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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 ..... nt in Dilip B. Jiwrajka was delivered by the Hon ble Supreme Court in a batch of writ petitions, in which writ petitions, various provisions of the IBC from Sections 95 to 100 were challenged. In the above context, the Hon ble Supreme Court had occasion to deal with scheme of the IBC; the submissions made on behalf of the parties and analysis of IBC and principles of natural justice. Principle of waiver - HELD THAT:- Hira Lal Patni vs. Sri Kali Nath [ 1961 (5) TMI 58 - SUPREME COURT ], was a case where there was an issue raised regarding the lack of jurisdiction by the Court granting the decree. The present is not a case where either of the parties are raising any issue regarding lack of jurisdiction of the Adjudicating Authority in 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. 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 consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 of liquidation was passed on 07.10.2023 against the Corporate Debtor. Notice under Section 13(2) under the SARFAESI Act, 2002 was issued on 18.05.2016, calling upon the Corporate Debtor and its Guarantors. A Demand Notice in Form-B was issued to the Respondent on 18.12.2020 and called up on him to pay a sum of Rs.354,09,04,055/-. (iv) An application under Section 95 was filed by the Appellant on 14.12.2021 against the Personal Guarantor for financial debt of Rs.354,09,05,055/- as on 18.12.2020. The Adjudicating Authority on 25.09.2023, directed the Appellant to serve a copy of the application to Respondent. On 30.10.2023, the Respondent appeared before the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 present case, there was no question of applicability of principle of wavier in respect of the Appellant. The Appellant filed the reply to IA 5501 of 2023 as directed by the Adjudicating Authority. The order passed by the Adjudicating Authority is clearly against the scheme of the IBC and in the teeth of judgment of the Hon ble Supreme Court in Dilip B. Jiwrajka and deserve to be set aside. 5. Shri Krishnendu Datta, learned Senior Counsel appearing for the Respondent Personal Guarantor submits that the Central Bank of India had not raised any objection regarding jurisdiction of Adjudicating Authority in the reply filed to IA No.5501 of 2023. When the Central Bank of India had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment 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 under section 95 of the Code; b) For costs; c) For such other and further reliefs as this Hon ble Tribunal may deem fit and proper. 9. The application came for consideration on 04.12.2023, on which date no one appeared on behalf of the Appellant. The learned Counsel for the Respondent made various submissions and submitted that Demand Notice has not been served. The Appellant was directed to file affidavit of service. The Adjudicating Authority noticed IA No.5501 of 2023 filed by Personal Guarantor challenging the maintainability and the argument of the Personal Guarantor that the guarantee was also contingent. The matter was adjourned to 02.01.2024. The order dated 04.12.2023 is as follows: IA 5501/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 issued by the Adjudicating Authority under sub-section (3). (5) The Adjudicating Authority shall by order appoint the resolution professional recommended under sub-section (2) or as nominated by the Board under sub-section (4). (6) A resolution professional appointed by the Adjudicating Authority under subsection (5) shall be provided a copy of the application for insolvency resolution process. 12. Section 98 deals with replacement of RP and Section 99 provides for submission of report by RP. Section 99 is as follows: 99. Submission of report by resolution professional. - (1) The resolution professional shall examine the application referred to in section 94 or section 95, as the case may be, within ten days of his appointment, and submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin 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 and creditors and for arriving at a repayment plan. (3) The Adjudicating Authority shall provide a copy of the order passed under subsection ( 1) along with the report of the resolution professional and the application referred to in section 94 or 95, as the case may be, to the creditors within seven days from the date of the said order. (4) If the application referred to in section 94 or 95, as the case may be, is rejected by the Adjudicating Authority on the basis of report submitted by the resolution professional or that the application was made with the intention to defraud his creditors or the resolution professional, the order under sub-section (1) shall record that the creditor is entitled to file for a bankruptcy order under Chapter IV. 14. From the sequence of events, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (ii) the relationship of creditor and debtor subsists. This is similar to the UNCITRAL Guide which emphasises the need for the insolvency court to evaluate commencement criteria before admitting insolvency proceedings, ensuring a fair hearing for the parties involved. [UNCITRAL Legislative Guide on Insolvency, 2004, Part 2(I), paras 56, 57.] 16. After considering the aforesaid submissions, the Hon ble Supreme Court rejected the above argument noticing that the adjudicatory role should be interposed at the stage of Section 97. The Hon ble Supreme Court clearly held that bearing in mind the statutory scheme, it would be impermissible for this Court to allow for the adjudicatory intervention of the Adjudicating Authority in adjudicating what is described as jurisdictional question at the stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess 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 elucidate. 