Mr. Aunirban Saha vs Assets Care & Reconstruction ...

IN THE MATTER OF: Neeta Saha ...Appellant

Versus

Asset Care & Reconstruction Enterprises Ltd. ...Respondent

Present:

For Appellant : Mr. Rajat Bhardwaj, Ms. Ankita M. Bhardwaj, Mr. Kaustubh Khanna, Mr. Saurav Kahroda, Advocates

Ms. Shankari Mishra, Ms. Aakash Sharma, Ms. Jyoti Khurana, Mr. Karan Kholi, Advocates for Applicant.

For Respondent : Mr. Gaurav Mitra, Mr. Aditya Vashisht, Advocates.

With I.A. No. 5598 of 2024 In Company Appeal (AT) (Ins) No. 693 of 2023

IN THE MATTER OF: Aunirban Saha ...Appellant

Versus

Asset Care & Reconstruction Enterprises Ltd. ...Respondent

Present:

For Appellant : Mr. Rajat Bhardwaj, Ms. Ankita M. Bhardwaj, Mr. Kaustubh Khanna, Mr. Saurav Kahroda, Advocates Ms. Shankari Mishra, Ms. Aakash Sharma, Ms. Jyoti Khurana, Mr. Karan Kholi, Advocates for Applicant.

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 1 For Respondent : Mr. Gaurav Mitra, Mr. Aditya Vashisht, Advocates. Mr. Arvind Varma, Sr. Advocate with Mr. Shahrukh Ejal, Advocate.

With I.A. No. 5595 of 2024 In Company Appeal (AT) (Ins) No. 716 of 2023

IN THE MATTER OF: Aniel Kumar Saha ...Appellant

Versus

Asset Care & Reconstruction Enterprises Ltd. ...Respondent

Present:

For Appellant : Mr. Rajat Bhardwaj, Ms. Ankita M. Bhardwaj, Mr. Kaustubh Khanna, Mr. Saurav Kahroda, Advocates

Mr. Abhishek Anand, Ms. Shankari Mishra, Ms. Aakash Sharma, Ms. Jyoti Khurana, Mr. Karan Kholi, Advocates for Applicant.

For Respondent : Mr. Gaurav Mitra, Mr. Aditya Vashisht, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

The above three Interlocutory Applications (IAs) have bene filed by

the Resolution Professional ("RP") with regard to the Corporate Insolvency

Resolution Process ("CIRP") of the Personal Guarantors, praying for certain

clarifications with respect to judgment of this Tribunal dated 30.05.2023

in Company Appeal (AT) (Insolvency) No. 692 and 693 of 2023 as well as

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 2 the judgment and order of this Tribunal dated 02.06.2023 in Company

Appeal (AT) (Insolvency) No. 716 of 2023.

2. IA No.5603 of 2024 has been filed by RP in Company Appeal (AT)

(Insolvency) No. 692 of 2023, in which following prayers have been made:

"A) Allow the present Application and vacate the stay granted by this Hon'ble Tribunal vide order dated 30.05.2023 in terms of judgment passed by Hon'ble Supreme Court in the matter of Dilip B Jivrajka versus Union of India [Writ Petition (Civil) No. 1281 of 2021]; and/or,

b. Pass any other further order as this Appellate Tribunal may deem appropriate in the facts and circumstances of the instant case."

3. Learned Counsel for the RP during the course of his submissions has

confined his submission praying for clarification of the judgment dated

30.05.2023 in terms of the judgment passed by Hon'ble Supreme Court in

Dilip B Jivrajka versus Union of India - Writ Petition (Civil) No. 1281

of 2021.

4. Brief facts necessary to be noticed for deciding the three IAs filed by

the RP are as follows:

(i) Company Appeal (AT) (Insolvency) Nos.692, 693 & 716 of 2023

have been filed by the Appellant(s) - Personal Guarantors of

the Corporate Debtor challenging order dated 10.04.2023

passed by the National Company Law Tribunal, New Delhi

Bench (Court-II) appointing RP (the Applicant herein) in

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 3 Section 95 Application filed by the Asset Care &

Reconstruction Enterprise Ltd.

