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TMI Blog2024 (11) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case necessary to be noticed for deciding the Appeal are: (i) Central Bank of India sanctioned Cash Credit Facility of Rs.75 crores to the Corporate Debtor - M/s. Parekh Aluminex Ltd. A restructuring package to the Corporate Debtor was approved by the Corporate Debts Restructure ("CDR") Empowered Group on 24.06.2013 and 25.07.2013 and consequently the Appellant sanctioned Working Capital Facilities to the Corporate Debtor. A Master Restructuring Agreement dated 23.09.2013 was executed. On 30.09.2013, the Appellant approved the CDR package for credit facilities of the Corporate Debtor of Rs.134.74 crores. The Respondent - Personal Guarantor executed a Deed of Guarantee dated 10.04.2014 and guaranteed the repayment of the credit facility availed by the Corporate Debtor from the Appellant as well as the other lenders. (ii) Corporate Debtor committed default in repayment, hence, the Appellant classified loan account of the Corporate Debtor as NPA on 31.12.2015. The Respondent claimed to have resigned as a Director of the Corporate Debtor on 28.04.2016. (iii) On 23.11.2017, the Adjudicating Authority admitted a Section 7 Application against the Corporate Debtor. An order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 application filed by the Appellant, the Adjudicating Authority was required to appoint a Resolution Professional ("RP") under Section 97 of the IBC and without appointing the RP and without giving an opportunity to RP to submit a Report as contemplated under Section 99 of the IBC, the Adjudicating Authority ought not to have proceeded to adjudicate various issues raised by the Personal Guarantor. It is submitted that IA No.5501 of 2023 was filed by the Personal Guarantor on 27.11.2023, i.e., subsequent to judgment of the Hon'ble Supreme Court in Dilip B. Jiwrajka v. Union of India - (2024) SCC 5 SC 435 decided on 09.11.2023. The Hon'ble Supreme Court in Dilip B. Jiwrajka's case has laid down that adjudicatory issues in Section 95 application had to be undertaken by the Adjudicating Authority only at the stage of hearing of the application of Section 100. The provisions of Section 95 to 100 have been elaborately dealt by the Hon'ble Supreme Court. The process adopted by the Adjudicating Authority, while rejecting Section 95 application filed by the Appellant is clearly contrary to the law laid down by the Hon'ble Supreme Court in Dilip B. Jiwrajka's case. In the facts of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2023 by the Adjudicating Authority to the Appellant to serve copy of the petition on Respondent and matter was adjourned to 30.10.2023. On 30.10.2023, the Respondent appeared. The Adjudicating Authority passed following order on 30.10.2023: "1. Mr. V. K. Nair, Advocate appeared for the Petitioner. 2. Mr. Rohit Gupta, Advocate a/w Ms. Nikita Vardhan, Mr. Vishal Tiwari, Advocates i/b Kanga & Co. appeared for the Respondent. 3. Learned Counsel for the Personal Guarantor seeks some time to contest this petition on the limitation aspect. 4. Time granted. 5. List this matter on 04.12.2023 for hearing." 8. Before the matter could be heard on next date, the Hon'ble Supreme Court passed judgment in Dilip B. Jiwrajka's case on 09.11.2023. On 27.11.2023, IA No.5501 of 2023 was filed by the Personal Guarantor before the Adjudicating Authority praying for dismissal of Company Petition. In IA No.5501 of 2023, following prayers were made: "a) That this Hon'ble Tribunal be pleased to pass an Order dismissing the Company Petition filed by the Petitioner against the Applicant/ Respondent since the Applicant/ Respondent is not a debtor or a guarantor of the Petitioner as required und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intment of RP. Section 97 of the IBC is as follows: "97. Appointment of resolution professional. - (1) If the application under section 94 or 95 is filed through a resolution professional, the Adjudicating Authority shall direct the Board within seven days of the date of the application to confirm that there are no disciplinary proceedings pending against resolution professional. (2) The Board shall within seven days of receipt of directions under sub-section (1) communicate to the Adjudicating Authority in writing either - (a) confirming the appointment of the resolution professional; or (b) rejecting the appointment of the resolution professional and nominating another resolution professional for the insolvency resolution process. (3) Where an application under section 94 or 95 is filed by the debtor or the creditor himself, as the case may be, and not through the resolution professional, the Adjudicating Authority shall direct the Board, within seven days of the filing of such application, to nominate a resolution professional for the insolvency resolution process. (4) The Board shall nominate a resolution professional within ten days of receiving the direction issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Where the resolution professional finds that the debtor is eligible for a fresh start under Chapter II, the resolution professional shall submit a report recommending that the application by the debtor under section 94 be treated as an application under section 81 by the Adjudicating Authority. (9) The resolution professional shall record the reasons for recommending the acceptance or rejection of the application in the report under sub-section (7). (10) The resolution professional shall give a copy of the report under sub-section (7) to the debtor or the creditor, as the case may be." 13. Section 100 provides for admission or rejection of application, which provision is as follows: "100. Admission or rejection