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TMI Blog2021 (4) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... chase Agreement dated 21.11.2012 and that the said amount was a debt disbursed against the consideration for advance payment as per the agreement and hence was covered within the definition of financial Debt and that the Respondent / Applicant would be treated as Financial Creditors and resultantly admitted the Section 7 Application of the Respondent / Financial Creditor / Applicant for initiation of CIRP - It is to be mentioned that an inherent power of the Tribunal has its gross root in necessity and the said power can be exercised by a Tribunal based on the rudimentary principle that an act of Court shall prejudice no person . Further, to meet the ends of justice an inherent power of a Tribunal being Co-extensive with need can be exercised to render justice to the litigants. Undoubtedly, the Adjudicating Authority (National Company Law Tribunal, Kochi Bench, Kerala) had rightly allowed application on 28.01.2021 (filed under Rule 11 of National Company Law Tribunal Rules, 2016 by the Respondent / Financial Creditor ) of course, based on proper material before it and the same requires no interference in the hands of this Appellate Tribunal sitting in Appeal . Looking at from any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the decision of the Hon'ble Supreme Court in (1996) 5 SCC 550-, (2003) 8 SCC 319 and 1995(2) CLJ 388 to state that a person playing deceit or fraud is not entitled to be heard. 5. We have heard the learned Senior Counsel Shri Aravind Pandian appearing for the applicant/financial creditor and the learned counsel for the respondent/Corporate Debtor Shri PV George (Puthiyedam). With respect to the contention of the respondent regarding the disqualification of the Director, the learned Senior counsel has stated that the Hon'ble Madras High Court vide judgment dated 15.12.2020 in W.P.No.18641 of 2020 and W.M.P. Nos.23123, 23125, 23127 and 23129 of 2020 held as under: "43. In the result, these appeals are allowed by setting aside the impugned order dated 27.1.2020. Consequently, the publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is here by quashed. As a corollary to our conclusion on the deactivation of DIN, the DIN of the respective directors shall be reactivated within 30 days of the date of receipt of a copy of this order. Nonetheless, we make it clear that it is open to the ROC concerned to initiate action wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand of the 'Appellant' that it was demonstrated before the 'Adjudicating Authority' that the 'Respondent'/'Petitioner' is neither an 'Operational Creditor' nor a 'Financial Creditor' and further that there is no 'debt' and that the 'Respondent' is not in 'Default' under the Code. 5. The Learned Counsel takes a stand that the competence of the signatory to the Section 7 Application of the I & B Code, 2016 was also questioned as he was disqualified as 'Director' at the time of signing the Section 7 'Application' and the 'Consent Terms'. Also that, the Order of the Hon'ble Madras High Court whereby the disqualification was set aside is not an absolute one. 6. The Learned Counsel for the 'Appellant' projects an argument that there is a gross abuse of Rule 11 of the National Company Law Tribunal Rules, 2016, since there is no power enjoined upon the 'Adjudicating Authority' to 'Review' its own 'Orders'. 7. The Learned Counsel for the 'Appellant' brings it to the notice of this 'Tribunal' that an 'Application' was filed in Form-1 by the Respondent/Applicant, seeking to recover certain amounts along interest on the premise that the agreement for purchase of shares did not fructify and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical in nature. 12. The Learned Counsel for the 'Appellant' emphatically contends that the 'Adjudicating Authority' had reviewed its own order disposing of the IBA /13/KOB/2020 by reserving liberty to the 'Applicant' to file fresh application and that there is no error 'apparent on the face of the record' so as to 'Review' the said orders. In this connection, the Learned Counsel for the 'Appellant' relies on the decision of the Hon'ble Supreme Court in 'Delhi Administration' V. 'Gurudip Singh' reported in AIR 2000 SC, P.3737 and that of the decision of the Honble Supreme Court in MA Murthy V 'State of Karnataka & Ors.' reported in 2003 7 SCC at P.517. 