(ii) The Financial Creditor - Asset Care & Reconstruction

Enterprise Ltd. has filed three separate applications under

Section 95 being IB-78/ND/2023 against Neeta Saha (giving

rise to Company Appeal (AT) (Insolvency) No.692 of 2023); IB-

82/ND/2023 against Aunirban Saha (giving rise to Company

Appeal (AT) (Insolvency) No.693 of 2023); and IB-79/ND/2023

against Aniel Kumar Saha (giving rise to Company Appeal (AT)

(Insolvency) No.716 of 2023). In all the aforesaid Applications

filed under Section 95, the Adjudicating Authority appointed

the RP by order dated 10.04.2023, which came to be

challenged in the above Appeal(s) filed by the Appellant - the

Personal Guarantors.

(iii) Company Appeal (AT) (Insolvency) No.692 of 2023 and

Company Appeal (AT) (Insolvency) No.693 of 2023 came to be

disposed of by this Tribunal by order dated 30.05.2023, which

is as follows:

"30.05.2023 These Appeals have been filed against the Order dated 10th April, 2023 by which the Adjudicating Authority on an Application under Section 95 of the Code filed by the Financial Creditor has appointed Resolution Professional and directed the Professional to give a report to the Financial Creditor as well as Personal Guarantor.

2. Learned Counsel for the Appellant submits that no Application under Section 95 was served on the Appellant. He has further referred to Order dated 10.02.2023 of the

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 4 Adjudicating Authority and submits that in pursuance of the said order also no service was effected on the Appellant. He submits that he could not appear before the Adjudicating Authority due to aforesaid and also could not bring into the notice of the Adjudicating Authority, the NoC which was given by the Financial Creditor dated 30th December, 2022.

3. From the order impugned, it does appear that Adjudicating Authority has fixed 14th June, 2023 for further consideration. We are of the view that ends of justice will be served in giving an opportunity to the Appellant to file an objection before the Adjudicating Authority on or before 14 th June, 2023 which may be considered by the Adjudicating Authority while proceeding further in the matter. Issuing notice to the Respondent and keeping the Appeal pending shall result further delay in matter. In view of the aforesaid, we permit the Appellant to file an objection, it shall be open for the Adjudicating Authority to proceed further after considering objections of the Appellant.

4. With these observations, the Appeals are disposed of. In view of the fact that we have permitted the Appellant to file an objection, IRP shall not submit any report in the meantime. We make it clear that we are not expressing any opinion on merit."

(iv) Company Appeal (AT) (Insolvency) No.716 of 2023 came for

consideration before this Tribunal subsequently on

02.06.2023, on which date, this Tribunal disposed of Company

Appeal (AT) (Insolvency) No.716 of 2023 in terms of order dated

30.05.2023 passed in Company Appeal (AT) (Insolvency)

Nos.692 and 693 of 2023. Order dated 02.06.2023 is as

follows:

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 5 "02.06.2023 This appeal has been filed against the order dated 10.04.2023. Counsel for the Appellant submit the same was passed by the Adjudicating Authority on an Application under Section 95 of the Code filed by the Financial Creditor.

Counsel for the Appellant submits that two appeals have been filed by the Personal Guarantor against the same order which have already been disposed of by the judgment dated 30.05.2023 in Company Appeal (AT) (Ins.) No. 692 of 2023 and Company Appeal (AT) (Ins.) No. 693 of 2023.

This Appeal is also disposed of in terms of the aforesaid order dated 30.05.2023."

(v) After passing of order dated 30.05.2023 and 02.06.2023 by

this Tribunal, the Application under Section 95 against the

Personal Guarantors proceeded before the Adjudicating

Authority. It is useful to notice the order passed by

Adjudicating Authority in IB-78/ND/2023, i.e. filed against

Neeta Saha. On 09.05.2024, when IB-78/ND/2023 came for

consideration, learned Counsel appearing for the Personal

Guarantor, i.e. Appellant submitted that Adjudicating

Authority cannot further proceed with the matter without

considering his objections to the appointment of RP in the

wake of the order passed by this Tribunal on 30.05.2023. The

said order of the Adjudicating Authority has been brought on

record by reply filed on behalf of Neeta Saha, in IA No.5603 of

2024. The said order is as follows:

"When it is the argument put forth by the Ld. Counsel appearing for the Personal Guarantor that in the wake of the

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 6 order passed by Hon'ble NCLAT, this Adjudicating Authority cannot further proceed with the matter, without considering his objections to the appointment of RP, in terms of the provisions of Section 97 of IBC, 2016. Mr. Gaurav Mitra, Ld. Counsel appearing for the Applicant submitted that in the wake of the judgment of Hon'ble Supreme Court in W.P. (Civil) No. 1281 of 2021 titled Dilip B. Jiwrajka vs. Union of India & Ors., the PG has no right to address this Tribunal at the stage where the issue regarding appointment/continuation of RP has to be determined. There is no assistance from the Ld. Counsel for the RP in the matter. Nevertheless, as prayed by Ld. Counsel appearing for the Applicant and the Personal Guarantor, the hearing is deferred to 22.05.2024. On the next date of hearing, the Ld. Counsels for the parties should remain present physically.

