Rajiv Kumar Agarwalla vs Mr. Jitendra Lohia

IN THE MATTER OF: Rajiv Kumar Agarwalla ...Appellant Versus Rajesh Kumar Kejriwal & Ors. ...Respondents

Present: For Appellant : Mr. Bharat Sood, Advocate and Dr. Dhanpat Ram Agarwal, CA. For Respondents : Mr. Saikat Sarkar, Mr. Areak Ganguli, Mr. Shashank Agarwal and Ms. Bhavya Khatreja, Advocates for R-2. WITH Company Appeal (AT) (Insolvency) No. 285 of 2020

IN THE MATTER OF: Rajiv Kumar Agarwalla ...Appellant Versus Jityendra Lohia ...Respondent

Present: For Appellant : Mr. Bharat Sood, Advocate and Dr. Dhanpat Ram Agarwal, CA. For Respondent : Mr. Saikat Sarkar, Mr. Areak Ganguli, Mr. Shashank Agarwal and Ms. Bhavya Khatreja, Advocates for R-1.

ORDER

(Hybrid Mode)

[Per: Justice Rakesh Kumar Jain] (Oral)

31.01.2024 : This Appeal is directed against the order dated 02.01.2020,

by which an Application filed by the Appellant under Section 60(5) of the

Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as `The Code')

read with Rule 11 of the NCLT Rules, 2016, (Rules) for recalling of the order

dated 15.01.2018 has been dismissed on the ground that the Court does not

have a power to review its own order.

2. In brief, the `Olympia Credit and Mercantile Private Ltd.' filed an

Application under Section 7 of the Code read with Rule 6 of the Insolvency

and Bankruptcy Board of India (Application to the Adjudicating Authority)

Rules, 2016, bearing CP (IB) No.695/KB/2017, before the National Company

Law Tribunal, Kolkata, for the Resolution of an amount of ₹25 Lakhs/-. The

Application was admitted on 15.01.2018, Rajesh Kumar Kejriwal was

appointed as an Interim Resolution Professional (IRP) and Moratorium was

imposed.

3. The order dated 15.01.2018 was challenged by the Appellant

(suspended Director of the Corporate Debtor) by way of an Appeal viz. Comp.

App. (AT) (Ins.) No. 65/2018 titled as `Prithvi Finvest Company Pvt. Ltd.' Vs.

`Olympia Credits & Mercantile Pvt. Ltd.', which was dismissed on 22.02.2018

with the following order:

"Learned counsel for the Appellant submits that a settlement has been arrived between the Corporate Debtor and the Financial Creditor and thereby requested to set aside the impugned order dated 15th January, 2018 passed in CP(IB)695/KB/2017. This is also accepted by Mr. Keith Varghese, learned counsel appearing on behalf of the respondent. However, in view of the fact that the case has already been admitted and under Rule 8 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rule, 2016, the case can be withdrawn only before admission and in absence of any other illegality, the relief as sought for cannot be granted. The appeal is dismissed. No Costs."

4. Thereafter, the Appellant filed the present application under Section

60(5) of the Code read with Rule 11 of the NCLT Rules, 2016, bearing CA

No.642/2018 decided on 30.07.2018, for recalling of the order dated

15.01.2018, inter alia, on the ground that the order dated 15.01.2018 is

without jurisdiction because the `Prithvi Finvest Company Private Limited'

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 2 of 12 (Corporate Debtor) is a Non-Banking Financial Company which is excluded

from the operation of the provisions of the Code. However, the said application

was dismissed by the Tribunal on 02.01.2022 on the ground that the

Appellant is seeking review in the garb of recall and the ground that the

Tribunal had no jurisdiction to pass the order of admission was not initially

taken before the Tribunal. Aggrieved against the order dated 02.01.2022, the

present Appeal has been preferred.

