Lyka Labs Limited vs Modi Lifecare Industries Limited

IN THE MATTER OF: Lyka Labs Ltd. ...Appellant

Versus

Modi Lifecare Industries Ltd. ...Respondent

Present: For Appellant : Mr. Gaurav Mitra & Mr. Vidhi Nigam, Advocates.

For Respondent : Mr. Akshay Sharma, Advocate.

ORDER

16.03.2023 This appeal is directed against the order dated

20.11.2019 passed by the 'Adjudicating Authority' (National Company Law

Tribunal, Ahmedabad Bench, Ahmedabad) by which an application filed

under Section 9 of the Insolvency & Bankruptcy Code, 2016 (in short 'Code')

bearing C.P. (IB) 141/9/NCLT/AHM/2018 has been dismissed.

2. At the outset, Counsel for the Appellant has submitted that the

'impugned order' is totally bereft of reasons and it is thus a non-speaking

order. He has drawn our attention to Para 14 of the 'impugned order' in

which the following observation has been made :-

"Considering all the facts, materials available on record, arguments heard and the observations made in the point

Company Appeal (AT)(Insolvency) No. 168 of 2020 2

no. 12, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6 & 12.7, this application is hereby rejected."

3. He has then referred to Paragraph Nos. 12.1 to 12.7 of the 'impugned

order', which read as under:-

"12. It is observed that :-

12.1 The Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 is filed on 08.03.2018 for the default amount of Rs. 5,95,04,537.00, which was due on account of royalty fees payable by the Corporate Debtor to the Petition as per the Technical Guidance Agreement dated 14.09.2012.

12.2 The Technical Guidance Agreement dated 14.09.2012 is signed by the Petition and the Respondent, containing 11 articles including the article no. 7, which refers to in the event of any dispute, as discussed supra, the parties may go first to the Arbitrator for settlement of dispute.

12.3 The Petitioner has issued the demand notice for Rs.

5,95,04,537/- to the Respondent on 10.10.2017 in form-3 to the Corporate Debtor Company, before approaching the Arbitrator for settlement, as per the Technical Guidance Agreement.

12.4 Pre-existing disputes is established when the Petitioner raised a demand of Rs. 84,72,740/- on 25.07.2017, which was replied by the Respondent on 31.07.2017 submitting that the said demand is unjustified. Thereafter, Petitioner vide letter dtd:

Company Appeal (AT)(Insolvency) No. 168 of 2020 3

14.09.2017, after a gap of 11/2 months, again raised a demand of Rs. 5,95,04,537/-, which was also replied by the Respondent company on 30.09.2017 and questioned the tow different amount of demand arrived at, submitting that the said demands are improper and unjustified.

12.5 The Petitioner instructed the Respondent vide its letter dtd: 18.5.2017 to use the residual packing material with Lyka's name or logo printed on it on or before 30.09.2017, but the Respondent did not agree to that instruction. The Respondent has rather filed a suit before City Civil Court in the matter.

12.6 The Petitioner has not disclosed the existence of pre-dispute in the form part V of the Application on the date of filing of the Petition for initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency & Bankruptcy Code.

12.7 The entire claim has been made on the basis of the Technical Guidance Agreement and the Petitioner has not enclosed any Invoice in support of their claim. As per the Article 7 of the Technical Guidance Agreement, which is the arbitration agreement between the parties, where both the parties had agreed to first refer the disputes to the Arbitrator for adjudication, which has not been followed. The Petitioner has preferred application before this Adjudicating Authority, ignoring the mechanism available in Technical Guidance Agreement."

4. It is contended that in paragraph nos. 12.2 and 12.7 the Corporate

Debtor has taken a plea that because of Article 7 of the Technical Guidance

Company Appeal (AT)(Insolvency) No. 168 of 2020 4

Agreement (in short 'Agreement') dated 14.09.2012. The parties had to first

refer to the arbitrator before taking their dispute to any court of law. It is

further submitted that in Para-12.4 the Corporate Debtor has referred to

difference in amount of demand raised on 25.07.2017 of Rs. 84,72,740/-

and on 14.09.2017 of Rs. 5,95,04,537/-. It is further submitted that in Para

12.5 the Corporate Debtor has referred to the filing of the Civil Suit at the

instance of the Appellant. However, it is submitted that none of the

contentions noticed in the pleadings of the Corporate Debtor in paragraph

12, divided in 7 sub-paragraphs, has been discussed at all in Para- 14 while

rejecting the application rather the Tribunal has said that the "observations

made in the point no. 12, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6 & 12.7" which are

otherwise not the observations of the Corporate Debtor but its pleadings.

5. It is further submitted that the Tribunal should have taken into

consideration at least the defence of the Appellant in regard to the various

issues raised in the entire Para-12 but nothing has been taken into

consideration and the application has been rejected without any reasons.

6. It is thus submitted that in such circumstances, the 'impugned order'

may be set aside and the matter may be remanded back to the Tribunal for

deciding it afresh by giving reasons for at least agreeing with the pleadings

much less the evidence led by the Respondent after taking into

consideration evidence led by the Appellant for the purpose of establishing

that the Appellant is entitled not only to maintain the application under

Section 9 but also the resolution of an amount which is stated to be due.

Company Appeal (AT)(Insolvency) No. 168 of 2020 5

7. It is also submitted that the speaking order is the heart and soul of

the principle of natural justice which has to be followed by the Tribunal

being the 'Adjudicating Authority'. He has also relied upon a decision of the

Supreme Court in the case of State of Orissa vs. Binapani Dei & Ors.

[(1967) 2 SCR 625] to contend that not only principle of natural justice has

to be followed in the judicial matters but also where an administrative order

is passed effecting a person in his civil life.

8. On the other hand, while supporting the 'impugned order', Counsel for

the Respondent has submitted that there is no error as the finding has

rightly been recorded on the basis of the evidence which has been produced

before the Tribunal.

9. We have heard Counsel for the Parties and after perusal of record are

of the considered opinion that the 'impugned order' is sans reasons and is

an example of violation of principle of natural justice because the Tribunal

was obliged at least to give reasons in its order to agree with the contentions

of the Corporate Debtor recorded in Para-12 if not the reasons for not being

satisfied with the reasons given by the Appellant in support of the

maintability and success of its application.

10. Therefore, the present appeal is hereby allowed. The 'impugned order'

is set aside. The matter is remanded back to the 'Adjudicating Authority' to

decide it afresh by taking into consideration the pleadings and the evidences

Company Appeal (AT)(Insolvency) No. 168 of 2020 6

of the Appellant and pleadings and the evidence of the Respondent and then

to pass a well speaking order in accordance with law.

11. The parties shall appear before the Tribunal on 17th April, 2023.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) Sim/RR

Company Appeal (AT)(Insolvency) No. 168 of 2020