List on 22.05.2024."

(vi) In the above order, the Adjudicating Authority has also

observed that RP is not giving any assistance. It appears that

after the aforesaid order, the RP filed IA No.5603 of 2024 in

this Tribunal on 05.08.2024. This Tribunal issued notice on

the Applications filed in all the three IAs by order dated

08.08.2024. The replies have been filed by the Appellant(s) to

the IAs.

5. We have heard learned Counsel for the RP; learned Counsel for the

Financial Creditor - Asset Care & Reconstruction Enterprise Ltd. as well as

learned Counsel for the Appellant - Personal Guarantors.

6. Learned Counsel for the RP submits that the order which was passed

by this Tribunal on 30.05.2023 granting liberty to the Personal Guarantors

to file objections was prior to judgment of the Hon'ble Supreme Court dated

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 7 09.11.2023 in Dilip B Jivrajka versus Union of India [Writ Petition

(Civil) No. 1281 of 2021 the Hon'ble Supreme Court having declared the

law pertaining to Personal Guarantors, the Adjudicating Authority has to

proceed in accordance with law declared by the Hon'ble Supreme Court. It

is submitted that on account of submissions made by the Personal

Guarantors, the RP is not able to file its Report in the proceedings under

Section 95 against the Personal Guarantors. It is submitted that it has

been categorically laid down by the Hon'ble Supreme Court that all

adjudicatory issue has to be decided at the time of hearing of the

Application under Section 100 and the objections filed by the Appellant -

Personal Guarantors also has to be considered at the time of hearing the

Application under Section 100, as per the law laid down by the Hon'ble

Supreme Court. It is submitted that the judgment of the Hon'ble Supreme

Court bind all including NCLT, NCLAT, Appellant and Respondent.

7. Learned Counsel appearing for the Financial Creditor also supports

the submissions of RP and relies on paragraph 82 of the judgment of the

Hon'ble Supreme Court in Dilip B Jivrajka and submits that at the time

of passing order under Section 97, no adjudicatory issue need to be

decided.

8. Learned Counsel for the Appellant, i.e., Personal Guarantors has

opposed the Application of RP. It is submitted that RP being not party to

the Appeal(s), he had no locus to file Application(s). It is submitted that

present Application(s) are not maintainable, the RP having no locus. It is

submitted that this Tribunal after considering detail submissions of the

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 8 Appellant(s) passed order dated 30.05.2023 directing the Adjudicating

Authority to consider the objections of the Appellant(s). It is submitted that

Application(s) filed by Financial Creditor have concealed several relevant

facts and the Application(s) can be rejected at initial stage also. The

Financial Creditor has deliberately not stated the correct facts. The learned

Counsel for the Appellant, however, does not deny the applicability of the

judgment of the Hon'ble Supreme Court in Dilip B Jivrajka (supra). With

regard to cases of Personal Guarantors, he placed reliance on paragraphs

64, 65 and 72 of the judgment of Dilip B Jivrajka. It is submitted that

proceedings against Personal Guarantors has also to be conducted in

accordance with the rules of natural justice.

9. We have considered the submissions of learned Counsel for the

parties and have perused the records.

10. As noted above, the judgment of this Tribunal passed on 30.05.2023,

i.e. much before the delivery of the judgment of the Hon'ble Supreme Court

in Dilip B Jivrajka, which was delivered on 09.11.2023. In paragraphs 3

and 4 of the judgment passed by this Tribunal on 30.05.2023, following

was observed:

"3. From the order impugned, it does appear that Adjudicating Authority has fixed 14th June, 2023 for further consideration. We are of the view that ends of justice will be served in giving an opportunity to the Appellant to file an objection before the Adjudicating Authority on or before 14th June, 2023 which may be considered by the Adjudicating Authority while proceeding further in the matter. Issuing notice to the Respondent and keeping the Appeal pending shall result further delay in matter. In view of the aforesaid, we permit the Appellant to file an objection, it shall be

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 9 open for the Adjudicating Authority to proceed further after considering objections of the Appellant.

