to the Learned Counsel complaints should have been filed after

holding preliminary inquiry.

11. Against this, the case put up by the Financial Creditor/Respondent

is that discrepancies in the signatures of the Interim Applications, if any,

were entirely inadvertent, accidental and due to sheer chance or

ignorance (see Written-Submissions of Respondent Diary No. 23599). The

Respondent has also filed Reply Diary No. 21564. The Argument of

Respondent/Financial Creditor is that Mr. Praful Bafna had filed Affidavit

dated 09th May, 2020 before the Adjudicating Authority reaffirming the

contents of I.A. No. 41 and 42 of 2020. It is argued that the Corporate

Debtor maliciously raised contentions that Mr. Praful Bafna's signatures

were forged and Criminal Proceedings under Section 340 of Cr. P.C.

should be initiated, with intention to delay the proceedings before the

Adjudicating Authority to avoid legal obligations to repay the Financial

Creditor's debt which is to the tune of Rs. 12.45 crores. It is argued that

the Corporate Debtor obtained unauthorised report from Private Forensic

Lab and filed the same under I.A. No. 62 of 2020. The Financial Creditor

claims that the said Report is fabricated in conspiracy. It is also claimed

that there are Judgments to show conviction can not be found solely on

the opinion furnished by the Handwriting Expert and Court is required to

P a g e 12 | Company Appeal (AT) (Insolvency) No. 626 of 2020 see whether there is direct or circumstantial evidence to corroborate the

opinion of the Handwriting Expert. It is also argued that evidence of

Handwriting Expert is only an opinion and is not conclusive. The

Financial Creditor claims that the Interim Applications bearing I.A. No.

41 and 42 of 2020 filed had true contents and factual background and

the Financial Creditor also filed affidavit reaffirming all the contents of

the Interim Applications and thus the disputes being raised by the

Corporate Debtor are malicious, baseless and frivolous. Referring to the

contents of I.A. Nos. 41 and 42 of 2020, it is argued that all the

averments and statements made therein were matters of facts and record

and there was no falsehood in the two Interim Applications. It is argued

that the Corporate Debtor has tried to sell off assets and stocks of the

Company during pendency of present proceedings and therefore the

Adjudicating Authority had passed orders on 2nd December, 2019

directing parties to maintain status-quo with regard to the assets and

property of the Company. According to the Learned Counsel for the

Financial Creditor there were no false averments or statements made in

the Interim Applications and Section 193 of IPC were not attracted. Even

regarding the allegation of forgery it is argued that the signatures on the

Interim Applications were genuine and true and Section 463 of Penal

Code is committed if someone makes false document as per Section 464

of Penal Code: It is argued that this being so, when the signatures on the

Applications are genuine and true, Section 464 of the Penal Code would

P a g e 13 | Company Appeal (AT) (Insolvency) No. 626 of 2020 not be attracted. It is also argued that to invoke Section 464 of Penal

Code false document has to be made with a dishonest and fraudulent

intention as was held in the matter of "Dr. Vimla Vs. Delhi Administration"

by Hon'ble Supreme Court in Criminal Appeal No. 213 of 1960 decided

on 29th November, 1962 (MANU/SC/0163/1962) (1963 SCR Supl. (2)

585). The Financial Creditor has submitted that to order prosecution of

perjury there must be prima facie case of deliberate falsehood and matter

of substance and Court has to be satisfied that there is reasonable

foundation for the charge. Mere inaccurate statement can not be basis

for charge of perjury. It is argued that I.A. Nos. 41 and 42 of 2020 were

filed with bona fide intention to restore CP/204/2019 and to restore

earlier order dated 2nd December, 2019. It is further argued that under

Section 340 of Cr. P.C. Court is not bound to make a complaint regarding

commission of offence referred in Section 195 (1) (b) (i) as the Section is

conditioned by the words "Court is of opinion that it is expedient in the

Interest of Justice" to initiate proceedings.