5. The first and foremost question which arises is as to whether the

Appellant is a Non-Banking Financial Company (NBFC) or not. In this regard,

Counsel for Appellant has referred to Annexure A3 appended with the memo

of Appeal which is a certificate issued by the Reserve Bank of India,

Department of Non-Banking Supervision, Kolkata Regional Office as per

which, the Appellant has been registered to carry the business of Non-

Banking Financial Institution without accepting public deposit. Counsel for

Appellant has also handed over a list of the NBFC dated 30.10.2023 in which

the name of the Corporate Debtor is specifically mentioned. Thus, this fact is

not disputed by the Respondent (Liquidator). Therefore, it is well neigh proved

that the Appellant is NBFC.

6. Counsel for the Appellant has then argued that if the Appellant is NBFC

then whether it is exempted from the application of the provisions of the Code.

In this regard, he has referred to Section 227 of the Code to contend that

power is vested with Central Government to notify Financial Service Provider

and has referred to the Notification No. GSR 852 E dated 15.11.2019, which

has been issued by the Ministry of Corporate Affairs exercising its powers

under Section 227 (Z)(k) of sub-Section (2) of Section 239 of the Code to

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 3 of 12 formulate the Rules namely "the Insolvency and Bankruptcy (Liquidation

Proceedings of Financial Service Provider Application to Adjudicating

Authority), Rules 2019".

7. He has further referred to a Notification dated 18.11.2019, as per which

the NBFC which include Housing Finance Companies would come under the

purview of the Code if the asset of the Company is more than ₹ 500 Crores/-.

The said Notification is also reproduced as under:

8. Counsel for the Appellant has then referred to an order dated

09.11.2023, passed by this Court, in which it has been noticed that as per Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 4 of 12 the record of the Respondent, the current Asset of the Corporate Debtor is

amounting to ₹ 4,178,635,943/- which is less than the amount of ₹ 500

Crores/-, therefore, it does not come within the ambit of the Code. Order dated

09.11.2023 is also reproduced for a ready reference:

"Today, when the case was called out Learned Counsel Mr. Bharat Sood in compliance of the order dated 11.10.2023 submits that no Appeal has been preferred before the Hon'ble Supreme Court against the Judgment dated 21.11.2019 passed in Company Appeal (AT) (Ins.) No. 710 of 2019.

From the perusal of the order dated 22.03.2021 it appears that Mr. Kumarjit Banerjee sought time to file Vakalatnama on behalf of the Respondent Nos. 2 to 20 and time was granted to file the same. Further the matter was directed to be listed on 04.05.2021. Thereafter, Advocate Mr. Kumarjit Banerjee never appeared in court proceedings, neither the Vakalatnama nor the Rejoinder was filed. On last the occasion, Counsel for Appellant argued the matter and the matter was directed to be listed for today.

Today, Mr. Saikat Sarkar along with Mr. Bhavya Khatreja appear on behalf of Respondent No. 1 in Comp. App. (AT) (Ins.) No. 284 of 2020 and Respondent No. 21 in Comp. App. (AT) (Ins.) No. 285 of 2020. During the course of arguments, Learned Counsel for the Respondent No. 1 submits a notification issued by Ministry of Corporate Affairs on 01.05.201, whereby the exercise of the powers conferred by sub-section (3) of Section 1 of the IBC, 2016 (31 of 2016), the Central Government hereby appoints the 1st day of May, 2018 as the date on which the provisions of Section 227 to Section 229 (both inclusive) of the said Code shall come into force.

Further, Counsel for the Respondent submits another notification issued by Ministry of Corporate Affairs on 18.11.2019, whereby, in exercise of the powers conferred under Section 227 of the IBC, 2016 (31 to 2016), the Central Government in consultation with the Reserve Bank of India hereby notifies that Non-

banking finance companies (which include housing finance companies) with asset size of Rs. 500 crore or more, will be filled within the categories of financial Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 5 of 12 service providers for the purpose of their insolvency and liquidation proceedings. Let these copies be kept on record.

Counsel for the Respondent relied upon the Reply filed on behalf of the Respondent on 24.02.2021 and referred to Balance Sheet as on 31st March, 2017 of Prithvi Finvest Co. Pvt. Ltd., whereby, the assets including Non-current assets and Current Assets was amounting to Rs. 4,178,635,943/-, which is annexed as Annexure A at Page 17 of the Reply. It clearly shows that the assets were less than of Rs. 500 Crores.