4. With these observations, the Appeals are disposed of. In view of the fact that we have permitted the Appellant to file an objection, IRP shall not submit any report in the meantime. We make it clear that we are not expressing any opinion on merit."

11. This Tribunal had no doubt permitted the Appellant to file objections

and it was open for the Adjudicating Authority to proceed further after

considering the objections of the Appellant. It was further observed that

IRP shall not submit any report in the meantime.

12. Now, we need to notice the judgment of the Hon'ble Supreme Court

in Dilip B Jivrajka. Learned Counsel for the Appellant has relied on

paragraphs 64, 65 and 72 of the judgment, which paragraphs were under

the Heading-B, 'Applicability of the Principles of Natural Justice'. In

paragraphs 64, 65 and 72, the Hon'ble Supreme Court laid down following:

"64. At the same time, it needs to be noted that the principles of natural justice are not to be construed in a straitjacket. The nature of natural justice is liable to vary with the exigencies of the situation. In a given situation, it may extend to a fullyfledged evidentiary hearing while, on the other hand, the principles of natural justice may require that a bare minimum opportunity should be given to an individual who is liable to be affected by an action, to furnish an explanation to the allegations or the nature of the enquiry.

1. Role of the Resolution Professional as a facilitator is to collate facts

65. In the provisions of Chapter III, particularly in Section 99, Parliament has provided for an engagement of the debtor with the resolution professional at various stages. Sub-section (2) of Section 99 stipulates that where an application has been filed by the creditor under Section 95, the resolution professional may require the debtor

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 10 to prove the repayment of the debt in the manner which has been indicated in sub-clauses (a), (b) and (c). Evidently, the expression "may require the debtor to prove repayment of the debt" implicates the role of the debtor in explaining, whether, as a matter of fact, the debt remains unpaid or has been paid.

We are of the view that the submission that an adjudicatory role should be interposed at the stage of Section 97(5) cannot be accepted. The power which is conferred on the adjudicating authority at the stage of filing of an application is to appoint a resolution professional. The appointment of a resolution professional is for the purpose of a facilitative exercise which is contemplated by Section 99 which, as we have noted, eventually ends in a report either recommending the acceptance or rejection of the application. Bearing in mind the statutory scheme, it would be impermissible for this Court to allow for the adjudicatory intervention of the adjudicating authority in adjudicating what is described as a jurisdictional question at the stage of Section 97(5)."

13. There cannot be any denial that principles of natural justice are also

attracted in the proceeding in Application under Section 95. However, the

Hon'ble Supreme Court, after noting the scheme of insolvency proceeding,

has held that Adjudicating Authority role cannot be held to be applicable

at the stage of Section 97(5), i.e., at the stage when RP has been appointed.

It has further been held by the Hon'ble Supreme Court that right of

representation has been provided under Section 99, sub-section (2). In

paragraphs 75, 76 and 77, the Hon'ble Supreme Court has laid down

following:

"3. A right of representation has been provided under Section 99(2)

75. On behalf of the petitioners, it has been submitted that the resolution professional has been empowered to

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 11 make wide ranging enquiries for the purpose of eliciting information under sub-section (4) of Section 99. In our view, it is necessary to clarify the ambit of sub-section (4) of Section 99. Sub-section (4) is prefaced by the words "for the purposes of examining an application". In other words, the information which the resolution professional is empowered to seek or the explanation which the resolution professional can require to be furnished is for that purpose. That apart, sub-section (4) also goes on to specify that the information or explanation may be sought in connection with the application. In other words, the nature of the information or the explanation which is sought must have a nexus with the application. Therefore, properly read, the power to seek information or, for that matter, to seek an explanation is related to the nature of the application which has been submitted under Section 94 or Section 95. We are of the view that the right to file such representation is sufficient compliance of audi alterum partem requirements.