Suo Motu Restoring of C.P.(IB) 204/7/AMR/2019

12. Having heard Learned Counsel for parties and having gone through

the record as has been placed before us, firstly we look into the

Impugned Order suo motu restoring CP/204/2019. We have gone

through the reasons recorded by the Adjudicating Authority and part of

which we have reproduced above. There is no dispute with regard to the

P a g e 14 | Company Appeal (AT) (Insolvency) No. 626 of 2020 fact that the Financial Creditor had filed Annexure P3 (Page 62)

Application under Section 7 of IBC having No. CP/204/2019. It is not

disputed that Application under Section 9 of M/s. Eshwar Enterprises

which was also filed against the Corporate Debtor having

TCP/(IB)/119/9/AMR/2019 got admitted on 21st February, 2020 and

CIRP was initiated. The Proceeding at Page 84 of the Appeal Paper Book

shows that on 13th February, 2020 the Adjudicating Authority recorded

that TCP/(IB) No. 111/9/AMR/YP/2019 (In impugned order number

Recorded is "119" and there is some typing error) against same Corporate

Debtor has initiated CIRP and thus there was no need to keep the

present Petition CP/204/2019 pending and the Applicant can submit

claim before IRP and accordingly disposed the Company Petition. There is

no dispute that the other Proceeding initiated by M/s. Eshwar

Enterprises later on was settled and said proceeding was withdrawn.

Because of that, the Financial Creditor filed I.A. No. 41 and 42 of 2020

(Annexure P5 Page 88 to 99). (It is signatures in these applications

regarding which contentions are raised by the Corporate Debtor). We find

ourselves in agreement with the Adjudicating Authority that when the

other proceeding initiated by M/s. Eshwar Enterprises attracted suo

motu directions of the Adjudicating Authority to dispose of the

CP/204/2019, and when the proceeding of M/s. Eshwar Enterprises

later got withdrawn, the Financial Creditor did have a right to get its

application decided on merits. Considering controversy which has come

P a g e 15 | Company Appeal (AT) (Insolvency) No. 626 of 2020 up in the present matter, and the time it was consuming, if the Financial

Creditor which had also filed I.A. No. 69 of 2020 and another

unnumbered application with similar prayers as in I.A. Nos. 41 and 42 of

2020 and then sought withdrawal of I.A. No. 41 and 42 of 2020, there

was nothing wrong in the Adjudicating Authority adopting course it did.

Considering the disputes which had come up Adjudicating Authority

adopted the course of accepting of the memo (Annexure P10 Page 154)

and letting I.A. Nos. 41 and 42 of 2020 be withdrawn to cut short the

delays. It suo motu restored the CP/204/2019. Under Section 424 of the

Companies Act, 2013 (with amendment extending it to IBC, inserted by

Act 31 of 2016 with effect from 15th November, 2016) Adjudicating

Authority is guided by Principles of Natural Justice. The Adjudicating

Authority has ample Inherent powers even under Rule 11 of the National

Company Law Tribunals Rules, 2016 to make such Orders as may be

necessary for meeting ends of justice or to present abuse of the process

of the Tribunal. If the Adjudicating Authority in order to cut short the

delay which was being caused due to the controversies raised by the

Corporate Debtor and consequential abuse of process suo motu restored

CP/204/2019 we do not find that it committed any error. The Interest of

Justice and the facts and circumstances of the matter required such suo

motu action on the part of the Adjudicating Authority. We thus maintain

this part of the order of the Adjudicating Authority.

P a g e 16 | Company Appeal (AT) (Insolvency) No. 626 of 2020 Such action for Criminal Prosecution should have been taken?

13. The Adjudicating Authority in the impugned Order observed that

no order of prosecution of the person verifying the affidavit can be

ordered by the Authority and it was outside the realm of jurisdiction of

the Authority. For such reasoning, the Adjudicating Authority without

going into the merits of I.A. No. 51 and 52 of 2020 proceeded to observe

that the Corporate Debtor may approach the appropriate forum for

redressal. It observed that, it would be venturing into jurisdiction of

Criminal Court if it went into I.A. No. 51 and 52 of 2020.

