2023 (1) TMI 255 - AT - Insolvency and Bankruptcy

Jurisdiction of Adjudicating Authority, while hearing any Application under Insolvency and Bankruptcy Code, 2016 - initiation of roving and fishing enquiry - It is submitted that the Adjudicating Authority had no jurisdiction to ask for materials and documents as has been enumerated in the Order impugned - Section 424(2) of the Companies Act, 2013 - HELD THAT - The Adjudicating Authority had ample jurisdiction to ask for documents from Applicant/Appellant as well as the Resolution Professional for determination of the issues raised. The Order of the Adjudicating Authority indicate the doubts regarding the claim of the Applicant especially when claim totaled Rs. 12893,39,03,000/- arising out of three assignment deeds which were allegedly short-stamped. In the present case, we are not required to express any opinion with regard to the merits of the claim of the Appellant especially when I.A. No. 203/JPR/2022 filed by the Appellant is pending consideration and the Direction in the I.A. No. 203/JPR/2022 seeking various documents were with the object of examining the veracity of the claim. In so far as the direction of the personal appearance of the directors of the Appellant is concerned, which direction related to appearance on the next date of hearing and the next date having already over and Appellant having also appeared and participated in the proceeding, there is no necessity to examine the correctness of the direction for personal appearance. In pursuance of the Impugned Order, it appears that several documents have been provided for, we see no reason to keep this Appeal pending, we only observe that in event with regard to any particular documents, there is any difficulty faced by the Appellant/Applicant, it is always open for the Applicant/Appellant to file an appropriate application seeking exemption giving reasons for not producing the particular document which Application may be considered by the Adjudicating Authority and appropriate order be placed therein to prosecute the proceedings further. The Adjudicating Authority having jurisdiction to ask for documents and doubts having been expressed by the Adjudicating Authority with regard to the claim of the Appellant, and the Application I.A. No. 203/JPR/2022 being still pending for consideration, we see no reason to entertain this Appeal, at this stage where the proceeding has further proceeded, documents submitted, report filed. Appeal dismissed.

Summary

Issues:
1. Challenge to Order dated 10th May, 2022 in I.A. No. 203/JPR/2022 in IB No. 39/PB/2018.

Detailed Analysis:
1. The Appeal was filed against the Order dated 10th May, 2022, arising from the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Appellant, claiming to be a Financial Creditor, filed a claim of Rs. 12893,39,03,000/-, which was challenged due to being declared a related party to the Corporate Debtor. The Appellant sought reconstitution of the Committee of Creditors, leading to the Adjudicating Authority issuing directions for documents and details.

2. The Appellant's Counsel argued that the Adjudicating Authority exceeded jurisdiction by requesting unnecessary documents, initiating a roving inquiry, and wrongly declaring the Appellant a related party. The Counsel contended that the Authority erred in seeking personal appearance and denying an interim prayer for a stay on the CoC meeting.

3. The Resolution Professional's Counsel countered, stating that the Authority had the power to request relevant documents to verify the claim's authenticity. The claim was deemed fake, and the Adjudicating Authority was justified in seeking details, including the Appellant's status under the Companies Act, 2013.

4. The Respondent's Counsel asserted that the Appellant lacked transparency in the insolvency process, justifying the Authority's request for documents to uncover the alleged false claim.

5. The Tribunal reviewed the arguments and examined the jurisdiction of the Adjudicating Authority under the NCLT Rules, 2016, emphasizing the power to call for evidence and information necessary for decision-making.

6. The Tribunal found that the Adjudicating Authority had the jurisdiction to request documents to address doubts regarding the Appellant's claim of Rs. 12893,39,03,000/- arising from allegedly short-stamped assignment deeds.

7. Referring to the Companies Act, 2013, the Tribunal highlighted the Tribunal and Appellate Tribunal's powers to summon persons, examine under oath, and demand document production, supporting the Adjudicating Authority's actions.

8. Citing a Supreme Court judgment, the Tribunal emphasized the importance of litigants approaching the court with clean hands, indicating that the Adjudicating Authority's actions were justified to verify the claim's authenticity.

9. The Tribunal concluded that the Appeal was premature as the Adjudicating Authority's directions were being followed, with documents submitted and a report filed. The Appeal was dismissed with the option for the Appellant to seek exemption for specific document submissions if needed.

10. The Tribunal's decision was based on the ongoing proceedings, document submissions, and the pending consideration of the initial Application, indicating no reason to continue the Appeal at that stage.

In summary, the Tribunal upheld the Adjudicating Authority's jurisdiction to request documents, dismissed the Appeal as premature, and provided the Appellant with the option to seek exemptions for document submissions as needed.