Union Of India vs Oriental Bank Of Commerce

Union of India, Ministry of Corporate Affairs A Wing, 5th Floor, Shastri Bhawan New Delhi-110001. ....Appellant

Vs.

Oriental Bank of Commerce Plot No.5, Institutional Area Sector-32, Gurgaon - 122001. ....Respondent

Present: For Appellant: Mr. Sanjay Sorie, Director Legal MCA, Mr. Gopal Singh and Mr. A.K. Sahoo, Advocates for DROC.

For Respondent: Mr. Vishal Yadav, Advocate.

JUDGMENT

Venugopal M., J:

The Appellant has projected the present Company Appeal being

aggrieved against the order dated 22.11.2019 passed by the Adjudicating

Authority (National Company Law Tribunal), New Delhi, Principal Bench.

2. The Adjudicating Authority (National Company Law Tribunal), New

Delhi, Principal Bench while passing the impugned order on 22.11.2019

in (IB)-939(PB)/2018 had observed the following: -

"In pursuance of our direction, Mr. Manjeet Singh, Deputy ROC is present in the Court. He seeks

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 1 of 10 and is granted one week time to file affidavit on the following issues:-

a) The direction issued in numerous orders of admission of petition under Section 7, 9 & 10 of the Insolvency and Bankruptcy Code have not been complied with wherein we have asked the ROC to update the master data of the Corporate Debtor so as to inform the public at large about the status of the company which has come under Corporate Insolvency Resolution Process.

b) By virtue of imposition of moratorium under Section 14, the board of directors is suspended and why the uploading by RP who represent the Board of Directors/ management of the company is not permitted. In the alternative the mechanism for uploading the data like annual accounts etc. on the website of the ROC, may be clarified.

2. The needful shall be done within a week with a copy in advance to the counsel for the applicant.

3. The parawise reply to the present company application may also be filed.

4. We further direct that in all cases of Insolvency & Bankruptcy Code and Company Petition, the Union of India, Ministry of Corporate Affairs through the Secretary be impleaded as a party respondent so that authentic record is made available by the officers of the Ministry of Corporate Affairs for proper

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 2 of 10 appreciation of the matters. This shall be applicable throughout the country to all the benches of National Company Law Tribunal. The Registrar shall send a copy of this order to all NCLT benches so that respective Deputy Registrar may ensure that proper parties are impleaded." and directed the matter to be listed for further consideration on 11.12.2019.

3. It is the contention of the Appellant that the impugned order bristles

with numerous infirmities and that the Adjudicating Authority does not

possess the powers to pass an order, which was in the 'nature of rule'

under the guise of an 'order'.

4. According to the Appellant, the 'rule making power' is the exclusive

domain of the Central Government (being a subordinate legislation) and

the same is required to be placed after notification before the August

House of the Parliament.

5. It is represented on behalf of the Appellant that the Adjudicating

Authority before passing the impugned order ought to have issued notice

to the Union of India, since the subject matter in issue concerns about the

imposition of a new rule, which the said Authority has no power to make

especially its direction to implead.

6. It is the stand of the Appellant that the Hon'ble Supreme Court of

India in the decision of "Antonio S.C. Preria v. Ricardina Noronha (D)

By Lrs. - (2006) 7 SCC 740" had answered the issue, whether a 'third

person' to the dispute should be heard and held that the third person

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 3 of 10 must be heard in the same dispute if he or she has suffered or is likely to

suffer any substantial injury by the decision of the Hon'ble Court.

7. In this connection, on behalf of the Appellant it is brought to the

notice of this Tribunal that the Appellant had issued diligently, the 'Office

Memorandum' to all the concerned parties by directing them to furnish a

list of companies under 'CIRP, Liquidation and Master Data' for the same.

Moreover, the ingredients of Section 399(2) of the Companies Act, 2013

were taken into account.

8. Mr. Sanjay Sorie, Director Legal MCA points out that a separate

application is to be filed before the 'Tribunal' or 'Court' for production of

documents from the 'Registrar of Companies' by virtue of Section 399(2)

of the Companies Act, 2013 stands unenforceable and not as per Law.

Apart from this, the direction issued in the impugned order to the effect

that 'Corporate Insolvency Resolution Professional' is bound to produce

the record, which can be viewed or accessed by any public person for

analyzing and scrutinizing from the 'Ministry of Corporate Affairs 21

Portal'.