With regard to these observations and findings, reference needs to

be made to Section 424 of the Companies Act, 2013 which was amended

by Act 31 of 2016 w.e.f. 15.11.2016 and reference to IBC was inserted.

Section 424 of the Companies Act, 2013 reads as under (amended

Section 424):

"424. Procedure Before Tribunal and Appellate Tribunal.- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice, and, subject to the other provisions of this Act 1[or of the Insolvency and Bankruptcy Code, 2016] and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.

P a g e 17 | Company Appeal (AT) (Insolvency) No. 626 of 2020 (2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act 1[or under the Insolvency and Bankruptcy Code, 2016], the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908.) while trying a suit in respect of the following matters, namely:--

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office;

(e) issuing commissions for the examination of witnesses or documents;

(f) dismissing a representation for default or deciding it ex parte;

(g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and

(h) any other matter which may be prescribed.

(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send for execution of its orders to the court within the local limits of whose jurisdiction,--

P a g e 18 | Company Appeal (AT) (Insolvency) No. 626 of 2020

(a) in the case of an order against a company, the registered office of the company is situate; or

(b) in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain.

(4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code, and the Tribunal and the Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)."

(Emphasis Supplied)

14. Now Section 195 of IPC requires reference. The same reads as

follows:

"(1) No Court shall take cognizance-

(a) (i) of any offence punishable under sections 172 to 188 (both inclusive) of the Indian Penal Code (45 of 1860 ), or

(ii) of any abetment of, or attempt to commit, such offence, or

(iii) of any criminal conspiracy to commit such offence, except on the complaint in writing of the public servant concerned or of some other public servant to whom he is administratively subordinate;

(b) (i) of any offence punishable under any of the following sections of the Indian Penal Code (45 of 1860 ), namely, sections 193 to 196 (both inclusive), 199, 200, 205 to 211 (both inclusive) and 228, when such offence is alleged to

P a g e 19 | Company Appeal (AT) (Insolvency) No. 626 of 2020 have been committed in, or in relation to, any proceeding in any Court, or

(ii) of any offence described in section 463, or punishable under section 471, section 475 or section 476, of the said Code, when such offence is alleged to have been committed in respect of a document produced or given in evidence in a proceeding in any Court, or

(iii) of any criminal conspiracy to commit, or attempt to commit, or the abetment of, any offence specified in sub-

clause (i) or sub- clause (ii), 29[except on the complaint in writing of that Court, or of some other Court to which that Court is subordinate.] (2) Where a complaint has been made by a public servant under clause (a) of sub- section (1) any authority to which he is administratively subordinate may order the withdrawal of the complaint and send a copy of such order to the Court; and upon its receipt by the Court, no further proceedings shall be taken on the complaint:

Provided that no such withdrawal shall be ordered if the trial in the Court of first instance has been concluded.

(3) In clause (b) of sub- section (1), the term" Court" means a Civil, Revenue or Criminal Court, and includes a tribunal constituted by or under a Central, Provincial or State Act if declared by that Act to be a Court for the purposes of this section.

(4) For the purposes of clause (b) of sub- section (1), a Court shall be deemed to be subordinate to the Court to which appeals ordinarily lie from the appealable decrees or sentences of such former Court, or in the case of a Civil Court from whose decrees no appeal ordinarily lies, to the

P a g e 20 | Company Appeal (AT) (Insolvency) No. 626 of 2020 principal Court having ordinary original civil jurisdiction within whose local jurisdiction such Civil Court in situate:

Provided that-

(a) where appeals lie to more than one Court, the Appellate Court of inferior jurisdiction shall be the Court to which such Court shall be deemed to be subordinate;

(b) where appeals lie to a Civil and also to a Revenue Court, such Court shall be deemed to be subordinate to the Civil or Revenue Court according to the nature of the case or proceeding in connection with which the offence is alleged to have been committed."