Counsel for the Appellant seeks liberty to file hard copy of the Convenience Compilation. Permission accorded. He is directed to file the same and indicate the page no. and paragraphs of the judgments which they want to rely upon, within two weeks after Diwali Holiday. Further, Counsel for the Appellant is directed to serve soft copy of the same well in advance to the Respondent on their e-mail address.

List these matters for further arguments on 23rd January, 2024.

Interim Order, if any, shall continue till the next date of hearing.

9. Counsel for the Appellant has further submitted that the deposit of the

Appellant is only Intra-Corporate Deposits and not the Public Deposits,

therefore, it is excluded and is not a Corporate Person under Section 3(7) of

the Code.

10. He has relied upon two decisions of this Tribunal rendered in the cases

of `Randhiraj Thakur' Vs. `M/s. Jindal Saxena Financial Service Pvt. Ltd. &

Anr.', Comp. App. (AT) (Ins.) No. 32 & 50 of 2018, decided on 18.09.2018 and

`Housing Development Finance, PMC Private Ltd.' Vs. `RHC Holding Private

Limited', Comp. App. (AT) (Ins.) No.26/2019, decided 10.07.2019 to contend

that if the Corporate Debtor is NBFC then no proceedings can be initiated

against it under the provisions of the Code and can be raised at any stage for

recalling of the order and the order of admission initially passed was set aside.

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 6 of 12

11. He has also referred to a decision of the Hon'ble Supreme Court in the

case of `Harshad Chiman Lal Modi' Vs. `DLF Universal Ltd. & Anr.' (2005) 7

SCC 791, to contend that though the issue that the Appellant is a NBFC and

is not covered by any of the provisions of the Code was not taken at the time

when the application under Section 7 was admitted or even when the Appeal

filed by Appellant was dismissed though on grounds, but it can still be taken

up for the purpose of recalling of the order on the ground that if the Court is

having no jurisdiction on the subject matter of the dispute then the order

passed in such matter is a nullity.

12. In support of his argument he has also relied upon the decision of the

Hon'ble Supreme Court in the case of `Jagmittar Sain Bhagat & Ors.' Vs.

`Health Services, Haryana, & Ors.', (2013) 10 SCC 136 and `Isabella Johnson

(Smt.)' Vs. `M.A. Susai', (1991) 1 SCC, 494. He has also relied upon a decision

of this Court rendered by Three Members Bench in the case of `Saumil A.

Bhavnagri' Vs. `Messers Nimit Builders Private Limited', Comp. App. (AT) (Ins.)

No.710/2019, decided on 21.11.2019, in which the same view has been taken

that if the Court has no jurisdiction over the subject matter, it cannot decide

the same and any decision taken by the Court is a nullity.

13. On the other hand, in reply, Counsel appearing on behalf of the

Liquidator has submitted that the case is at the stage of liquidation and much

water has flown under the bridge since the date of admission of the order. It

is further submitted that against the order dated 15.01.2018, by which the

application was admitted, Appeal was preferred by the Appellant in which also

the plea that the Code is not applicable because the Appellant is an NBFC is

not taken. It is further submitted that the application bearing C.A. (IB) No.

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 7 of 12 642/KB/2018 was in fact, a frustrated attempt by the Appellant for the

purpose of recalling of the order in the garb of a review which has rightly been

dismissed by the impugned order dated 02.01.2020.

14. He has also referred to a decision of the Hon'ble Supreme Court in the

case of `Budhia Swain & Ors.' Vs. `Gopinath Deb & Ors.', (1999) 4 SCC 396, to

contend that the right of recall is lost by waiver. It is contended that the power

to recall a Judgement will not be exercised when the ground for re-opening

the proceedings or vacating the Judgement was available to be pleaded in the

original action but was not done or where a proper remedy in some other

proceedings such as by way of Appeal or revision was available but was not

availed. The right to seek vacation of a Judgement may be lost by waiver,

estoppel or acquiescence.

15. We have heard Counsel for the Parties and perused the record with their

able assistance.

