2022 (8) TMI 549 - AT - Insolvency and Bankruptcy

Providing Police protection to the Liquidator to take over the custody of the School and the Petrol Pump that was functioning so far, on the properties, leased out to Rajeswari Educational Society and the Indian Oil Corporation by the Corporate Debtor to run the School and the Petrol Pump - categorical stand of the Applicants is that the company belongs to them and the said value of the company, as on today, is not less than three times to that of the liability of the company - HELD THAT - It must be borne in mind that there is no provision in the I B Code, 2016, that enables the Creditors other than those who triggered the Insolvency Resolution Process, to be impleaded as Parties. In law, the Impleadment of Parties, is ultimately, within the ambit of exercise of discretion by a Tribunal / Authority, as the case may be. More importantly, no person, can be added, unless he is a necessary party. A necessary party means that a person is very much necessary to the Constitution of Suit / an Appeal in a given Proceeding before a Court of Law / Tribunal / Authority. In fact, whether a person has an enforceable legal right is to be looked into by a Tribunal in regard to the impleadment of parties. To array a person as a prospective / proposed Respondent(s) is not a Substantive Right, but undoubtedly, it is one of the procedure and the Tribunal is to exercise its judicial discretion, of course, in a subjective manner, diligently. It cannot be gainsaid that, an Individual will not be added as a Party, just because he will be affected by the Tribunal incidentally, when it passes an Order in a given proceedings, before it. An Appellant / Plaintiff in a given legal proceeding is the dominus litis. He cannot be coerced to include a person as Party against whom, he does not want to contest, unless it is a compulsion of Law. It must be borne in mind that a necessary party is one without whom no Order can be passed effectively, in a given case. A proper party is one in whose absence an effective Order can be made, but whose presence is necessary, for a complete and final decision on the questions, involved in a given Proceeding. Further, a mere interest of a Party in the fruits of a litigation, cannot be a yardstick / test for his being impleaded as a Party. Keeping in mind the entire conspectus of the attendant facts and circumstances of the present case in a holistic fashion, comes to an inevitable and inescapable conclusion that the Applicants are not necessary/ proper parties, to be arrayed as Respondents and even without their presence, this Tribunal can dispose of the main Company Appeal, of course, on merits, based on the available material on record. Application dismissed.

Summary

Issues Involved:
1. Police protection to the Liquidator for taking over custody of certain properties.
2. Hardships faced by parties running a school and petrol pump on leased properties.
3. Allegations against the Liquidator by the Applicants.
4. Impleadment of Applicants as Respondents in the main appeal.
5. Allegations of misconduct by the Liquidator.
6. Applicability of Section 29A of the I&B Code, 2016.
7. Interest of Applicants in the adjudication of the appeal.
8. Necessity and propriety of adding parties to the proceedings.

Issue-wise Detailed Analysis:

1. Police Protection to the Liquidator:
The Appellants were dissatisfied with the order dated 02.03.2022 by the Adjudicating Authority (NCLT, Chennai), which provided police protection to the Liquidator to take over custody of a school and petrol pump on properties leased to Rajeswari Educational Society and Indian Oil Corporation by the Corporate Debtor.

2. Hardships Faced by Parties Running a School and Petrol Pump:
The Applicants argued that the Liquidator secured police protection to evict the management of the school and petrol pump, causing hardship. They contended that the Liquidator could only step into the shoes of the Corporate Debtor as a lessor and not evict them based on the impugned order of police protection.

3. Allegations Against the Liquidator by the Applicants:
The Applicants claimed that the Liquidator, in collusion with IDBI Bank officials, acted against the interests of the company and stakeholders. They alleged that the Liquidator's actions were detrimental to the company's interests and that the Liquidator had not complied with the orders of the Adjudicating Authority.

4. Impleadment of Applicants as Respondents in the Main Appeal:
The Applicants sought to be impleaded as Respondents No. 4 to 7 in the main appeal, arguing that their hardships should be heard before determining whether the impugned order should be set aside. The Liquidator opposed this, stating that the Applicants approached the Tribunal with unclean hands and had not fulfilled the orders of the Adjudicating Authority.

5. Allegations of Misconduct by the Liquidator:
The Applicants alleged that the Liquidator acted against the interests of the company and stakeholders, including selling assets at undervalued prices and shifting the company's office to his house. They also claimed that the Liquidator paid off one operational creditor's claim during the proceedings, violating the waterfall mechanism under Section 53 of the I&B Code, 2016.

6. Applicability of Section 29A of the I&B Code, 2016:
The Applicants argued that Section 29A of the I&B Code, 2016, which restricts certain persons from submitting a resolution plan, would only apply if the promoters sought to take back the company under specific provisions. They contended that they were ready to pay the total claims and should not be deprived of taking back the company.

7. Interest of Applicants in the Adjudication of the Appeal:
The Applicants claimed that they had an interest in the adjudication of the present appeal and that their grievances should be heard and adjudicated while determining any pending applications before the Adjudicating Authority and the Appellate Authority.

8. Necessity and Propriety of Adding Parties to the Proceedings:
The Tribunal highlighted that there is no provision in the I&B Code, 2016, that enables creditors other than those who triggered the insolvency resolution process to be impleaded as parties. The Tribunal emphasized that impleadment of parties is within the discretion of the Tribunal and that a necessary party is one without whom no order can be passed effectively. The Tribunal concluded that the Applicants were not necessary or proper parties to be arrayed as Respondents in the main appeal and that the main appeal could be disposed of on merits based on the available material on record.

Conclusion:
The Tribunal dismissed I.A. Nos. 584 and 585 of 2022 in Comp. App (AT) (CH) (INS) No. 269 of 2022, finding them devoid of merits. The Applicants were not deemed necessary or proper parties to be added as Respondents in the main appeal.