15. Section 340 of Cr. P.C. is also relevant and is as follows:

"340. (1) When, upon an application made to it in this behalf or otherwise, any Court is of opinion that it is expedient in the interests of justice that an inquiry should be made into any offence referred to in clause (b) of sub- section (1) of section 195, which appears to have been committed in or in relation to a proceeding in that Court or, as the case may be, in respect of a document produced or given in evidence in a proceeding in that Court, such Court may, after such preliminary inquiry, if any, as it thinks necessary,-

(a) record a finding to that effect;

(b) make a complaint thereof in writing;

(c) send it to a Magistrate of the first class having jurisdiction;

(d) take sufficient security for the appearance of the accused before such Magistrate, or if the alleged offence is non- bailable and the Court thinks it necessary so to do, send the accused in custody to such Magistrate; and

P a g e 21 | Company Appeal (AT) (Insolvency) No. 626 of 2020

(e) bind over any person to appear and give evidence before such Magistrate.

(2) The power conferred on a Court by sub- section (1) in respect of an offence may, in any case where that Court has neither made a complaint under sub- section (1) in respect of that offence nor rejected an application for the making of such complaint, be exercised by the Court to which such former Court is subordinate within the meaning of sub- section (4) of section 195.

(3) A complaint made under this section shall be signed,-

(a) where the Court making the complaint is a High Court, by such officer of the Court as the Court may appoint;

*[(b) in any other case, by the presiding officer of the Court, or by such officer of the Court as the Court may authorise in writing in this behalf.]

(4) In this section," Court" has the same meaning as in section 195."

16. As the Corporate Debtor is harping on Section 193 of Penal Code the

same also be referred which is as under:

"193. Punishment for false evidence.--Whoever intentionally gives false evidence in any stage of a judicial proceeding, or fabricates false evidence for the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine;

P a g e 22 | Company Appeal (AT) (Insolvency) No. 626 of 2020 and whoever intentionally gives or fabricates false evidence in any other case, shall be punished with imprisonment of either description for a term which may extend to three years, and shall also be liable to fine.

Section 193 of Penal Code has three explanations which are not

necessary to reproduce but can be kept in the view.

17. Section 195 (3) of Cr. P.C. referred above shows that the term "Court"

used in the Section includes the Tribunal constituted by or under Central,

Provincial or State Act if declared by that Act to be a Court for the purposes

of this Section. We have already seen Section 424 which in Sub-Section 4

has included the National Company Law Tribunal and National Company

Law Appellant Tribunal under the Companies Act and proceedings before

these Tribunals have to be deemed to be Judicial Proceedings within the

meaning of Section 193 and 228 and for the purposes of Section 196 of the

Indian Penal Code and the NCLT this Tribunal shall be deemed to be Civil

Court for the purposes of Section 195 and Chapter XXVI of Cr. P.C. Chapter

XXVI contains Section 340 of Cr. P.C. As per Section 5 (1) of IBC the

"Adjudicating Authority" for the purposes of Part-II of IBC, means National

Company Law Tribunal constituted under Section 408 of the Companies Act,

2013. Under Section 61 of IBC any person aggrieved by the order of the

Adjudicating Authority may prefer an Appeal to National Company Law

Appellate Tribunal. These Provisions make it clear that Adjudicating

Authority was not right in its observations that it did not have jurisdiction to

order Prosecution. In our view in appropriate case, the Adjudicating

P a g e 23 | Company Appeal (AT) (Insolvency) No. 626 of 2020 Authority has powers to act in terms of Section 340 of Cr. P.C. read with

Section 195 of Cr. P.C. Under Section 340 of Cr. P.C. the Adjudicating

Authority can hold preliminary inquiry if it is "of opinion that it is expedient

in the Interest of Justice that an inquiry should be made" into the any

offence referred in Clause 'b' of Sub-Section 1 of Section 195, which appears

to have been committed in or in relation to a proceeding in that Court or, as

the case may be, in respect of a document produced or given in evidence in a

proceeding in that Court, i.e.-Adjudicating Authority, here.

