Phoenix Arc Pvt Ltd vs M/S. Patna Highway Projects Ltd & Anr

Contempt Case (AT) No. 28 of 2023 in Comp. App. (AT) (Ins) No. 131 of 2020

IN THE MATTER OF: Phoenix ARC Pvt. Ltd. ...Appellant

Versus

Patna Highway Projects Ltd. & Anr. ...Respondents

Present: For Appellant : Mr. Sachit Kumar Sahijipal, Mr. Amarinder Singh, Mr. Saurabh S. Sinha, Mr. Rishbha, Advocates For Respondents : Mr. Ramji Srinivasan, Sr. Adv. With Mr. Abhijeet Sinha, Mr. Samar Bansal, Mr. Kaustubh Chaturvedi, Ms. Namrata Saraogi, Vedant, Karti K Pandey, Advocates for CoC Mr. Krishnendu Datta, Sr. Adv. with Ms. Pooja, Ms. Mahima, Mr. Karan, Mr. Rahul, Advocates for RP

ORDER

Per: Justice Rakesh Kumar Jain: (Oral)

11.10.2023: This contempt petition has been filed by AJR Infra and

Tolling Ltd. (formerly Gammon Infrastructure Projects Ltd.) against Sutanu

Sinha (Resolution Professional of Patna Highway Projects Ltd.) and one Ajay

Walimbe for the alleged violation of the order dated 24.01.2020 which came

to be passed in CA (AT) (Ins) No. 131 of 2020 in the matter of Phoenix ARC

Pvt. Ltd. Vs. Patna Highway Projects Ltd. & Anr. The relevant portion of the

order dated 24.01.2020 is reproduced for a quick reference:-

"In the meantime, the Interim Resolution Professional will not constitute any Committee of Creditors, if not yet constituted. However, he will ensure that the company remains going concern and will take assistance of the (suspended) Board of Directors. The persons who are working will perform their duties including the paid Directors. The person who is authorised to sign the bank cheques may sign cheques only after authorisation of the Interim Resolution Professional' with counter signature of the Interim Resolution Professional' at the back side of the cheques. In such case, the Bank shall release the payment. The Interim Resolution Professional will place this order before the Banks, in which accounts of Corporate Debtor are maintained. The Bank Account(s) of the Corporate Debtor be allowed to be operated for day-to-day functioning of the Company such as for payment of current bills of the suppliers, salaries and wages of the employees/workmen, electricity bills etc."

2. In brief, Corporation Bank (Financial Creditor) filed an application

under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code')

for initiation of Corporate Insolvency Resolution Process against Patna

Highway Projects Ltd. which is stated to be a special purpose vehicle of

Gammon Infrastructure Projects Ltd. The said application was admitted and

CIRP was initiated. This order was challenged by way of an appeal by Phoenix

ARC Pvt. Ltd., one of the Financial Creditor, in which the aforesaid order dated

24.01.2020 was passed.

3. The case of the Petitioner is that the Respondent No. 1 (RP) has violated

the order by appointing a project monitoring consultancy during the

subsistence of the order i.e. in the month of June, 2020. However, it is a

conceded fact that the CA (AT) (Ins) No. 131 of 2020 was withdrawn by the

Appellant on 20.07.2020 with the following order:-

"Mr. Prateek Kumar, Learned Counsel for the Appellant seeks to withdraw the appeal. The appeal is accordingly dismissed as withdrawn. The interim directions, if any, shall stand vacated."

4. It is also submitted that the Respondent No. 2 created a WhatsApp

group in the month of June, 2020 which was joined by the IRP etc.

5. At the time of preliminary hearing held on 26.09.2023, the Respondent

No. 1 raised two objections about the maintainability of the petition, the said

objections were recorded. The order is as under:-

"Counsel for Respondent No. 1, at the threshold, has raised two objections, firstly, as to how, the petition is maintainable by a 3rd party and secondly, the petition itself is barred by limitation.

Faced with this argument, Counsel for the Appellant prays for some time to prepare his case to answer these issues. On his request, adjourned to 11th October, 2023."

6. At the outset, in order to answer the first question as to how the petition

is within the period of limitation, Counsel for the Petitioner has relied upon a

decision of the Hon'ble Supreme Court in the case of Pallav Sheth Vs.

Custodian and Ors. (2001) 7 SCC 549 to contend that though there is a

limitation of one year, as per Section 20 of the Contempt of Courts Act, 1971,

to initiate the contempt proceedings for the violation of an order yet the

petition can still be filed if the contemnor has concealed the facts and acted

fraudently.

7. In so far as, the issue of the locus standi is concerned, he has relied

upon another decision of the Hon'ble Supreme Court in the case of Girish

Mittal Vs. Parvati V. Sundaram & Anr. (2019) 20 SCC 747 to contend that the

contempt can be initiated by an aggrieved third party.