76. Hence, the petitioners' assertion that the statutory framework, as interpreted and applied by the adjudicating authority, results in a violation of natural justice lacks merit. The reliance on State Bank of India v Rajesh Agarwal does not help the case of the petitioners, as the court in that case established that exceptions to natural justice must be confined to the 'narrowest possible limits.' The court underscored that the waiver of prior hearing is permissible only in situations where its inclusion would obstruct the entire process. In that case, the court specifically addressed the duties of banking authorities, emphasizing the obligation to adopt fair procedures and afford borrowers a hearing before classifying their accounts as fraud accounts, given the serious penal and civil consequences. The court further held that reasoned orders must be passed when categorizing an account as a fraud account. It then clarified that no hearing is required before lodging an FIR. In other words, it held that

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 12 the principles of audi alteram partem must be read into the Circular issued by the Reserve Bank of India on the classification of bank accounts as fraud accounts. However, a crucial distinction is made here, signifying that the circumstances of this case are distinct from those considered in Rajesh Agarwal (supra). The classification of the borrowers account as fraud without giving any opportunity of being head entailed significant material consequences, including the disability on accessing institutional finance. That may be contra-distinguished with the procedure under Section 95 to Section 99. In this, a person is not deemed a debtor but a resolution professional is appointed to ascertain whether the facts substantiate the application for an IRP. An interim-moratorium is placed on legal proceedings concerning the debt to safeguard the debtor from further legal action. However, the interim-moratorium does not act to freeze the assets and legal rights and title of the debtor. Once a recommendation is made, it is not binding on the adjudicating authority. The authority would only decide after looking at the recommendation of the resolution professional and affording full opportunity of hearing to the debtor or the personal guarantor, as the case may be. Consequently, the petitioners' argument lacks merit when assessed against these established legal principles.

77. Rules have been framed in 2019 in pursuance of the provisions of Section 239(2). The Rules, inter alia, provide for the Form (Form A) in which an application under Section 94 has to be submitted; the Form (Form B) in which a demand notice has to be served under Section 95(4) on the guarantor demanding payments; and the Form (Form C) in which an application has to be submitted under Section 95(1). Form A is the statutory Form in which an application is submitted by the debtor. Form C, on the other hand, is the statutory Form in which an application is submitted by a creditor. Form C is required to be filled in by the creditor who

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 13 institutes an application for the initiation of the insolvency resolution process. This includes particulars of the applicant, particulars of the guarantor, particulars of the debt and particulars of the insolvency professional. The creditor who fills up Form C would have to furnish such information as lies within the knowledge of the creditor who is the applicant under Section 95(4). When the resolution professional is empowered to seek information or an explanation in connection with the application, such information or explanation must be relevant to and bearing a connection with the nature of the application itself."

14. Thus, there cannot be any denial that principles of natural justice

are applicable, but the stage for applicability has been clearly laid down by

the Hon'ble Supreme Court. In paragraph 82, the Hon'ble Supreme Court

has held following:

"82. For the reasons which we have already indicated, we have come to the conclusion that an adjudicatory decision- making process of the nature which has been suggested by the petitioners would not be implicated under Section 97(5). To accept the submission of the petitioners would render the provisions of Sections 99 and 100 otiose."

15. The conclusion of judgment in paragraph 86 is as follows:

"V. Conclusion

86. We summarise the conclusion of this judgment below:

(i) No judicial adjudication is involved at the stages envisaged in Sections 95 to Section 99 of the IBC;

(ii) The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 14

95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application;

(iii) The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining 'jurisdictional facts' at the stage when it appoints a resolution professional under Section 97(5) of the IBC is rejected. No such adjudicatory function is contemplated at that stage. To read in such a requirement at that stage would be to rewrite the statute which is impermissible in the exercise of judicial review;

(iv) The resolution professional may exercise the powers vested under Section 99(4) of the IBC for the purpose of examining the application for insolvency resolution and to seek information on matters relevant to the application in order to facilitate the submission of the report recommending the acceptance or rejection of the application;

(v) There is no violation of natural justice under Section 95 to Section 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional;

(vi) No judicial determination takes place until the adjudicating authority decides under Section 100 whether to accept or reject the application. The report of the resolution professional is only recommendatory in nature and hence does not bind the adjudicatory authority when it exercises its jurisdiction under Section 100;

(vii) The adjudicatory authority must observe the principles of natural justice when it exercises jurisdiction under Section 100 for the purpose of determining whether to accept or reject the application;

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 15

(viii) The purpose of the interim-moratorium under Section 96 is to protect the debtor from further legal proceedings; and

(ix) The provisions of Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and Article 21 of the Constitution."