9. It is brought to the notice of this Tribunal on behalf of the Appellant

that the Central Government had implemented Companies (Registration

of Offices and Fees) Rules, 2014 and Section 399(1) (a) & (b) of the

Companies Act, 2013 had provided for inspection and furnishing the

certified copies of the documents kept by the Registrar on payment of

requisite fees. Added further, the Tribunal was not acting as an

'Adjudicating Authority' in terms of Section 60 of the Insolvency and

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 4 of 10 Bankruptcy Code, 2016. Further, the impugned order has a devastating

effect, since the Adjudicating Authority (Tribunal) lacks inherent

jurisdiction to pass the same.

10. Per contra, it is the contention of the Learned Counsel for the

Respondent/ Bank that in the impugned order no direction was issued to

the Bank and that the impugned order was passed in an Application

No.2024 of 2019 filed by the Resolution Professional relating to the

difficulties faced by him in carrying out the compliance of the provisions

of the Companies Act, 2013 and other relevant provisions of Law. That

apart, the general direction issued in the impugned order has no bearing

on the Respondent and that the present Appeal is filed against the wrong

Respondent. Hence, the Appeal is liable to be dismissed, in the interest

of justice.

11. It is to be pertinently pointed out that if a certain thing is to be

performed in a particular manner, then the same is to be done in that

way. In fact, a procedural wrangle cannot be allowed to be shaked or

shackled with.

12. It is axiomatic principle in law that if a third party is concerned with

a dispute, that party is to be arrayed as a necessary or proper party to the

adjudication of main issue centering around the dispute. Besides this, an

opportunity of hearing is to be given to a third party to explain its stand.

Suffice it for this Tribunal to make a pertinent mention that the rules of

'principles of Natural Justice' are to be adhered to by the Tribunal because

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 5 of 10 of the latent and patent fact that the act of Tribunal/ Court/ Competent

Authority shall cause no harm to any person.

13. Of course, the 'principles of natural justice' are not the edicts of a

statute. The 'principles of natural justice' are not to be imprisoned in a

straight-jacket cast-iron formula. Notwithstanding the same, observing

the tenets of natural justice is of paramount importance in the considered

opinion of this Tribunal.

14. A necessary party is a person who ought to have been arrayed as a

party and in whose absence no effective order can be passed by a Court

of Law/ Tribunal/ Appropriate Authority. A proper party is a party who

although not a necessary party is a person whose presence will enable the

Authority to effectively, efficaciously, comprehensively and adequately

adjudicate upon all the controversies centering around a given case.

15. In fact, 'impleadment of parties' is only a matter of fact and not a

matter of Law. Addition of parties/ striking out parties of course, is a

matter of discretion to be exercised by a Tribunal/ Court based on sound

judicial principles. The said discretion can be exercised either on the

application of a Petitioner/ Respondent or suo-motu or on the application

of a person who is not a party to any pending proceedings. However, the

said discretion cannot be exercised in a cavalier and whimsical fashion.

16. Whether a party is a proper/ necessary party for an effective and

efficacious adjudication of the controversy involved in a given case,

although it is for the concerned Tribunal/ Court/ Authority to subjectively

consider the same based on facts and circumstances of a case, which float

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 6 of 10 on the surface. In this regard, with an utmost care, caution and

circumspection a finding has to be rendered by passing necessary orders

in a objective and dispassionate manner for impleading a party to take

part in the main arena of proceedings. Undoubtedly, a notice will have to

be issued to the newly impleaded party and a just, fair and final order can

only be passed after hearing the Objections/ Reply of the said party. In

the instant case on hand, this Tribunal on going through the impugned

order dated 22.11.2019 passed by the National Company Law Tribunal,

New Delhi, Principal Bench in (IB)-939(PB)/2018, is of the considered

opinion that the Appellant was not provided with an adequate opportunity

of being heard in the subject matter in issue, except directions being

issued in regard to the filing of affidavit on the issues therein and the filing

of parawise reply. The time was sought for and one week's time was

granted by the Tribunal. Because of the fact that the impugned order

passed by the Tribunal wherein direction was issued in all cases of the

'Insolvency & Bankruptcy Code' and Company Petition, the Union of India,

Ministry of Corporate Affairs through Secretary be impleaded as a party

respondent so that authentic record is made available by the officers of

Ministry of Corporate Affairs for proper appreciation of the matter and this

being applicable throughout the country to all the Benches of National

Company Law Tribunal etc., such a wholesale, blanket and omnibus

directions cannot be issued in single stroke, as opined by this Tribunal.