17. The Hon ble Supreme Court has recorded its conclusion in paragraph 86. Paragraph 86.1, 86.2, 86.3 and 86.6 are as follows: 86.1. No judicial adjudication is involved at the stages envisaged in Section 95 to Section 99 IBC; 86.2. The resolution professional appointed under Section 97 serves a facilitative role of collating all the facts relevant to the examination of the application for the commencement of the insolvency resolution process which has been preferred under Section 94 or Section 95. The report to be submitted to the adjudicatory authority is recommendatory in nature on whether to accept or reject the application; 86.3. The submission that a hearing should be conducted by the adjudicatory authority for the purpose of determining jurisdictional facts at the stage when it app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof, 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 implementation of CDR Package, even the issue of limitation was not gone into. 20. Learned Counsel for the Appellant has also contended that even prior to judgment of the Hon ble Supreme Court in Dilip B. Jiwrajka, the judgment of this Tribunal in Ravi Ajit Kulkarni vs. State Bank of India (2021) SCC OnLine NCLAT 641, this Tribunal after examining the scheme of Section 95 to 100 in paragraph 44, this Tribunal held that before the stage of appointment of the RP, the Code or Rules and Regulations, do not provide for any hearing as such to be given to the Debtor. Following have been held by this Tribunal in paragraphs 44 to 47: 44. It has been argued that although in the present matter the Creditor had served a copy of the application after it was filed and a copy of amended application also afterit was filed to the Appellant but the notice th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 objects of IBC by protracted disputes, after limited notice to appear has been issued even if Debtor raises disputes on merit, the same may be adjudicated only after receipt of report from Resolution Professional under Section 99. Before that point of time the process is more of filing of application and collecting of evidence through a professional person like Resolution Professional. 47. In substance, once the application is filed (as per Section 95, 96 read with Rule 10) the Adjudicating Authority has to act on it, and following principles of natural justice, give limited notice to Personal Guarantor to appear referring to the Interim Moratorium that has commenced as per terms of Section 96. Then the next stage is of appointing Resolution Professional as per Section 97 read with Rules and Regulations. Third stage will be Resolution Professiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rejection of the application on merits, thus, cannot be questioned. 25. Shri Krishnendu Datta in support of his submission contends that on principle of waiver, no objection can be allowed to be raised by the Appellant. Learned Senior Counsel has relied on various judgments of the Hon ble Supreme Court. We need to notice the judgments, which have been relied by Mr. Datta in support of his submissions. Reliance has been placed on judgment of the Hon ble Supreme Court in Hira Lal Patni vs. Sri Kali Nath (1961) SCC OnLine SC 42. The above was a case, where a decree was passed in a suit filed in the original side of the High Court of judicature at Bombay and decree was put in execution at Agra in the state of Uttar Pradesh. An objection was raised before the executing Court that there was inherent lack of jurisdiction in the Bombay High Court. The Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 question of inherent lack of jurisdiction in the sense that the Bombay High Court was incompetent to try a suit of that kind. The objection to its territorial jurisdiction is one which does not go to the competence of the court and can, therefore, be waived. In the instant case, when the plaintiff obtained the leave of the Bombay High Court on the original side, under clause 12 of the Letters Patent, the correctness of the procedure or of the order granting the leave could be questioned by the defendant or the objection could be waived by him. When he agreed to refer the matter to arbitration through court, he would be deemed to have waived his objection to the territorial jurisdiction of the court, raised by him in his written statement. It is well settled that the objection as to local jurisdiction of a court does not stand on the same footing as an objection to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 . The principle of waiver is to be put in service in reference to contract between the parties, where one party waives its right for a consideration. In the facts of the present case and sequence of events, we do not find that the Appellant has waived any of its rights in reference to Section 95 application. Filing of the application IA No.5501 of 2023 was an act of Personal Guarantor and it was the Personal Guarantor, who raised objection to section 95 application, without even appointment of RP. When the Adjudicating Authority directed the Financial Creditor to file a reply to the application, filing of the reply by the Appellant to IA No.5501 of 2023, cannot be termed as a waiver of any of its righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 act is prescribed under any statute, the act must be done in that manner or not at all. In paragraphs 31 and 32, following have been laid down: 31. It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. The origin of this rule is traceable to the decision in Taylor v. Taylor [(1875) 1 Ch D 426 : 45 LJCh 373] which was followed by Lord Roche in Nazir Ahmad v. King Emperor [(1936) 63 IA 372 : AIR 1936 PC 253] who stated as under: [W]here a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all. 32. This rule has since been approved by this Court in Rao Shiv Bahadur Singh v. State of V.P. [AIR 1954 SC 322 : 1954 SCR 1098] and again in Deep Chand v. State of Rajasthan [AIR 1961 SC 1527 : (1962) 1 SCR 662] . These cases were considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 represent the clearing agent of the appellants in that he was not their employee but also stated that he was not present when the samples were taken. In fact, therefore, there was no representative of the appellants when the samples were taken. In law equally the Tribunal ought to have realised that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of the law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person. 35. Insofar as submission of learned Senior Counsel for the Respondent on the basis of Comm. Suit (L) filed in the Bombay High Court, the said proceedings could not have in any manner operated as estoppel on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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