Nui Pulp And Paper Industries Pvt Ltd vs Roxcel Trading Gmbh

NUI Pulp and Paper Industries Pvt. Ltd. ...Appellant

Vs.

M/s. Roxcel Trading GMBH ...Respondent

Present: For Appellant: - Mr. S. Santanam Swaminadhan, Ms. Nishtha Khurana and Mr. Kartik Malhotra, Advocates.

For Respondent: - Mr. Arun Kathpalia, Senior Advocate with Mr. Ankur Khandelwal, Mr. Gowrang, Mr. Vatsal Joshi, Advocates.

O R D E R

17.07.2019─ The Respondent- 'M/s. Roxcel Trading GMBH'-

('Operational Creditor') filed an application under Section 9 of the

Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short) against

'NUI Pulp and Paper Industries Pvt. Ltd.'- ('Corporate Debtor').

2. The matter was listed before the Adjudicating Authority (National

Company Law Tribunal), Single Bench, Chennai, on 25th June, 2019 and

counsel for the 'Corporate Debtor' appeared by filing a Caveat. The

counsel for the 'Corporate Debtor' submitted that there is an existence of

dispute between the parties and thereby prayed for time for filing reply.

On the request of the counsel for the 'Corporate Debtor', time was allowed

to file reply affidavit and time was also allowed to the 'Operational

Creditor' for file rejoinder.

Contd/-.........

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3. However, while adjourning the case for 15th July, 2019, the

following interim order was passed:

"However, the apprehension of the Applicant can be

taken note of till the time either the Application is

admitted or rejected, the assets and the accounts of

the Company need to be maintained on date except

withdrawal of the legitimate expenses required for

carrying on the day-to-day expenses. Therefore, this

Authority in exercise of the powers conferred under

Rule 11 of the NCLT Rules, 2016, restrains the

Corporate Debtor and its Directors from alienating,

encumbering or creating any third party interest on

the assets of the 1st Respondent Company till further

orders."

4. Learned counsel for the Appellant submits that before admission

of an application under Sections 7 or 9, the Adjudicating Authority has

no jurisdiction to restrain the 'Corporate Debtor' and its Directors from

alienating, encumbering or creating any third party interest on the assets

of the 'Corporate Debtor'. No such power can be exercised under Rule 11

of the National Company Law Tribunal Rules, 2016.

Company Appeal (AT) (Insolvency) No. 664 of 2019 -3-

5. It is submitted that inherent power can be exercised by the

Adjudicating Authority (National Company Law Tribunal), if it comes to

the notice on receipt of reply that the 'Corporate Debtor' somehow or

other trying to get adjournment or to alienate the matter after filing of the

application under Sections 7 or 9. No such ground having shown by the

'Operational Creditor' on the first day of issuance of notice or allowing the

'Corporate Debtor' to file reply. The Adjudicating Authority has no

jurisdiction to pass interim order.

6. Learned counsel appearing on behalf of the Respondent-

'Operational Creditor' while submitted that there was an apprehension

that the 'Corporate Debtor' and its Directors are intended to sell the

assets of the 'Corporate Debtor' to defeat the purpose of the 'I&B Code'

and cause wrongful losses to all the creditors including the 'Operational

Creditor' before the Adjudicating Authority. It is always open to the

Adjudicating Authority to pass interim order.

7. Before deciding the issue, we asked learned counsel for the

Appellant as to whether the 'Corporate Debtor' intends to sell or alienate

or transfer or create any third party interest on the assets of the

'Corporate Debtor', it is submitted that the 'Corporate Debtor' cannot give

any such undertaking as it will act taking into consideration the necessity

of the 'Corporate Debtor' for its day-to-day functioning.

Company Appeal (AT) (Insolvency) No. 664 of 2019 -4-

8. Rule 11 of the National Company Law Tribunal Rules, 2016 deals

with 'inherent powers' of the National Company Law Tribunal and reads

as follows:

"11. Inherent Powers.- Nothing in these rules shall

be deemed to limit or otherwise affect the inherent

powers of the Tribunal to make such orders as may

be necessary for meeting the ends of justice or to

prevent abuse of the process of the Tribunal."

9. From the aforesaid Rule 11, it is clear that the Tribunal

(Adjudicating Authority herein) can make any such order as may be

necessary for meeting the ends of justice or to prevent abuse of the

process of the Tribunal.

10. From the aforesaid provisions, it is clear that once an application

under Sections 7 or 9 is filed by the Adjudicating Authority, it is not

necessary for the Adjudicating Authority to await hearing of the parties

for passing order of 'Moratorium' under Section 14 of the 'I&B Code'. To

ensure that one or other party may not abuse the process of the Tribunal

or for meeting the ends of justice, it is always open to the Tribunal to pass

appropriate interim order.

Company Appeal (AT) (Insolvency) No. 664 of 2019 -5-

11. The Respondent- 'Operational Creditor' had issued Demand Notice

under Section 8(1) and after receipt of the reply under Section 8(2),

informed that the 'Corporate Debtor' has not made payment, filed an

application under Section 9. It was at this stage, the 'Operational

Creditor' brought to the notice of the Adjudicating Authority (National

Company Law Tribunal) that there is an apprehension that the 'Corporate

Debtor' may abuse the process of the 'I&B Code' to deny the creditors

from its legitimate rights if admission of the application under Section 9.

12. The Appellant having not given any undertaking or made any

specific reply and refused to say that they have no such intention, we are

of the view that it is always open to the Adjudicating Authority to pass

ad-interim order before admitting any application under Sections 7 or 9

or 10 of the 'I&B Code'. However, on reply, once the application is

admitted, then the order of 'Moratorium' under Section 14 will follow,

taking away the right of the Board of Directors of the 'Corporate Debtor'

to take any decision on behalf of the 'Corporate Debtor' prohibiting others

from taking any action against the 'Corporate Debtor' which is different

from interim order. On the other hand, if application under Sections 7 or

9 or 10 is rejected, the interim order will automatically stands vacated.

Company Appeal (AT) (Insolvency) No. 664 of 2019 -6-

13. For the reasons aforesaid, we are not inclined to interfere with the

impugned order. The appeal is dismissed. No costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Kanthi Narahari) Member(Technical) Ar/g

Company Appeal (AT) (Insolvency) No. 664 of 2019