Whether the Appellant through the Secretary, Ministry of Corporate

Affairs be impleaded as a necessary Party/ even as proforma Respondent

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 7 of 10 before the Tribunal is to be determined only on a case to case basis when

the need of a given case arises for rumination of issues, which comes up

before the respective Tribunals and when an order like the impugned one

is passed by the 'Tribunal' or 'Competent Authority' without hearing the

party concerned, by not following the 'principles of Natural Justice' by not

initially ordering notice and not taking into consideration of the objections

of that party, certainly, it will result in serious miscarriage of justice,

besides causing undue hardship.

17. As a matter of facts, there is no necessity to array the Appellant/

Union of India, Ministry of Corporate Affairs, New Delhi as a party in

respect of the applications filed under Section 7, 9 or 10 of IBC for the

purpose of reliable record or for appreciation of the matter. Even for the

purported violation under Section 68 to 77 of IBC and for taking action as

per Section 236(2) of the Code whether to implead the Central Government

as a proforma Respondent it is for the individual applicant to take a call

because he is the 'dominus litus' although, when no relief is claimed

against the Union of India, it need not even be a proforma party in an

application filed under IBC, since it is an Otiose one. In public interest/

criminal offences being taken up before the special Court under Section

435 of the Companies Act, 2013 in a Company Petition/ Appeal before the

Tribunal, the Union of India through any authorized officer/ person can

be added as a party and in other cases it is for the Applicant/ Appellant

or for the Tribunal to take an ultimate decision for showing a person as a

necessary or proper party. In case of misjoinder of a party, the Applicant/

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 8 of 10 Appellant/ the Tribunal has always the option to strike out/ remove the

name of Union of India from the array of parties, in the proceedings

pending before it.

18. In the present case, the 'Ministry of Corporate Affairs' was neither

arrayed as a party nor impleaded in the subject matter before the

Adjudicating Authority. Also, that the 'Registrar of Companies' had not

filed any response/ reply/ counter (in respect of the clarification sought

for) prior to the passing of the impugned order. An Adjudicating Authority

(National Company Law Tribunal) has a quasi-judicial one is to abide by

the principles of 'Natural Justice'. After providing a reasonable

opportunity of being heard to the other side, the Tribunal can pass

appropriate orders. If an order is passed by the Tribunal, without

affording an opportunity of hearing to the parties, the same is

unsustainable in Law as per decision Sree Metaliks Ltd. v. Union of India

(2017) 203 Com Cases 442 : (2017) 140 CLA 30 (Cal).

19. Be that as it may, after going through the impugned order, this

Tribunal comes to an inevitable and irresistible conclusion that the

directions issued in respect of Application No.2024/ 19 filed by the

Resolution Professional to implead the 'Secretary of Ministry of Corporate

Affairs' as party Respondent in all cases of I&B Code is nothing but beyond

the power of the Tribunal and it tantamounts to imposition of a new rule

in a compelling fashion. In short, the impugned order making it applicable

throughout the country to all the Benches of the National Company Law

Tribunal is untenable one and the said order suffers from material

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 9 of 10 irregularity and patent illegality in the eye of Law. As a logical corollary,

this Tribunal, this Tribunal set aside the impugned order dated

22.11.2019 in (IB)-939(PB)/2018 in furtherance of substantial cause of

justice. Consequently, the present Appeal succeeds.

20. In fine, the Company Appeal No.1417 of 2019 is allowed. The

impugned order dated 22.11.2019 in (IB)-939(PB)/2018 passed by the

National Company Law Tribunal, New Delhi, Principal Bench is set-aside

for the reasons ascribed by this Tribunal in this Appeal. However, there

shall be no order as to costs. I.A. No.4056 of 2019 is closed with a

direction being issued to the Appellant to file the certified copy of the

impugned order dated 22.11.2019 within one week from today.

[Justice Venugopal M.] Member (Judicial)

[V. P. Singh] Member (Technical)

[Alok Srivastava] Member (Technical)

NEW DELHI

22nd May, 2020

Ash

Company Appeal (AT) (Insolvency) No. 1417 of 2019 Page 10 of 10