18. The Learned Counsel for the Appellant/Corporate Debtor has argued

that without Adjudicating Authority holding preliminary inquiry and going

through the procedure as prescribed under Section 340, it is not possible for

the Appellant to file private complaint before any Magistrate for the Act

complained as there is bar created under Section 195 of Cr. P.C. and no

Court will take cognizance. The Learned Counsel has relied on various

Judgments. We do not think it is necessary to refer to the various

Judgments as it is apparent to us that no Court can take cognizance of

offence punishable under Sections as mentioned in Section 195(1)(b)(i)

except on complaint in writing by the Court concerned. Reference to

Judgment in the matter of "Narendra Kumar Srivastava Vs. State of Bihar"

(2019) 3 SCC 318 itself makes the points clear which parties are raising

against each other. In the matter of "Narendra Kumar Srivastava" Contempt

case was dropped by High Court on the basis of compliance shown by

Respondents in show-cause affidavit. Appellant therein filed Private

Complaint before Assistant Chief Judicial Magistrate alleging that because of

P a g e 24 | Company Appeal (AT) (Insolvency) No. 626 of 2020 the false and wrong statement made by Respondents in their show-cause

affidavit, High Court dropped Contempt Case. Magistrate took cognizance

but in Revision, High Court set aside the Order. Appeal was filed to Supreme

Court. Hon'ble Supreme Court maintained Order of High Court inter alia

observing:

"17. Section 340 CrPC makes it clear that a prosecution under this section can be initiated only by the sanction of the court under whose proceedings an offence referred to in Section 195 (1) (b) has allegedly been committed. The object of this section is to ascertain whether any offence affecting administration of justice has been committed in relation to any document produced or given in evidence in court during the time when the document or evidence was in custodia legis and whether it is also expedient in the interest of justice to take such action. The court shall not only consider prima facie case but also see whether it is in or against public interest to allow a criminal proceeding to be instituted.

18. This Court in Chajoo Ram V. Radhey Shyam6 , held that the prosecution under Section 195 CrPC could be initiated only by the sanction of the court and only if the same appears to be deliberate and conscious. It emphatically held as under: (SCC p. 779, para 7) "7. The prosecution for perjury should be sanctioned by courts only in those cases where the perjury appears to be deliberate and conscious and the conviction is reasonably probable or likely. No doubt giving of false evidence and filing false affidavits is an evil which must be effectively curbed with a strong hand but to start prosecution for perjury too readily

P a g e 25 | Company Appeal (AT) (Insolvency) No. 626 of 2020 and too frequently without due care and caution and on inconclusive and doubtful material defeats its very purpose. Prosecution should be ordered when it is considered expedient in the interests of justice to punish the delinquent and not merely because there is some inaccuracy in the statement which may be innocent or immaterial. There must be prima facie case of deliberate falsehood on a matter of substance and the court should be satisfied that there is reasonable foundation for the charge."

19. In Santokh Singh V. Izhar Hussain7, this Court has held that every incorrect or false statement does not make it incumbent on the court to order prosecution. The court has to exercise judicial discretion in the light of all the relevant circumstances when it determines the question of expediency. The court orders prosecution in the larger interest of the administration of justice and not to gratify the feelings or personal revenge or vindictiveness or to serve the ends of a private party. Too frequent prosecutions for such offences tend to defeat its very object. It is only in glaring cases of deliberate falsehood where conviction is highly likely that the court should direct prosecution.