of application. - (1) The Adjudicating Authority shall, within fourteen days from the date of submission of the report under section 99 pass an order either admitting or rejecting the application referred to in section 94 or 95, as the case may be. (2) Where the Adjudicating Authority admits an application under sub-section (1), it may, on the request of the resolution professional, issue instructions for the purpose of conducting negotiations between the debtor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions made on behalf of the parties and analysis of IBC and principles of natural justice. The arguments advanced before the Hon'ble Supreme Court in the writ petitions that at the time when Adjudicating Authority appoint the RP under Section 97, sub-section (5), the Adjudicating Authority should be required to decide the jurisdictional questions. The said argument has been noticed by the Hon'ble Supreme Court in paragraph 68 of the judgment, which is as follows: "68. The submission which has been urged on behalf of the petitioners, however, is that Section 97(5) contemplates a role for the adjudicating authority in the appointment of a resolution professional anterior to the stage which is contemplated during the course of adjudication under Section 100. It has been urged that when the adjudicating authority appoints a resolution professional under Section 97(5), the adjudicating authority should be required to decide the jurisdictional questions on the basis of which the provisions of Part III are implicated. In other words, it is urged that, at that stage, it would be necessary for the adjudicating authority to apply its mind as to whether : (i) a debt subsists; and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly relying on the resolution professional's report, to decide the fate of applications under Section 94 or 95 IBC. 74. The true adjudicatory function of the authority commences under Section 100 after the submission of the report. Another reason why we are not inclined to accept the submission is that what is described as a jurisdictional question by the petitioners may not be a simple matter to be decided as a question of law. The jurisdictional questions of the nature which have been suggested by the petitioners, namely, on whether there is a subsisting debt or whether the relationship of debtor and creditor subsists, would involve a decision on mixed questions of law and fact. The entire scheme of Sections 99 and 100 implicates timelines which have been laid down by Parliament. The entire process of implementing these timelines would be rendered nugatory if an adjudicatory role were to be read into the provisions of Section 97(5). The final reason which would militate against accepting the submission is that the provisions of Section 99 do not as such implicate any adverse civil consequences particularly if those provisions are read in the manner in which we now propose to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntee was to come into force only upon implementation of CDR package in full and signed by all the lenders in terms of LOA issued. Ld. Counsel for the Personal Guarantor place on record a letter dt. 23.03.2016 having reference No BY.CDR(DAP)No. 749/2015-16, stating that the Company M/s Parekh Aluminex Limited stands exited from the CDR mechanism as failure. 3.6.8. As regards contention that the said Petition is time barred, we find that the Financial Creditor invoked the Guarantee on 18.05.2016 by Notice u/s 13(2) of SARFAESI Act, 2002 and the Corporate Debtor came to be admitted into CIRP on 01.02.2019. Since, we have already returned the finding that this Guarantee had not become effective on account of failure in implementation of CDR Package, we are not dealing with the issue of limitation any further. 3.6.9. In view thereof, the Company Petition bearing CP (IB) No.420 of 2022, is disposed of as dismissed. In view of the dismissal of the Company Petition, all pending Applications including IA No.5501 of 2023, stands closed." 19. The Adjudicating Authority held that since it has returned a finding that guarantee had not become effective on account of failure in implementatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be Section 100. Under NCLT Rule 11, Adjudicating Authority is duty bound to pass orders to prevent abuse of process. As such, limited notice to appear may be given to the Personal Guarantors so that when Resolution Professional is appointed, he may provide material as per Section 99(2) of IBC. Till the stage of Section 100, the process is of collecting necessary evidence. 46. The Appellant is himself criticizing the impugned order claiming that the Adjudicating Authority has already recorded finding that the Personal Guarantor has committed a default and thus the Resolution Professional cannot while examining the application under Section 99 give a contrary opinion. At the same time, the Learned Senior Counsel for the Appellant has tried to submit that before appointment of Resolution Professional the Personal Guarantor should be able to show that the debt is not due or that it is not payable. This is contradiction. In our view, the stage for examining merits of the Application would be Section 100 of IBC. To prevent abuse of process of double hearings, first on merit before appointment of Resolution Professional and again at the stage of Section 100 which will defeat the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Personal Guarantor at the present stage. It is submitted that in the reply, which was filed in IA 5501 of 2023, no objection was raised by the Appellant that Adjudicating Authority ought not to hear the objections at that stage. It is submitted that Appellant has once waived its right to raise any objection and on principle of waiver, he cannot be allowed to raise this objection in the present Appeal to challenge the jurisdiction of the Adjudicating Authority to decide the question on merits. 