M/S Shree Nakoda Ispat Limited vs Biswa Janani Services Bhubaneswar

1. Shree Nokoda Ispat Limited, Through its Director, (Formerly known as M/s. Shree Nakodia Ispat Limited), A limited company incorporated under the Companies Act, 1956, Having its registered office at- Near Railway Crossing, Mowa Raipur, Chhattisgarh ...Appellant

Versus

1. Biswa Janani Serivces, Bhubaneshwar, Through its Managing Partner, Having its offices At: Plot No. 884/5666 & 885, P.O. Rasulgarh, Bhubaneshwar, District - Khurda, Odisha Email: biswajananiservices@gmail.com ...Respondent

For Appellant: Mr. Ratan K. Singh, Sr. Advocate with Mr. Rajeev Gurung, Advocate For Respondent: Mr. Darpan Wadhwa, Sr. Advocate with Mr. Shreyan Das, Mr. Avijit Patnaik, Mr. Bidesh Ranjan Behera, Mr. Amer Vaid, Advocates

JUDGEMENT

Ashok Bhushan, J:

1. This Appeal by the Corporate Debtor has been filed against the Order

dated 02nd August, 2022 passed by the National Company Law Tribunal,

Cuttack Bench, Cuttack (hereinafter referred to as "The Adjudicating

Authority"). By which Order, I.A. (IB) No. 25/CB/2022 in CP(IB) No. -2-

62/CB/2021 filed by the Corporate Debtor seeking initiation of appropriate

proceedings and imposition upon the Operational Creditor under Section 65

& 76 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to

as "The Code") has been dismissed.

2. In this Appeal, the Appellant challenges the Order passed by the

Adjudicating Authority in I.A. No. 25/2022 which Application was filed

under Section 65 and 76 of the Code praying for imposition of penalty and

initiating proceeding for punishment.

3. In CP (IB) No. 62/CB/2021 filed by the Operational Creditor under

Section 9 before the Adjudicating Authority, an Order was passed on 2nd

August, 2022 rejecting Section 9 Application, which Order, the Operational

Creditor has challenged and filed Appeal i.e. Company Appeal (AT) Ins. No.

1315 of 2022 which has been dismissed by us vide Judgement of the date.

4. Learned Counsel for the Appellant submits that the Adjudicating

Authority committed error in rejecting the Application under Section 65 and

76 of the Code taking view that Special Court established under IBC is alone

competent to entertain Criminal Proceedings in respect of offence punishable

under the provisions of the Code and the Adjudicating Authority has no role

in implementing the penal provisions under the Code. Further that

proceeding initiated by the Operational Creditor under Section 9 have been

dismissed with the observations that it needs further investigation. The

proceeding initiated by Operational Creditor cannot be termed as fraudulent

transaction or malicious in nature and prayer under Section 65 is to be

rejected. Learned Counsel for the Appellant submits that the Adjudicating

Company Appeal (AT) (Insolvency) No. 1260 of 2022 -3-

Authority committed error in rejecting the Application filed under Section 65

and 76 of the Code. Learned Counsel for the Appellant has placed reliance

on Judgement of this Tribunal in "Committee of Creditors of Amtek Auto

Ltd. through Corporation Bank Vs. Mr. Dinkar T. Venkatasubramanian

and Ors. [2019 SCC OnLine NCLAT 449]".

5. We have considered the submissions of Learned Counsel for the

Appellant and have perused the record.

6. This Tribunal in the matter of "Committee of Creditors of Amtek Auto

Ltd." had occasion to consider Section 74 and has categorically held that the

Adjudicating Authority is empowered to refer the matter to IBBI or the

Government of India to take up the matter, if any case of offence under

Section 74 (3) of Chapter VII of Part-II is made out. In paragraph 46,47 and

48 of the Judgement, following is laid down:

"46. From sub-section (2) of Section 236, it is clear that no Special Court can take cognizance of any offence punishable under the 'I&B Code', including punishment prescribed under Section 74(3) of Chapter VII of Part II, save on a complaint made by the Insolvency and Bankruptcy Board of India or the Central Government or any person authorized by the Central Government in this behalf.

47. Normally, the Insolvency and Bankruptcy Board of India or the Central Government are not made a party respondent to any of the 'Corporate Insolvency Resolution Process'. Therefore, they can not have any idea as to whether any offence has been committed by any 'Corporate Debtor' or its

Company Appeal (AT) (Insolvency) No. 1260 of 2022 -4-

members, including 'Successful Resolution Applicant' ('Corporate Debtor') under Section 74(3) or any of the provisions of Chapter VII of part II of the 'I&B Code'.

48. In this background, we are of the view that it is the Adjudicating Authority who is required to refer such matter to the Insolvency and Bankruptcy Board of India or the Central Government to take up the matter to the Special Court if on investigation, if any case of offence under Chapter VII, including Section 74(3) is made out."

7. Law is thus well settled, that the Adjudicating Authority with regard to

allegation of offence in appropriate case, can always refer the

recommendation to the Insolvency and Bankruptcy Board of India or to the

Central Government to consider as to whether the case is made out for filing

a complaint before the Special Court.

8. We thus do not approve the observations of the Adjudicating Authority

to the extent that the Adjudicating Authority has no role in implementing the

penal provisions in the Code. Limited role which can be performed by the

Adjudicating Authority is to make a reference if there are allegations which

need consideration by IBBI or Central Government for purpose of filing a

complaint.

9. We thus to the above extent observe and clarify that the Statement

made in paragraph 2 of the Impugned Order does not lay down the correct

law. We have by our separate order passed in Company Appeal (AT) Ins. No.

1315 of 2022 on 11.11.2022 dismissed the Appeal filed by the Operational

Creditor challenging the Order dated 2nd August, 2022 rejecting the Section

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9 Application filed by the Operational Creditor. The observations have been

made by the Adjudicating Authority that proceeding initiated by the

Operational Creditor cannot be termed as fraudulent transaction or

malicious transaction in nature hence petition under Section 65 was

rejected.

10. In the facts of the present case where the Adjudicating Authority has

found that there was pre-existing dispute between the parties and

Application under Section 9 was not liable to be admitted which Order has

been confirmed by us by Judgment/Order dated 11.11.2022 in Company

Appeal (AT) Ins. No. 1315 of 2022, we see no reason to issue any direction to

the Adjudicating Authority at this stage to consider making a reference to

the Board or Central Government for prosecution under Section 76. The

matter needs to rest here.

11. In result, with the observations and clarification as made above, this

Appeal is disposed of.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

NEW DELHI 11th November, 2022

Basant

Company Appeal (AT) (Insolvency) No. 1260 of 2022