6 (1971) 1 SCC 774 : 1971 SCC (Cri) 331

7. (1973) 2 SCC 406 : 1973 SCC (Cri) 828"

(Emphasis Supplied)

19. The present Appeal has been filed being aggrieved by the orders of the

Adjudicating Authority and the Appellant has sought setting aside of the

impugned Orders and prayed that we may pass orders as deemed fit. The

Appellant's grievance is that the Adjudicating Authority should have held

P a g e 26 | Company Appeal (AT) (Insolvency) No. 626 of 2020 preliminary inquiry and directed prosecution. We look into this grievance

keeping above Judgment of Hon'ble Supreme Court in view.

20. The Appellant/Corporate Debtor as per provisions referred and case

law requires to satisfy us that "it is expedient in the Interest of Justice that

an inquiry should be made".

Broadly putting the facts of the present matter in nutshell when the

CP/204/2019 of the Financial Creditor was disposed asking the Financial

Creditor to go to the IRP in the matter of M/s. Eshwar Enterprises, and later

that other matter got settled, the natural corollary was that the Financial

Creditor was entitle to claim in interest of justice that the Adjudicating

Authority restore the CP/204/2019 as well as Interim Orders which had

been passed earlier in its Petition. For this Financial Creditor filed I.A. Nos.

41 and 42 of 2020. It is not the argument before us that the contents or

averments made or statements made in the two Interim Applications were

false. The whole argument is centred on the signatures which were put below

the I.As. The Corporate Debtor is going on repeating and insisting that the

concerned signatures are not of Mr. Praful Prakash Bafna.

21. In the Appeal, copy of CP/204/2019 is filed as Annexure P3 page 62.

The copy of General Affidavit Verifying Petition is at Page 79. Copy of Board

Resolution signed by Director Y.P. Bafna Authorizing Mr. Praful Prakash

Bafna is at Page 80. The Appellant is comparing signatures of the authorised

signatory on the General Affidavit Verifying Petition (Page 79) and

Vakalatnama (Page 82) with the signatures below (Annexure P5 - Page 88 to

P a g e 27 | Company Appeal (AT) (Insolvency) No. 626 of 2020

101) I.A. No. 41 of 2020 and I.A. No. 42 of 2020. On various pages of the two

I.As the rubber stamps of the "Director/Authorized Signatory" (as on

Authorization, Company Petition and Vakalatnama) are put, and signed. The

affidavits filed in support are notorised.

22. The Corporate Debtor is insisting only with regard to the signatures on

I.A. Nos. 41 and 42 of 2020. The Financial Creditor filed I.A. No. 69 of 2020

(Annexure P9 Page 148) which shows that the Financial Creditor opposed

the I.A. Nos. 51 and 52 of 2020 of the Corporate Debtor as well as the I.A.

No. 62 of 2020 (Annexure P8) that the same was filed to create procedural

and technical hurdles and to divert attention of the Tribunal making false

and baseless allegations against the Financial Creditor. The Application

sought to restore the CP/204/2019 and the earlier order dated 2nd

December, 2019. Similar averments were made in subsequent Memo

(Annexure P10 page 154) and Financial Creditor claimed that with regard to

I.A Nos. 41 and 42 of 2020 wrongful contentions issues are raised causing

unreasonable delay and deviations and that to expedite hearing of the

Petition it wants to withdraw the I.A. Nos. 41 and 42 of 2020 with liberty to

file fresh Interim Applications recapitulating the contents of the Interim

Applications.

23. The I.A. No. 62 of 2020 (Annexure P8) shows that the Corporate

Debtor acted on its own to get forensic report. Paragraphs 6 and 7 of the said

Annexure P8 may be reproduced which read as under:

P a g e 28 | Company Appeal (AT) (Insolvency) No. 626 of 2020 "6 It is respectfully submitted that, the signatures of Mr. Praful Prakash Bafna on the interim applications are different from signatures of Mr. Praful Prakash Bafna in the present Company Petition. The signatures are forged and made to believe that they are signed by Mr. Praful Bafna who allegedly came down to Hyderabad on 21.02.2020. The copy of Company Petition and Interim Applications I.A. No. 41 of 2020 and I.A. No. 42 of 2020 are filed herewith as Annexure-2, Annexure -3 and Annexure -4. The Comparative Table of signatures in Company Petition and forged signatures in Interim Applications IA No. 41 of 2020 and 42 of 2020 are filed herewith as Annexure A-5.

