M/S Gopalpur Ports Ltd vs M/S Sri Avantika Contractors Ltd

M/s Gopalpur Ports Ltd. Gopalpur Port, Arjeepalli, Via Chatrapur Chatrapur Ganjam, Odisha - 761 020 Through Authorised Representative ...Appellant

Versus

M/s Sri Avantika Contractor (I) Ltd. 610-B, Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad, Tlangana - 500 016. ...Respondent

For Appellant: Mr. Arun Kathpalia, Sr. Advocate with Mr. Rajnish Sinha, Ms. Shreya Kohli, Ms. Akshaya Ganpath and Ms. Kauser Husain, Advocates. For Respondents: Mr. Ajit Kumar Sinha, Sr. Advocate with Mr. Kumar Anurag Singh and Zain A. Khan, Advocates.

ORDER

(Virtual Mode)

23.07.2021: This Appeal has been filed by the Appellant - Corporate Debtor

against the impugned order passed by the Adjudicating Authority (National

Company Law Tribunal), Cuttack Bench, Cuttack in CP (IB) No. 159/CTB/2019.

The impugned order reads as under:

"ORDER

Ld. Counsels for the petitioner and respondent are present. The matter has been part heard. Ld. Counsel for the respondent shall file profit & loss account and Balance sheet of the company 2

for the year 2011-2012 to till date. Post the matter on 27.03.2020 for further hearing."

2. The Appellant claims that the Application under Section 9 of Insolvency and

Bankruptcy Code, 2016 (for short 'IBC') has been filed although there were pre-

existing disputes and even a suit was pending since 2016 and when the Application

under Section 9 was being heard, the present order came to be passed. It is argued

by Learned Senior Counsel for the Appellant that if document at page 410 of the

Appeal is perused, it can be seen that the Operational Creditor had in February,

2020 written to various authorities including the Hon'ble Prime Minister, wherein

in Para 13, it is categorically stated that although the contingent liability was

existing, the same was not shown in the Annual Return and thus, the Operational

Creditor knows that the Balance Sheets do not reflect such contingent liability but

still the present impugned order is passed. Argument is that if such order is

passed, it is in the nature of directions for Discovery of Documents under Order XI

Rule 12 of Code of Civil Procedure 1908 (CPC in short) and in that case if Section

424 of Companies Act, 2013 is perused, it would be necessary that there should

be an application and there should be order on the same and that the procedure

as prescribed under Order XI Rule 12 with regard to Discovery of Documents

should have been followed. It is argued that no such application was filed and that

it would be necessary that the Adjudicating Authority should record reasons for

passing of such orders for discovery. It is stated that the impugned order which

has been passed, is not a speaking order and apart from that it is stated that the

Company Appeal (AT) (Insolvency) No. 674 of 2020 3

documents are accessible to the Operational Creditor as can be seen from the

notices sent to the various authorities including Hon'ble Prime Minister. It is

argued that there are documents on record showing that there are disputes

pending between the parties since 2016. The Learned Senior Counsel relied on the

judgment in the matter of "Assistant Commissioner vs Shukla & Brothers", 2010 4

SCC 785. Referring to the said judgment, the Learned Senior Counsel for the

Appellant vehemently submits that the recording of reasons is mandated by the

Hon'ble Supreme Court and order which is bereft of reasons should not be

maintained. The Learned Senior Counsel has further referred to judgments of

Hon'ble High Court of Gujarat to submit that giving reasons for orders in the nature

of discovery is also necessary under the provisions of CPC.

3. The Learned Senior Counsel submits that Rule 11 of NCLT Rules could not

be relied on where there are specific provisions to be followed.

4. The Learned Counsel for the Respondent - Operational Creditor referred to

synopsis of the Appeal Para 15(e) to submit that the Appellant itself has accepted

that the documents concerned directed to be produced are in public domain and

are accessible. Learned Counsel for the Respondent submits that there was no

reason for the Appellant to carry the appeal only because the Adjudicating

Authority had given directions to produce the Balance Sheets. Learned Counsel

further referred Para 7.19 of the Appeal to submit that the Appellant is relying on

the notice dated 24th February, 2020 that the Annual Returns do not reflect the

Company Appeal (AT) (Insolvency) No. 674 of 2020 4

concerned contingent liability and so the Appellant really had no grievance to file

the same.