13. The Learned Counsel for the 'Appellant' submits that the 'Tribunal' will have jurisdiction to 'Review' its 'Order' only if it is authorised by the 'Statute' and in the absence of the same, it cannot assume jurisdiction to 'Review' its own order and in this regard, the Learned Counsel for the 'Appellant' refers to (i) the decision of the Hon'ble Madras High Court in Mallappa Chettiar and Others V.Alagiri Naicker & Ors reported in AIR 1931 Mad 791, (ii) the decision of the Hon'ble Madras High Court in Manilal Gadiya V Mangilal Kes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behind Athappa Chetty c. Ramanatham Chetty MANU/TN/0076/1919; (1919) 10 L.W 359 : 37 M.L.J. 536 to what is undoubtedly the leading case in this matter, the Full Bench Calcutta decision, the headnote is both correct and clear. "Inherent jurisdiction must be exercised with care, subject … to the condition that the matter is not one with which the Legislature has so specifically dealt as to preclude the exercise of inherent power". (ii) The Learned Counsel for the 'Appellant' relies on the decision of the Hon'ble High Court of Madras in Manilal Gadiya V Mangilal Kesarinath Sewak and Ors. reported in AIR 1977 Mad P.140, wherein at Pargraph 5, it is observed as follows: " On the other hand, Mr. Raja Masilamani pointed out that the Court's jurisdiction cannot be invoked under Secs. 151 and 152 C.P.C for the purpose of amending the decree. There is absolutely no error, clerical or otherwise to invoke the jurisdiction of Court under Sec. 152. Further when the remedy is available for the petitioner to file either review petition or appeal, the Court's jurisdiction cannot be invoked under Sec. 151 C.P.C. For this proposition he cited the decisions in Abdul Razack Sahib v. Abdul Ham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly the hearing of an appeal by the same officer who decided the case. Therefore, the course of decisions in this country has been to the effect that a right to review is not an inherent power: see -'David Nadar v. Manicka Vachaka Desika Gnana Sambanda Pandara Sannathi', 33 Mad 65; --'LA=ala Prayag lal v. jai Narayan singh', 22 Cal 419; -- 'Baijnath Ram Goenka v. Nand Kumar Singh', 34 Cal 677 and - 'Anantharaju Shetty v. Appu Hegade', 37 MLJ 162". Respondent's Submissions: 18. The Learned Counsel for the 'Respondent' submits that the 'Respondent' filed an 'Application No.IBA/13/KOB/2020 (under section 7 of the Insolvency & Bankruptcy Code, 2016) before the 'Adjudicating Authority' (National Company Law Tribunal, Kochi Bench, Kerala) and that by an order dated 25.8.2020, the said authority was pleased to allow the 'Application' and declared 'Moratorium'. 19. The Learned Counsel for the 'Respondent' points out that before the paper publication was effected, the 'Appellant' expressed willingness to settle the matter on the following terms and the said mail for 'Settlement Terms' runs as under: "Please see the matter (below) for withdrawing the application and do the needful Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s disposed of. However, the Applicant is at liberty to file fresh application if the Corporate Debtor has not Complied with the conditions stipulated in the settlement as mentioned in FA." 21. The Learned Counsel for the 'Respondent' contends that after the said terms arrived at between the parties, the 'Appellant' had not come forward to make payment towards 'Settlement' which was due on 30.11.2020 and requested the 'Appellant' not to present the cheque amounting to ₹ 2,14,00,000/- dated 30.11.2020 on the said date and sought time on several occasions. 22. The Learned Counsel for the 'Respondent' contends that 'Directors' of the Respondent' came to note that they were disqualified as 'Directors' and filed a Writ Petition 18641 of 2020 before the Hon'ble High Court of Madras, challenging their disqualification and the said Writ Petition was allowed by an order dated 15.12.2020 which reads as under : "In the result, these appeals are allowed by setting aside the impugned Order dated 27.1.2020. consequently, the publication of the list of disqualified directors by the ROC and the deactivation of the Din of the Appellants is hereby quashed. As a corollary to our conclusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication' under Section 7 of the Insolvency & Bankruptcy Code, 2016, the 'Respondent' is protected as per Section 167(a) of the Companies Act, 2013, and it is clear that the 'Office of the Director' shall become vacant in all the Companies other than the Company which is in 'Default', as per Section 167(a) of the Companies Act, 2013. 28. The Learned Counsel for the 'Respondent' submits that the disqualification of the Directors for the 'Respondent's default was quashed by the order passed by the Hon'ble High Court of Madras in Writ Petition No.18641 of 2020 dated 15.12.2020. 29. It is represented on behalf of the 'Respondent' that the 'Application 'in IA No.02/KOB/2021 in IBA/13/KOB/2020, the order in which an 'Appeal' was filed before this 'Tribunal' on 20.12.2020 and the order in Writ Petition 18641 of 2020 was made on 15.12.2020. Therefore, it is the contention of the Learned Counsel of the 'Respondent' that the Directors were very much qualified as on the date of filing of the 'Application' in IA No.2/KOB/2021 before the 'Adjudicating Authority'. 30. RESPONDENT'S CITATIONS: (i) The Learned Counsel for the 'Respondent' submits that this 'Tribunal' had dealt with inherent p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sections to 9, the proceeding that us before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of Creditors is not yet constituted, a Party can approach the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case." 31. The Learned Counsel for the 'Respondent' contends that in the present case, the 'Committee of Creditors' is not constituted and upon 'default' in the payment in the terms of the Settlement dated 26.8.2020, the 'Respondent' invoked Rule 11 of the National Company Law Tribunal R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eunder the liability was not denied. 