7. It is respectfully submitted that the Corporate Debtor has vide Letter dated 27.02.2020 submitted a request with Truth Labs Forensic Services to verify, analyze and issue a forensic report on the signatures of Mr. Praful Prakash Bafna on behalf of the Financial Creditor in the vakalatnama filed in the present company petition and I.A. No. 41 of 2020, I.A. No. 42 of 2020 and Business Management Agreement dated 29.12.2018. A copy of the Letter dated 27.02.2020 is filed herewith as -Annexure -

6."

24. The Financial Creditor has filed Reply before us (Diary No. 21564) and

stated in Reply Paragraph 6 as under:

"6. The contents of sub-para 10 are denied as false and baseless. It is expressly denied that any false statement was submitted by the Respondent by way of IA Nos. 41 and 42. There is no offence committed by the Respondent by merely requesting the Hon'ble Tribunal by

P a g e 29 | Company Appeal (AT) (Insolvency) No. 626 of 2020 way of the Interim Applications under question to re- instate the proceedings under C (I.B) 204/7/AMR/2019 in light of the fact that the CIRP has been cancelled by the Hon'ble Tribunal's order dated 21.02.2020 in CP (I.B)No. 111/9/AMR of 2019. Notwithstanding the fact that the Appellant has admittedly stated in its pleadings that Mr. Bafna was present in Hyderabad at the time of filing IA Nos. 41 and 42, the Respondent also filed an affidavit reaffirming the contents of IA Nos. 41 and 42 and has thereafter withdrawn the IA Nos. 41 and 42. It is submitted that a purported difference in a signature does not mean that it is fraud or perjury. Signatures of a person do vary at different points of time. It is also an established rule of law that a defect in regard to the signature on a plaint is a technical irregularity relating to matters of procedure which can be cured at any time irrespective of the limitation or other procedural hurdles. These unwarranted and fictitious accusations are a feeble attempt by the Appellant to mislead the Hon'ble Appellate Tribunal and create hurdles to delay the progress of CP (I.B) 204/7/AMR of 2019 pending before the Hon'ble Tribunal. It is also not the case of the Appellant that any unfair advantage or a dishonest gain or profit has been made by the Respondent in not deliberately appending his signatures on the aforementioned applications. The Offences complained of by the Appellant necessarily entail mensrea, in the absence of an intent the offence is not made out. Moreover, no unfair advantage or dishonest gain has been made by the Respondent by not reproducing the exact same signatures on the aforementioned

P a g e 30 | Company Appeal (AT) (Insolvency) No. 626 of 2020 applications. Furthermore, no injury, loss, harm or damage whether pecuniary or otherwise has been caused to the Appellants.

25. We find substance in the defence taken by the Financial Creditor to

the I.As 51 and 52 of 2020. The Appellant/Corporate Debtor has not shown

us that the Financial Creditor would have any advantage or benefit of

putting false signatures. The prayer of I.A. No 51 of 2020 (The Appeal Page

118) claims that the I.A. Nos. 41 and 42 of 2020 are not signed by the

authorized signatory Mr. Praful Prakash Bafna and prayer is to initiate

criminal proceedings against Mr. Praful Prakash Bafna under Section 340

read with Section 195 of Cr. P.C. and Section 193 of the Penal Code. If Mr.

Praful Prakash Bafna has not signed his prosecution is being sought. The

Corporate Debtor appears to have bulldozed when without asking the

Adjudicating Authority to pick and send the admitted and disputed

signatures for report of Handwriting Expert, on its own it sent documents

which were in its possession and then brandished the said Report filing I.A.