24. In the present case, there is no question of lack of jurisdiction by Adjudicating Authority to decide the application under Section 95. It is the Adjudicating Authority, who has jurisdiction to decide Section 95 application. However, Section 95 application has to be decided in accordance with statutory scheme as delineated by Sections 95 to 100. The learned Senior Counsel for the Respondent has submitted that Appellant has waived its right to raise objection and applying principles of waiver, it should not be allowed to raise objection with regard to lack of jurisdiction. It is submitted that Adjudicating Authority had jurisdiction to decide the issue, event on merits and reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject-matter of the suit or over the parties to it. But in the instant case there was no such inherent lack of jurisdiction. The decision of the Privy Council in the case of Ledgard v. Bull [13 Indian Appeals 134] is an authority for the proposition that consent or waiver can cure defect of jurisdiction but cannot cure inherent lack of jurisdiction. In that case, the suit had been instituted in the Court of the Subordinate Judge, who was incompetent to try it. By consent of the parties, the case was transferred to the Court of the District Judge for convenience of trial. It was laid down by the Privy Council that as the court in which the suit had been originally instituted was entirely lacking in jurisdiction, in the sense that it was incompetent to try it, whatever happened subsequently was null and void because consent of parties could not operate to confer jurisdiction on a court which was incompetent to try the suit. That decision has no relevance to a case like the present where there could be no quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding Section 95 application. The Adjudicating Authority has jurisdiction to decide Section 95 application as per the scheme of the IBC. The question of waiver with regard to jurisdiction of Adjudicating Authority to decide the application cannot be pressed into service in the present case. 27. The learned Senior Counsel for the Respondent relied on another judgment of the Hon'ble Supreme Court in (2004) 8 SCC 229 - Krishna Bahadur vs. Purna Theatre and Ors. In the above case, the question of principle of waiver was examined in reference to proceedings initiated before the Industrial Tribunal. In the above context, following was laid down by the Hon'ble Supreme Court in paragraph 9 : "9. The principle of waiver although is akin to the principle of estoppel; the difference between the two, however, is that whereas estoppel is not a cause of action; it is a rule of evidence; waiver is contractual and may constitute a cause of action; it is an agreement between the parties and a party fully knowing of its rights has agreed not to assert a right for a consideration." 28. When we look into the ratio of above judgment, the Hon'ble Supreme Court laid down that "waiver is contractua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights in that matter, and yet for some consideration consciously abandons the existing legal right, advantage, benefit, claim or privilege. Waiver can be contractual or by express conduct in consideration of some compromise. However, a statutory right may also be waived by implied conduct, like, by wanting to take a chance of a favourable decision. The fact that the other side has acted on it, is sufficient consideration." 31. Waiver is always related to some consideration on the basis of which a party consciously abandons the existing legal right. In the present case, neither any consideration is proved, nor there is any conscious abandonment of any of its rights by the Appellant. Hence, the submission of learned Senior Counsel for the Respondent that Appellant is precluded to raise the ground to challenge the order of the Adjudicating Authority on the ground of waiver, is misconceived. 32. We also need to notice the judgment relied by learned Counsel for the Appellant in support of his submissions. Reliance has been placed on (1999) 3 SCC 422 - Babu Varghese & Ors. vs. Bar Council of Kerala & Ors., where the Hon'ble Supreme Court held that if the manner of doing a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons would be rendered nugatory. The section, therefore, by conferring on Magistrates the power to record statements or confessions, by necessary implication, prohibited a Magistrate from giving oral evidence of the statements or confessions made to him." 34. Another judgment relied by the learned Counsel for the Appellant is (2015) 11 SCC 628 - Tata Chemicals Ltd. vs. Commissioner of Customs (Preventive) Jamnagar. The Hon'ble Supreme Court in the above judgment has laid down that there can be no estoppel against law, if the law requires that something be done in a particular manner. In paragraph 18 of the judgment, following was held: "18. The Tribunal's judgment has proceeded on the basis that even though the samples were drawn contrary to law, the appellants would be estopped because their representative was present when the samples were drawn and they did not object immediately. This is a completely perverse finding both on fact and law. On fact, it has been more than amply proved that no representative of the appellant was, in fact, present at the time the Customs Inspector took the samples. Shri K.M. Jani who was allegedly present not only stated that he did not repres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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