M/S.Nathellasampath Jewellary (P) Ltd vs Hemant Mehta

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 08.01.2019

CORAM

THE HONOURABLE MR.JUSTICE V.PARTHIBAN

Crl.R.C.No.760 of 2018 and Crl.M.P.No.8733 of 2018

1. M/s.Nathellasampath Jewellary (P) Ltd., rep. by Nathella Ranganatha Gupta

2. Nathella Ranganatha Gupta ... Petitioners

Vs

Hemant Mehta ... Respondent

PRAYER : Criminal Revision filed under Section 397 r/w 401 of Cr.P.C. seeking to set aside the order dated 28.06.2018 in Crl.M.P.No.5079 of 2018 in C.C.No.1476 of 2018 passed by the Fast Track Court II (Metropolitan Magistrate), Egmore at Allikulam, Chennai-3.

For Petitioners : Mr.V.Karthik,S.C. M/s.K.P.Ananthakrishna

For Respondent : Mr.S.A.Raja

ORDER

http://www.judis.nic.in The above Criminal Revision Petition has been filed

against the order, dated 28.06.2018 in Crl.M.P.No.5079 of 2

2018 passed by the learned Metropolitan Magistrate (Fast

Track Court II), Egmore at Allikulam, Chennai, rejecting the

petition filed in Crl.M.P.No.5079 of 2018 by the

accused/petitioners herein, praying to permit the Authorized

Interim Resolution Professional, Mr.Ram Ratan Kanoongo to

represent for and behalf of first petitioner company in all

further proceedings in C.C.No.1476 of 2018.

2. According to the petitioners/accused, the company

approached the National Company Law Tribunal (in short, 'the

Tribunal'), Chennai by filing a petition as Corporate Debtor

under Rule 7 of the Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016 to initiate Corporate

ISRP. The Tribunal delivered its order on 23.4.2018 on the

Corporate Debtor Application. While passing the order,

subsequently on 21.6.2018, the Tribunal appointed one Shri

Ram Ratan Kanoongo as Interim Resolution Professional (in

short, 'IRP'). On the appointment of IRP, the Directors of the

first petitioner company ceased to have any control over the

same. Therefore, in the pending proceedings before the http://www.judis.nic.in

Metropolitan Magistrate Court, a petition was filed on behalf 3

of the petitioner company to permit the IRP to represent for

and on behalf of first petitioner company. The trial Court,

after adverting to the petition, has dismissed the same.

Against the same, the present revision has been filed.

3. According to the trial Court, the accused cannot

represent through the representative in the proceedings

initiated under Section 138 of Negotiable Instruments Act (in

short, 'N.I.Act') and the order passed by the Tribunal is not

relevant and will not bind the proceedings.

4. Shri V.Karthik, learned Senior Counsel appearing

for the revision petitioners would submit that the trial Court

has completely misdirected itself by dismissing the petition

without proper understanding of the scheme of Insolvency

and Bankruptcy Code, 2016 and the Rules framed therein.

He would initially draw the attention of this Court to Section

305 of Cr.P.C., particularly, Sub Clause 2, which reads as

under:

“305. Procedure when corporation or http://www.judis.nic.in registered society is an accused. Right of person against whom proceedings are instituted to be 4

defended.

(1) .... ..... .....

(2) Where a corporation is the accused person or one of the accused persons in an inquiry or trial, it may appoint a representative for the purpose of the inquiry or trial and such appointment need not be under the seal of the corporation.

(3) to (6) .... .... ....“

5. According to the learned Senior Counsel, the

Company can appoint its representative to represent the same

as per the above provision. He would also refer to relevant

provisions of the Insolvency and Bankruptcy Code, 2016 to

point out the fact that as to how the trial Court has erred in

dismissing the petition. Firstly, the learned Senior Counsel

would draw the attention of this Court to Section 17,

particularly, Sub Clause (1)(a) & (b) of Section 17, which reads

as under:

“17. Management of affairs of corporate debtor by interim resolution professional.