16. The question of fact as to whether the Appellant is a NBFC or not been

duly proved by the Appellant by documentary evidence, i.e., the Certificate

issued by the RBI (appended as Annexure A-3) in the Appeal and also from

the current list issued in the Department of Non-Banking Supervision,

Kolkata Regional Office of the Reserve Bank of India on 30.10.2013, in which

the name of the Appellant has been categorically mentioned. Once it has been

proved that the Appellant was a NBFC even at the time when the Application

under Section 7 was filed or admitted on 15.01.2018, does it create an

obstacle in the way of the Appellant to setup this plea at the stage when the

Appeal filed by the Appellant against the order dated 15.01.2018 was

dismissed and this plea was not taken either before the Tribunal while

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 8 of 12 contesting the application under Section 7 or in the Appeal when the order

passed under Section 7 was challenged.

17. The answer to this question is in the decision of the Hon'ble Supreme

Court rendered in the case of `Harshad Chiman Lal Modi' (Supra), in which it

was held as under:

"30. We are unable to uphold the contention. The jurisdiction of a court may be classified into several categories. The important categories are (i) territorial or local jurisdiction; (ii) pecuniary jurisdiction; and (iii) jurisdiction over the subject-matter. So far as territorial and pecuniary jurisdictions are concerned, objection to such jurisdiction has to be taken at the earliest possible opportunity and in any case at or before settlement of issues. The law is well settled on the point that if such objection is not taken at the earliest, it cannot be allowed to be taken at a subsequent stage. Jurisdiction as to subject-matter, however, is totally distinct and stands on a different footing. Where a court has no jurisdiction over the subject-matter of the suit by reason of any limitation imposed by statute, charter or commission, it cannot take up the cause or matter. An order passed by a court having no jurisdiction is a nullity....

32. In Bahrein Petroleum Co. [(1966) 1 SCR 461 : AIR 1966 SC 634] this Court also held that neither consent nor waiver nor acquiescence can confer jurisdiction upon a court, otherwise incompetent to try the suit. It is well settled and needs no authority that "where a court takes upon itself to exercise a jurisdiction it does not possess, its decision amounts to nothing". A decree passed by a court having no jurisdiction is non est and its invalidity can be set up whenever it is sought to be enforced as a foundation for a right, even at the stage of execution or in collateral proceedings. A decree passed by a court without jurisdiction is a coram non judice."

18. Similar view has been taken by the Hon'ble Supreme Court in the case

of `Jagmittar Sain Bhagat & Ors.' (Supra), in which it has been held that:

"9. Indisputably, it is a settled legal proposition that conferment of jurisdiction is a legislative function and

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 9 of 12 it can neither be conferred with the consent of the parties nor by a superior court, and if the court passes a decree having no jurisdiction over the matter, it would amount to nullity as the matter goes to the root of the cause. Such an issue can be raised at any stage of the proceedings. The finding of a court or tribunal becomes irrelevant and unenforceable/inexecutable once the forum is found to have no jurisdiction. Similarly, if a court/tribunal inherently lacks jurisdiction, acquiescence of party equally should not be permitted to perpetrate and perpetuate defeating of the legislative animation. The court cannot derive jurisdiction apart from the statute. In such eventuality the doctrine of waiver also does not apply. (Vide United Commercial Bank Ltd. v. Workmen [1951 SCC 364 :

AIR 1951 SC 230] , Nai Bahu v. Lala Ramnarayan [(1978) 1 SCC 58 : AIR 1978 SC 22] , Natraj Studios (P) Ltd. v. Navrang Studios [(1981) 1 SCC 523] and Kondiba Dagadu Kadam v. Savitribai Sopan Gujar [(1999) 3 SCC 722] .)

10. In Sushil Kumar Mehta v. Gobind Ram Bohra [(1990) 1 SCC 193] this Court, after placing reliance on a large number of its earlier judgments particularly in Premier Automobiles Ltd. v. Kamlekar Shantaram Wadke [(1976) 1 SCC 496 : 1976 SCC (L&S) 70] , Kiran Singh v. Chaman Paswan [AIR 1954 SC 340] and Chandrika Misir v. Bhaiya Lal [(1973) 2 SCC 474 : AIR 1973 SC 2391] held, that a decree without jurisdiction is a nullity. It is a coram non judice; when a special statute gives a right and also provides for a forum for adjudication of rights, remedy has to be sought only under the provisions of that Act and the common law court has no jurisdiction; where an Act creates an obligation and enforces the performance in specified manner, "performance cannot be forced in any other manner".