No. 62 of 2020 asking the Adjudicating Authority to take it on record. What

the conclusion of that Report can be seen from Paragraph 8 of I.A. No. 62 of

2020 (Annexure P8 Page 141 at 144). The Corporate Debtor claimed that the

Report dated 2nd March, 2020 conclusively found that the signature of Mr.

Praful Prakash Bafna in I.A. Nos. 41 and 42 of 2020 were not "naturally

executed but they must have traced/transplanted/copy-pasted". When the

admitted and disputed signatures were not sent through the Adjudicating

Authority, and Corporate Debtor sent copies of documents it had, such

P a g e 31 | Company Appeal (AT) (Insolvency) No. 626 of 2020 report could naturally be expected. Copy of the Report has not been placed

before us.

26. We are of the view that even without going into the merit whether or

not, the signatures are matching, the Appellant has not shown that the

Financial Creditor or Mr. Praful Prakash Bafna the authorized Signatory had

anything to gain by authorized signatory not signing. The contents of the

I.As were false is also not the case. The Appellant/Corporate Debtor has not

prima facie shown any intention or mensrea on the part of the Financial

Creditor in this regard. Section 193 of Penal Code makes fabricating of false

evidence for the purpose of being used in any stage of judicial proceeding

punishable. Section 192 of Penal Code requires intention as specified therein

to term the act as "fabricating false evidence". No prima facie material is

shown by Corporate Debtor that by Praful Bafna himself not signing, the

Adjudicating Authority would "entertain an erroneous opinion touching any

point material" to the result of the proceeding. (This is not to be taken as any

finding whether or not he signed. We are only seeking material for "opinion"

as required under Section 340 of Cr.P.C.) In the facts of the matter it does

not appear to us that it is expedient in the Interest of Justice that an inquiry

should be made under Section 340 of Cr. P.C. No such case was made out

before the Adjudicating Authority and the Appellant has not convinced us

that Interest of Justice required an inquiry to be held and so the order of

Adjudicating Authority should be interfered with.

P a g e 32 | Company Appeal (AT) (Insolvency) No. 626 of 2020

27. We have taken note of the relevant circumstances and the reasons for

the Financial Creditor to move I.A. Nos. 41 and 42 of 2020 and the

controversy raised by the Corporate Debtor and it appears to us that there is

an element of frivolity in the disputes being raised by the Corporate Debtor.

From the facts of the matter, we are unable to form opinion that it is

expedient in the interest of justice that inquiry as sought by the Appellant

should be made.

28. The Appellant is right in claiming that the Adjudicating Authority

could not have directed the Appellant to approach appropriate forum for

redressal and that on this count it had jurisdiction under Section 340 of Cr.

P.C. However Appellant fails to convince us that facts and circumstance of

the matter required Adjudication Authority to form opinion that it is

expedient in the interest of justice that an inquiry should be made into

alleged offence. It appears to us that the observations made by the

Adjudicating Authority regarding jurisdiction may have to be modified.

29. For the above reasons, we pass the following Order:

i. The Order of the Adjudicating Authority dismissing I.A. Nos. 41 and 42 of

2020 as not pressed is maintained.

ii. The observations of the Adjudicating Authority that the Corporate Debtor

may approach appropriate forum for redressal of I.A. Nos. 51 and 52 of 2020

and directions in that regard are set aside.

P a g e 33 | Company Appeal (AT) (Insolvency) No. 626 of 2020 iii. I.A. No. 51 and 52 of 2020 shall stand disposed as it does not appear

that it is expedient in the Interest of Justice to hold preliminary inquiry

under Section 340 of Cr. P.C.

iv. Disposal of I.A. No. 62 of 2020 as directed by the Adjudicating Authority

is maintained.

v. The restoration of the CP (I.B)/204/7/AMR/2019 and further directions

in that regard are maintained.

The Appeal is disposed accordingly. No costs.

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

[V.P. Singh] Member (Technical)

New Delhi Basant B.

P a g e 34 | Company Appeal (AT) (Insolvency) No. 626 of 2020