(1) From the date of appointment of the http://www.judis.nic.in interim resolution professional.

(a) the management of the affairs of the 5

corporate debtor shall vest in the interim resolution professional;

(b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional.”

(c) & (d) .... .... ....

(2) ..... ..... ..... ....

(a) to (d) .... ..... ....”

6. Secondly, he would refer to Section 25 which

enumerates the duties of Resolution Professional and draw

the reference to Sub Clause 2 (a) & (b), which reads as under:

“25. Duties of Resolution Professional.

(1) ..... ..... .....

(2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions, namely:— (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration http://www.judis.nic.in proceedings;

6 7. Thirdly, the learned Senior counsel would draw

reference to Section 35(k) which reads as under:

“35. Powers and duties of liquidator

(k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor;

8. The learned Senior Counsel would also draw

reference to Sections 86, 97 to 99 of the Insolvency and

Bankruptcy Code, 2016, which deal with the scope of

functioning of the Resolution Professional. The learned Senior

Counsel would therefore, submit that once the IRP is

appointed by the Tribunal, he takes charge of the affairs of the

company and it is no more under the control of the erstwhile

Directors and therefore, in any quasi and judicial proceedings,

the Directors who stand removed, cannot represent the

company including the proceedings initiated under Section

138 of N.I.Act. In fact, the Directors are barred from

representing the company when IRP is appointed by the

Tribunal. Unfortunately, the learned Magistrate has http://www.judis.nic.in completely failed to appreciate the scheme of the Insolvency

and Bankruptcy Code, 2016 and impact of the direction of the 7

Tribunal and dismissed the petition without delving those

issues at all by a laconic order.

9. Per contra, Mr.Raja, learned counsel appearing for

the respondent would submit that appointment of IRP is only

a temporary measure and he cannot represent the company

and such Professionals are only appointed to look after day to-

day affairs of the company and they cannot represent the

company as such in any judicial proceedings. He would

therefore submit that the trial Court has correctly taken the

decision and dismissed the petition, which does not call for

interference.

10. Heard the learned Senior Counsel appearing for

the petitioners and the learned counsel appearing for the

respondent and perused the entire materials available on

record.

11. This Court finds considerable force in the

contention put forth by the learned Senior Counsel appearing http://www.judis.nic.in for the revision petitioners that once IRP is nominated and 8

appointed by the Tribunal, he takes complete charge of the

company and he alone can prosecute and being prosecuted

for and on behalf of the company. The provisions as relied on

by the learned Senior counsel for the petitoners are very clear

on that aspect. Once the IRP is appointed, the affairs of the

company vest in him for all matters and therefore, it is not

open to the trial Court exercising its jurisdiction under

Section 138 of N.I.Act to reject the petiton on the ground that

the order passed by the Tribunal is not binding. The learned

Magistrate, in fact, has passed a non-speaking order without

applying his mind to the scheme of Insolvency and

Bankruptcy Code, 2016 and the scope and import of the

appointment of the IRP to take charge of the company affairs.

The learned Magistrate has erroneously felt that it was not

binding on him without appreciating the fact that once IRP is

appointed, the erstwhile Directors cannot represent the

company at all in any proceedings. Therefore, the petition filed

by the petitioners herein ought to have been allowed, but

unfortunately, the learned Magistrate by mis-directing

himself, has dismissed the same.

http://www.judis.nic.in 9

12. For the foregoing reaons, the Revision Petiton is

allowed and the impugned order passed by the learned

Magistrate, dated 28.6.2018 is hereby set aside and

accordingly, the Crl.M.P.No.5079 of 2018 in C.C.No.1476 of

2018 is allowed.

08.01.2019

Suk

http://www.judis.nic.in 10

V.PARTHIBAN, J.

suk

CRL.REVISION NO.760 OF 2018

08.01.2019 http://www.judis.nic.in