8. On fact, it is submitted that the Petitioner came to know from the order

of the Patna High Court passed in Criminal Miscellaneous No. 13844 of 2023

that the Petitioners therein were the promoters /directors of the I Value

Advisors i.e. PMC. It is submitted that in the said case FIR was registered in Kudhani (Turki O.P) P.S. Case No. 587 of 2022 and was challenged but the

petition was dismissed.

9. It is further submitted that the Petitioner was not aware about the

appointment of PMC till then that it was appointed in June, 2020.

10. On the other hand, while contesting the petition, Sr. Counsel Ramji

Srinivasan appearing on behalf of the Respondent No. 2 has argued that the

Petitioner was very much present in various meetings of the CoC i.e. 3rd CoC

meeting held on 10.09.2020 and 04th CoC meeting held on 16.09.2020. It is

further submitted that the Petitioner was however not present by their choice,

in the 2nd CoC meeting, which was held on 21.08.2020 in which resolution

was passed for approval and ratification of the appointment and fee/expenses

of PMC/Bid Advisors of the CD. The said resolution is reproduced as under:-

"RESOLVED FURTHER THAT pursuant to the provisions of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and other applicable provisions, if any, of the Insolvency and Bankruptcy Code, 2016 and in accordance with rules and regulations made there under, the fees of INR 21,00,000/- plus applicable taxes including out of pocket expenses to be paid to I value Advisors Pvt. Ltd. as the PMC/Bid Advisors of the Resolution Professional be and is hereby approved and ratified by the Committee of Creditors."

11. It is further submitted that the Petitioner is in the habit of filing

frivolous petitions and even the appeal filed by the Petitioner earlier against

the order by which the resolution plan was approved was dismissed by this

Court. In this regard, he has referred to CA (AT) (Ins) No. 920 of 2022 which

was filed against the order dated 10.05.2022 passed by the National Company

Law Tribunal, Principal Bench, New Delhi by which I.A. No. 1538 of 2021 was

allowed, filed by the RP for approval of the resolution plan. This appeal was filed by the promoter of the Corporate Debtor (M/s Patna Highway Projects

Ltd.). It is further submitted that in the said case, this court has also dealt

with the issue of fraud etc as submitted by the Petitioner. Para 13 of the order

needs to be highlighted which read as under:-

"13. The submission of learned counsel for the Appellant that there was collusion between the Resolution Professional and the Successful Resolution Applicant also does not merit any acceptance. Fraud and collusion is very easy to allege but difficult to prove. No such materials have been brought on the record nor there are any specific pleadings on basis of which any conclusion can be drawn that there was any fraud and collusion in the conduct of the CIRP. Learned counsel for the Respondent is right in his submission that this Appeal is nothing but an attempt to derail the resolution and revival of the Corporate Debtor."

12. He has also argued that Respondents have not committed any contempt

because the order was only with regard to the direction to the RP that he will

ensure that the company remains a going concern and will take assistance of

the suspended board of directors. It is submitted that the RP was de-facto in

charge of the Corporate Debtor and was also asked to take assistance of the

suspended board of directors.

13. In the end, it is submitted that the present petition is totally frivolous

and has been filed with the ulterior motive which deserves to be dismissed

with exemplary costs.

14. Sr. Counsel Krishnendu Datta appearing on behalf of the Respondent

No. 1 (RP) has opened his argument, while contesting the petition, on the

ground of limitation. It is submitted that this Court has the jurisdiction to

issue contempt order under Section 425 of the Companies Act, 2013. The said

provision is reproduced as under:-

"Section 425: Power to punish for contempt.

*425. The Tribunal and the Appellate Tribunal shall have the same

jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may exercise, for this purpose, the powers under the provisions of the Contempt of Courts Act, 1971, which shall have the effect subject to modifications that--

(a) the reference therein to a High Court shall be construed as including a reference to the Tribunal and the Appellate Tribunal;

and

(b) the reference to Advocate-General in section 15 of the said Act shall be construed as a reference to such Law Officers as the Central Government may, specify in this behalf."

15. It is further submitted that Section 20 of the Contempt of Courts Act,

1971 provides the limitation for action for contempt which is also reproduced

as under:-

"20. Limitation for actions for contempt.--No court shall initiate any proceedings of contempt, either on its own motion or otherwise, after the expiry of a period of one year from the date on which the contempt is alleged to have been committed."

16. In support of his argument, he has relied upon a decision of this

Tribunal rendered in the case of Deccan Chronicle Holdings Ltd. Vs. Srei

Multiple Asset Investment Trust Vision India Pund, Successful Resolution

Applicant & Ors. Contempt Case (AT) No. 28 of 2021 in I.A. No. 953 of 2020

in CA (AT) (Ins) No. 553 of 2019 in which this Court has held that there is a

embargo contained in Section 20 of Contempt of Courts Act 1971 to exercise

contempt jurisdiction to take cognizance even in the matters pertaining to the

Code. It is further submitted that the decision in the case of Pallav Sheth

(Supra) is not applicable to the facts of the present case because it was

predicated on Section 17 of the Limitation Act which deals with fraud and

mistake whereas in the present case there is no allegation by the Petitioner that there has been a concealment on the part of the Respondent about the

appointment of PMC. In case, it is submitted by the Petitioner that they came

to know later on about it then it does not mean that the Petitioner would have

the benefit of Section 17 of the Limitation Act and would escape from the

rigours of Section 20.