11. The law does not permit any court/tribunal/authority/forum to usurp jurisdiction on any ground whatsoever, in case, such an authority does not have jurisdiction on the subject-matter. For the reason that it is not an objection as to the place of suing; "it is an objection going to the nullity of the order on the ground of want of jurisdiction". Thus, for assumption of jurisdiction by a court or a tribunal, existence of jurisdictional fact is a condition precedent. But once such jurisdictional fact is found to exist, the court or tribunal has power to decide on the adjudicatory facts or facts in issue. (Vide Setrucherla Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 10 of 12 Ramabhadraraju v. Maharaja of Jeypore [(1918-19) 46 IA 151 : (1919) 10 LW 362 : AIR 1919 PC 150] , State of Gujarat v. Rajesh Kumar Chimanlal Barot [(1996) 5 SCC 477 : AIR 1996 SC 2664] , Harshad Chiman Lal Modi v. D.L.F. Universal Ltd. [(2005) 7 SCC 791 : AIR 2005 SC 4446] and Carona Ltd. v. Parvathy Swaminathan & Sons [(2007) 8 SCC 559 : AIR 2008 SC 187] .)"

19. And in the case of `Isabella Johnson (Smt.)' (Supra), the Hon'ble

Supreme Court has observed as under:

"6. ...In our opinion a court which has no jurisdiction in law cannot be conferred with the jurisdiction by applying principles of res judicata. It is well settled that there can be no estoppel on a pure question of law and in this case the question of jurisdiction is a pure question of law."

20. The Hon'ble Supreme Court has held that there are three types of

jurisdiction exercised by the Court. Firstly, territorial, secondly, pecuniary

and thirdly, subject wise. In the present case, the dispute is in regard to

jurisdiction of the Court on the subject. As we have already observed from the

evidence led before us that the Appellant is a NBFC and the Asset of the

Appellant is less than ₹ 500 crores, therefore, it is exempted from the ambit

of the provisions of the Code and in such circumstances, the Tribunal, taking

upon itself jurisdiction to decide the lis between the parties under the Code

could not have decided the same, much less by admitting the application filed

under Section 7 of the Code. The argument of the Appellant is further

supported by a Three Member Bench decision of this Court rendered in the

case of `Randhiraj Thakur' (Supra), and in `Housing Development Finance, PMC

Private Ltd.' (Supra), in which a similar situation arose and the held that if the

NBFC is exempted then no order of admission could have been passed. So

much so, in the case of `Saumil A. Bhavnagri' (Supra), this Court, while

Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 11 of 12 allowing the Appeal against the order by which the recall was dismissed also

set aside the order which was originally passed.

21. No other point has been raised.

22. In view of the aforesaid facts and circumstances we are of the

considered opinion that this Appeal has merit and, therefore, the same is

hereby allowed and the impugned order is set aside.

23. It is needless to mention that since the Tribunal had no jurisdiction

over the subject matter, therefore, all the proceedings initiated from

15.01.2018 have become non-est.

Comp. App. (AT) (Ins.) No. 285 of 2020

1. This Appeal is directed against the order by which liquidation was

allowed. Since we have allowed Comp. App. (AT) (Ins.) No. 284 of 2020 by an

order of even date, holding that even the order of admission dated 15.11.2018

has become non-est, therefore, subsequent proceedings arising from the order

i.e., the order of the liquidation has also become non-est.

2. The present Appeal is allowed and the impugned order is set aside.

3. Before parting, we allow the Liquidator to file an appropriate application

before the Tribunal for recovery of his fee from the party concerned. In case,

any such application is filed within a period of one month from the passing of

this order, the Tribunal is requested to decide the application as early as

possible but preferably within a period of three months.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Ajai Das Mehrotra] Member (Technical) himanshu/kam Comp. App. (AT) (Ins.) Nos. 284 & 285 of 2020 12 of 12