5. Having heard Learned Counsel for both sides and having perused the record,

it needs to be mentioned that the Application under Section 9 of IBC has been

pending before the Adjudicating Authority since December, 2019. Keeping in view

Section 9 of the IBC, it was required to be ordered upon in 14 days with Limited

Notice to the Corporate Debtor. When above interim order was passed, the matter

has been carried to this Tribunal and on 10th August, 2020 relying on the judgment

of 'V. Padmakumar Vs. Stressed Assets Stabilisation Fund & Anr.', the appeal was

sought to be entertained. This Tribunal had then granted stay to the hearing before

the Adjudicating Authority. The Learned Counsel for the Respondent is submitting

that subsequently judgment relied on of this Tribunal has been set aside by the

Hon'ble Supreme Court in 'Assets Reconstruction Company (India) Ltd. vs. Bishal

Jaiswal & Anr', Civil Appeal No. 323 of 2021, vide judgment dated 15th April, 2021.

6. Sub-sections (1) and (2) of Section 424 of Companies Act, 2013, which is

relevant may be reproduced:

"(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 (5 of 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 (31 of

Company Appeal (AT) (Insolvency) No. 674 of 2020 5

2016)] and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.

(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 (31 of 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 (1 of 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."

Company Appeal (AT) (Insolvency) No. 674 of 2020 6

7. It is clear from the above that the Adjudicating Authority which is basically

dealing with the matter in summary manner, is not bound by the procedure laid

down by the Code of Civil Procedure but shall be guided by the principles of natural

justice and can regulate its own procedure. Even if Order XI Rule 12 of CPC may

be prescribing that any party may without filing affidavit apply to the Court for

Discovery of Documents, the same does not stop the Adjudicating Authority from

regulating own procedure reading sub-section (2) with sub-section (1) if the

Adjudicating Authority in the course of arguments finds that it needs to peruse

particular documents. In the present matter the Adjudicating Authority was not

dealing with any application filed or sought by the Operational Creditor but while

hearing the arguments in the matter which was on pre-admission stage and not

yet admitted, the Adjudicating Authority found it necessary to go through the Profit

and Loss account and Balance Sheets of the Company. As such it passed the

impugned order. The same can be even said to be within Rule 11 of the NCLT

Rules. At interlocutory stage, while hearing the parties, the Adjudicating Authority

required to peruse the documents and passed the impugned order. In this view of

the matter, we do not find that there was any reason to carry the present Appeal.

The Application under Section 9 of IBC has been pending for long and against the

spirit of provisions of IBC. The delay must be affecting the maximization of value

of assets. The merits of the application under Section 9 have yet not been

adjudicated and decided and so we are not entering in the issue whether there was

a pre-existing dispute.

Company Appeal (AT) (Insolvency) No. 674 of 2020 7

8. The Learned Counsel for the Respondent submits that judgment in the

matter of "Assistant Commissioner vs Shukla & Brothers" (Supra) was in the context

of regular judgment disposing matter and thus would not be helpful in the present

matter.

9. Perusal of Para 19 of the judgment of Hon'ble Supreme Court shows that

Orders of Court must reflect what weighed with the Court in granting or declining

relief claimed by the Applicant. These observations are binding. However, in the

present matter the Adjudicating Authority was not granting or declining relief. It

is only an order at interlocutory stage of hearing the matter, where the Adjudicating

Authority having power to regulate its own procedure gave a direction to produce

particular documents. The impugned order, as reproduced above, speaks for itself

of the mind of the Adjudicating Authority. It is apparent that for hearing the

matter, the Adjudicating Authority needed a particular document which is even

otherwise admittedly a public document. If that was so, there was no good reason

to file the present appeal and to raise a dispute as has been raised. It has only

prolonged the IBC proceeding against spirit of IBC.

10. We do not find any substance in the Appeal. The Appeal is dismissed.

Interim orders in Appeal stand withdrawn.

[Justice A.I.S. Cheema] The Officiating Chairperson

[Dr. Alok Srivastava] Member (Technical) Archana/gc.

Company Appeal (AT) (Insolvency) No. 674 of 2020