Mr. Surender Modi Suspended Director Of ... vs Kaliber Associates Private Limited ...

IN THE MATTER OF: Surender Modi ...Appellant Suspended Director of J.R. Modi Associates Ltd.

Versus Kaliber Associates Pvt. Ltd. ...Respondents Through Its Liquidator Mohan Lal Jain & Anr.

With Company Appeal (AT) (Insolvency) No. 523 of 2022

IN THE MATTER OF: Surender Modi ...Appellant Suspended Director of J.R. Modi Associates Ltd.

Versus Mohan Lal Jain, Liquidator of Kaliber Associates ...Respondents Pvt. Ltd. Anr.

Present: For Appellant: Mr. Sumesh Dhawan and Mr. Lokesh Mishra, Advocates. For Respondent: Mr. Anirban Bhattacharya, Mr. Dhruv Sachdeva, Advocates for R-1. Mr. Nipun Gautam and Mr. Rajiv Bajaj, Advocates for R-2.

ORDER

(Virtual Mode) 27.05.2022: This order shall dispose of two Appeals bearing CA (AT)

(Ins) No. 443 of 2022 and CA (AT) (Ins) No. 523 of 2022 as both the Appeals

are interconnected. However, the facts are being taken from CA (AT) (Ins) No.

443 of 2022.

The precise grievance of the Appellant (Corporate Debtor) is that they

had filed their Reply on 12.08.2021 within the time provided by the Tribunal 2

on 03.08.2021 with an advance copy to the Appellant and also paid the cost

but some how the Reply was not attached with the main file and as such the

following order was passed on 23.09.2021:-

"The order dated 3rd August, records that the Corporate Debtor was given last chance to file Reply subject to cost of Rs. 10,000/-. Today, none appears for Corporate Debtor neither any reply is filed or uploaded. The Ld. Counsel for the Applicant states that though prior to this, they were given time to file reply and they had served the copy to which their application is filed rejoinder, the rejoinder is on record Corporate Debtor is proceeded ex-parte. Heard, Learned Counsel for the ex-parte.

Order Reserved.

The Ld. Counsel for the Applicant is at liberty to file Written submissions of not more than three pages within a week."

After the aforesaid order was passed, the Appellant had filed an

application for setting aside the said ex-parte order but the application was

dismissed on 21.02.2022 with the following orders:-

"I.A. No. 4932/ND/2021:

None appears for the Applicant. This Application has been filed by Corporate Debtor seeking to set aside the ex-parte order dated 23.09.2021.

In the main matter IB-1122/ND/2020 the order is already reserved on 23.09.2021. Hence, no such application can be entertained at this stage.

I.A. No. 4932/ND/2021 is rejected and disposed of."

The order dated 21.02.2022 has been challenged by the Appellant in

CA (AT) (Ins) No. 523 of 2022. We are not touching the merits of the case,

therefore, we are not going into the details because the only submission made

by the Appellant is that he should have been granted at least one opportunity

to present its case before the Tribunal on the basis of the Reply filed.

Whereas Counsel for Respondent has submitted that sufficient time

was granted to the Appellant on 03.08.2021 when last chance was given to 3

file the Reply subject to payment of cost of Rs. 10,000/- but still the Appellant

did not appear on the next date of hearing i.e on 23.09.2021 and the Tribunal

had proceeded against the Corporate Debtor ex-parte and reserved the order.

He further submitted that the conduct of the Appellant has been very

casual because he did not appear on 21.02.2022 when the application filed

by them to set aside the ex-parte order was being heard and hence, the

Adjudicating Authority has dismissed the application.

Counsel for the Respondent has pointed out that in the said order dated

21.02.2022, the presence has been wrongly recorded by the Tribunal as no

one had put in appearance on behalf of the Applicant and only the

Respondent had actually appeared.

Be that as it may, Counsel appearing on behalf of the RP has submitted

that after the impugned order was passed, Corporate Insolvency Resolution

Process (CIRP) was initiated on 31.03.2022 and Committee of Creditors (COC)

was constituted on 21.04.2022. He has further submitted that one meeting

of CoC has already been held. Counsel for the RP has further submitted that

this Tribunal had otherwise stayed the further proceedings before the CoC

vide its order dated 10.05.2022 and therefore it has not proceeded thereafter.

We have heard Counsel for the parties and perused the record. The

issue involved in this case, dehors the merits, is as to whether, the Appellant

(Corporate Debtor) contesting the application filed under Section 7 of the

Insolvency and Bankruptcy Code, 2016 (Code) should be given one more

opportunity to present its case before the Tribunal after setting aside ex-parte

proceedings? It is well known that the proceedings under Section 7 of the

Code has serious repercussions and it is also well known that equal chance 4

should be given to the parties to contest the litigation before the Court. In this

regard, the Tribunal was magnanimous enough to have granted one last

opportunity to the Appellant vide its order dated 03.08.2021 to file their Reply

subject to cost of Rs. 10,000/- within a period of one week and we have found

from the record that the Appellant herein had actually filed the Reply and

paid the cost to the Respondent herein who had accepted the same. But the

said Reply could not be made part of the paper book. It is also noted that the

Appellant could not appear before the Tribunal on the adjourned date i.e

23.09.2021 and the Tribunal recorded that the Reply was not filed or

uploaded, therefore, the Appellant herein was proceeded against ex-parte and

the order was reserved. As soon as, it came to the notice of the Appellant that

the order has been reserved, an application was moved seeking a direction to

set aside the ex-parte proceedings but unfortunately again they could not

appear on 21.02.2022 and the application was dismissed for want of

prosecution.

However, the fact of the matter is that the said order dated 03.08.2021

was duly complied with by the Appellant by filing their reply in the Registry

of the Tribunal and paying the cost, determined by the Tribunal, to the

Respondent, which was admittedly received. It is apparent from the order

dated 23.09.2021 that the receipt of the cost has not been brought to the

notice of Tribunal otherwise, the Tribunal would have presumed that if the

cost is paid then the Reply must have been filed.

In these circumstances, we are of the view that the order dated

23.09.2021 is not in accordance with the factual position available on record

and therefore, the same deserves to be set aside. Once the order dated 5

23.09.2021 is set aside by which the Appellant was proceeded against ex-

parte, the order dated 21.02.2022 also deserves to be set aside.

In view of the aforesaid discussions, CA (AT) (Ins) No. 523 of 2022 is

allowed and order dated 21.02.2022 is set aside and consequently, the order

dated 23.09.2021, whereby the Appellant was proceeded against ex-parte is

also set aside. In the order dated 31.03.2022, challenged in CA (AT) (Ins) No.

443 of 2022, the Adjudicating Authority has recorded in Para 6 of the

impugned order that "the Corporate Debtor has not filed any Reply nor

appeared and hence the Corporate Debtor was proceeded against ex-parte

vide order dated 23.09.2021". Keeping in view that CA (AT) (Ins) No. 523 of

2022 is allowed, the impugned order dated 31.03.2022 is also set aside and

the matter is remanded back to the Adjudicating Authority, NCLT, New Delhi

to decide CP(IB) No. 1122/ND/2020 afresh taking into consideration the

Reply filed by the Appellant on 12.08.2021 and decide the matter as

expeditiously as possible. The parties are directed to appear before the

Tribunal on 05th July, 2022.

It is made clear that we have not expressed any opinion on the merits

of the case. Both appeals are allowed with the aforenoted direction. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical) Sheetal/md/rr