16. The submission of learned Counsel for the Appellant that RP has no

locus to file the Application cannot be accepted. It is to be noted that

Appeal(s) were filed by the Appellant challenging order dated 10.04.2023

by which, RP was appointed in the Application under Section 95 filed by

the Financial Creditor. The Appellant while challenging order dated

10.04.2023, did not implead the RP as one of the party, whereas RP was

required to be impleaded, since the appointment of RP was sought to be

challenged in the Appeal, the Appellant cannot take benefit of its own

mistake, in not impleading the RP in the Appeal, who was required to be

impleaded. It does not lie in the mouth of the Appellant to contend that RP

has no locus to file the Application. The objection, which are sought to be

raised by the Appellant, are only clear endeavor to prolong the proceedings

under Section 95. We have already noted that it is the Personal

Guarantors, who have contended before the Adjudicating Authority that

Adjudicating Authority cannot proceed further without deciding the

objections of the Appellant as directed by this Tribunal. We, thus, reject

the submission of the Appellant that RP has no locus. Furthermore, the

Adjudicating Authority in its order dated 09.05.2024 has observed that

there is no assistance from the learned Counsel for the RP in the mater. It

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 16 was due to the above observations that present Application has been filed

by the RP, which cannot be said to be without any locus.

17. As noted above, the learned Counsel for the RP has confined his

submissions only to clarifications of the order dated 30.05.2023 passed by

this Tribunal, to the effect that the said order can in any manner direct not

to follow the judgment of the Hon'ble Supreme Court in Dilip B Jivrajka

(supra). Further, the judgment of Dilip B Jivrajka of the Hon'ble Supreme

Court is binding on all including NCLT, NCLAT and both the parties of the

proceedings. The Hon'ble Supreme Court has now authoritatively laid

down that all adjudicatory functions is to be adopted by the Adjudicating

Authority, only at the time of hearing of the Application under Section 100.

We, thus, are of the view that as per the judgment of the Hon'ble Supreme

Court, all objections of the Appellant/ Personal Guarantor have to be

looked into at the time of hearing of the Application under Section 100. It

has been held by the Hon'ble Supreme Court in paragraph 74 that

adjudicatory function of the Authority commences under Section 100 after

the submission of the Report. Paragraph 74 of the Hon'ble Supreme Court

order is as follows:

"74. The true adjudicatory function of the authority commences under Section 100 after the submission of the report. Another reason why we are not inclined to accept the submission is that what is described as a jurisdictional question by the petitioners may not be a simple matter to be decided as a question of law. The jurisdictional questions of the nature which have been suggested by the petitioners, namely, on whether there is a subsisting debt or whether the relationship of debtor and creditor subsists, would involve a

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 17 decision on mixed questions of law and fact. The entire scheme of Sections 99 and 100 implicates time lines which have been laid down by Parliament. The entire process of implementing these time lines would be rendered nugatory if an adjudicatory role were to be read into the provisions of Section 97(5). The final reason which would militate against accepting the submission is that the provisions of Section 99 do not as such implicate any adverse civil consequences particularly if those provisions are read in the manner in which we now propose to elucidate."

18. We, thus, are of the view that RP cannot be precluded form

submitting its Report as per the law laid down by the Hon'ble Supreme

Court and the Adjudicating Authority has to consider all objections raised

by the Appellant(s) at the time of hearing of Section 100 and the order

passed by this Tribunal dated 30.05.2023, cannot be read in any manner

as to exclude the applicability of judgment of Hon'ble Supreme Court dated

09.11.2023 in Dilip B Jivrajka.

19. Insofar as the submission of the Appellant(s) that Financial Creditor

has not disclosed the relevant materials in the Application, these are the

issues, which can be pressed by the Appellant at the time of hearing of the

Application under Section 100. We in the present proceedings are not

expressing any opinion on the merits of the contentions of either of the

parties, which can be examined at the time of hearing of the Application

under Section 100.

20. In view of the foregoing discussion we dispose of the IA Nos.5603,

5595 and 5598 of 2024 clarifying that the Adjudicating Authority may

proceed in the proceedings under Section 95 as per the law laid down by

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 18 the Hon'ble Supreme Court in judgment dated 09.11.2023 in Dilip B

Jivrajka versus Union of India & Ors. The objections of the Appellant(s)

need to be decided at the time of hearing of the Application under Section

100. The RP is at liberty to file its Report in proceedings under Section 95.

All the Applications are disposed of accordingly. There shall be no order

as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

29th August, 2024

Ashwani

IA No. 5603 of 2024 in CA (AT) (Ins.) No.692 of 2023; IA No. 5598 of 2024 in CA (AT) (Ins.) No.693 of 2023; IA No. 5595 of 2024 in CA (AT) (Ins.) No.716 of 2023; 19