17. In so far as, the question of locus standi is concerned, it is submitted

that the decision in the case of Girish Mittal (Supra) is also not applicable as

the said judgment was decided on its own facts because in that case the

matter was before the Court in regard to the information not supplied under

the RTI and it was held that the order of the court is general in nature and

therefore, the direction contained therein may cause prejudice to any one who

may be called an aggrieved person but here in this case the Petitioner is

alleging grievance of private nature and the order passed by this Court was

not an order in rem but in personam. He also submitted that the RP has not

violated any part of the direction contained in the order dated 24.01.2020. In

this regard, he has referred to Section 17 of the Code to contend that as soon

as he was appointed as the IRP, Section 17(1)(a) provides that the

management of the affairs of the corporate debtor shall vest in the interim

resolution professional, Section 17(1)(b) further provides that the powers of

the board of directors or the partners of the corporate debtor, as the case may

be, shall stand suspended and shall be exercised by the interim resolution

professional and Section 17(1)(c) further provides that the officers and

managers of the corporate debtor shall report to the interim resolution

professional and provide access to such documents and records of the

corporate debtor as may be required by the interim resolution professional. He has also referred to Section 17(2) wherein the powers of the RP vis a vis

management of the CD are delineated. He has also referred to Section 19 of

the Code where he can seek cooperation from the personnel of the Corporate

Debtor. He has then referred to Section 20(1) to contend that the interim

resolution professional shall make every endeavour to protect and preserve

the value of the property of the corporate debtor and manage the operations

of the corporate debtor as a going concern.

18. In sum and substances, it is submitted that he has rather followed the

order of this Court because he was to ensure that the company remains a

going concern and in that process he had appointed the PMC which was later

on ratified by the CoC in its own wisdom, therefore, it is submitted that there

is no contempt committed by the Respondent No. 1 (RP) as well.

19. In rebuttal, Counsel for the Petitioner has reiterated the stand taken by

him at the time when he argued the case in affirmative.

20. We have heard Counsel for the parties and perused the record with their

able assistance.

21. It is well settled that the contempt is a serious matter because it causes

both physical and fiscal punishment specially when the contempt has been

alleged against a professional (RP). The Petitioner has to make out a full proof

case about the wilful violation of the order passed by the Tribunal for the

purpose of seeking attention to issue an order of contempt and punish

accordingly. In the present case, the petition has been filed after the expiry of

limitation of one year as the order was passed on 24.01.2020 and the petition

has been filed on 12.08.2023 and is clearly barred by limitation because the Petitioner was very well aware of the appointment of the PMC which was duly

ratified in the second meeting of CoC held on 21.08.2020 and the Petitioner

attended 3rd and 4th CoC meeting held on 10.09.2020 and 16.09.2020

subsequently.

22. The case of the Petitioner is that he came to know about the

appointment of the PMC somewhere in April, 2023 when the alleged

promoters/directors of the PMC challenged the FIR registered against them

before the Patna High Court and were not successful cannot be believed.

Therefore, in our considered opinion, in so far as the decision in the case of

Pallav Sheth (Supra) is concerned it is on its own facts and cannot be applied

to the present controversy. The petition is therefore in our considered opinion

highly belated and not maintainable.

23. In so far as, the question of locus standi is concerned, the decision in

the case of Girish Mittal (Supra) is also of no help because in that case it was

an order passed in rem which could have affected a person in the street,

therefore, the contempt was filed because of the direction issued by the

Hon'ble Supreme Court were not followed but here is the case in which the

direction issued was between the parties, therefore, it was a decision in

personam.

24. Be that as it may, even on merits we are satisfied that there is no

contempt made out in this case because the order which was passed on

24.01.2020 was only to the extent that the CoC shall not be constituted if it

is not yet constituted and the RP has to ensure that the company remains a

going concern which is also the spirit of Section 20(1) of the Code and further the RP was directed to take assistance of the suspended board of director

which is again the spirit of Section 19 of the Code.

25. It appears to us that the Petitioner has some ulterior motive in filing

this petition as stated by the Counsel for the Respondents that the Petitioner

is filing various petitions in various court, therefore, it would be just and

expedient if this petition is dismissed with exemplary costs so that it may

somehow, if not to punish the Petitioner for filing frivolous petition in court

and wasting its time but at least to deter it in future. Accordingly, this petition

is hereby dismissed with five lakhs costs, the petitioner shall deposit the costs

in the Prime Minister Relief Funds within a period of one month from the date

of receipt of certified copy of this order. In case, the costs is not deposited, the

contempt proceedings shall be initiated against the Petitioner for that

purpose.

The registry is directed to send a copy of this order to the Petitioner for

compliance.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sheetal/Ravi