36. The 'Respondent'/ 'Applicant'/ 'Financial Creditor' had filed Section 7 Application of the Code, alleging violation of 'Share Purchase Agreement' dated 21.11.2012, in and by which a sum of ₹ 30,00,00,000/- was agreed to be paid by the 'Respondent'/ 'Financial Creditor' to the 'Corporate Debtor' for acquiring the Company. Further, on the aforesaid date an 'Addendum' to the 'Agreement' was also executed wherein the 'Respondent'/ 'Financial Creditor' agreed to make payment to the Creditors of the 'Appellant'/'Corporate Debtor'. 37. Besides, this, the 'Appellant'/ 'Corporate Debtor' on 27.11.2012, had issued a letter requesting to hand over a sum of ₹ 1,00,00,000/- to Dr.J.J.R.Justin. Subsequently, on 5.9.2014 and 17.3.2015, the 'Respondent'/ 'Financial Creditor' had issued a letter agreeing to refund the advance amount. 38. Also that, on 28.11.2018, the Corporate Debtor had issued another Letter to the 'Respondent/' Financial Creditor' interalia stating that they were in verge of selling their property in order to settle their liabilities and further that they were trying their level best to find a buyer and to refund the 'Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Creditors' and resultantly admitted the Section 7 Application of the 'Respondent'/ 'Financial Creditor'/ 'Applicant' for initiation of CIRP. 44. It comes to light that the 'Appellant' / 'Corporate Debtor' filed application as per Rule 11 of the National Company Law Tribunal Rules, 2016 to recall the order passed by the 'Adjudicating Authority' dated 25.8.2020 in IBA/13/KOB/2020 and permitted it to settle the matter, along with the Application Form FA for withdrawal of CIRP, duly signed by the 'Respondent'/ 'Applicant' in IBA/13/KOB/2020 mentioning that on 26.8.2020, a settlement was arrived at for a total amount of Rupees Two Crore twenty Five Lakhs only) as full and final settlement of the whole claim between the 'Appellant'/ 'Corporate Debtor' on the following terms: a) M/s Sree Bhadra Parks and Resorts limited have paid a sum of ₹ 1,00,000/- on 26.8.2020. b) Cheque dated 10.09.2020 bearing No.214323 for ₹ 10,00,000/- was given. However, returning the said cheque M/s Sree Bhadra Parks and Resorts Limited has made an electronic transfer through RTGS of ₹ 10,00,000/- to the account of M/s Ramani Resorts and Hotels Pvt.Ltd. on 10.09.2020. c) A cheque date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000/- to the account of the 'Respondent'/ 'Financial Creditor' on 10.9.2020. 50. In regard to the plea of the disqualification of the 'Directors' of the 'Respondent'/ 'Financial Creditor'/ 'Applicant', the Writ Petition No.18641 of 2020 was filed before the Hon'ble High Court of Madras on 15.12.2020, the Hon'ble High Court of Madras had allowed the 'Appeals' by setting aside the Impugned Order dated 27.1.2020 therein and consequently, quashed the publication of the list of disqualified Directors by the 'Registrar of Companies' and the deactivation of the Directors of the 'Appellants', etc. COMPANIES ACT 2013: 51. It is to be pointed out that Section 164 of the Companies Act, 2013, provides disqualification for appointment of a person as a 'Director' of Company. Section 164(2) of the Companies Act, 2013 came into effect from 01.01.2014 and it applies prospectively. In fact, Section 164 of the Companies Act, 2013 applies by operation of Law resting on the circumstances emerging and coming into existence of the set of facts mentioned therein. As per Section 164(2) of the Companies Act, 2013, there is no distinction between the defaulting Public Company and Private Company. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal' pertinently points out that the decision of the Hon'ble Supreme Court in Swiss Ribbons Pvt.Ltd. V. Union of India dated 25.1.2019 reported in Manu/SC/0079/2019 squarely applies to the facts of the present case and in fact, the Hon'ble Supreme Court at Paragraph 52 of the Judgement in Swiss Ribbons had made it clear that at any stage where the 'Committee of Creditors' is not yet constituted, a party can approach National Company Law Tribunal directly, which 'Tribunal' may in exercise of its 'inherent powers' under Rule 11 of the National Company Law Tribunal Rules, 2016 allow or disallow an application for withdrawal or settlement and as such, it cannot be said by any stretch of imagination that the 'Adjudicating Authority'(National Company Law Tribunal, Kochi Bench, Kerala) cannot pass an order to restore and revive the application in IBA/13/KOB/2020 by way of an Interlocutory Application filed by the 'Respondent'/'Financial Creditor'/ 'Applicant'. Consequently, the contra plea taken on behalf of the 'Appellant' is not acceded to by this 'Tribunal'. INHERENT POWER : 56. It is to be mentioned that an 'inherent power' of the 'Tribunal' has its gross root in necessity and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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