Andhra Pradesh High Court - Amravati
M/S Tulasi Seeds Private Limited vs Union Of India on 30 September, 2022
IN THE HIGH COURT OF ANDHRA PRADESH
***
W.P.No.15743 of 2022
BETWEEN:
# M/s. Tulasi Seeds Private Limited,
A Company incorporated under the provisions of the
Companies Act, 1956 and having its registered office at
Tulasi House, #6-4-6, Arundel Pet, Guntur - 522002, A.P.,
Rep. by its Authorised Signatory,
Sri Kondaveeti Nagavara Prasad.
... Petitioner
AND
$ 1. The Union of India, rep. by its Secretary, Corporate Affairs, New
Delhi.
2. National Company Law Tribunal, rep. by its Member, Amaravathi
Bench, APIIC Tower, 2nd floor, Mangalagiri, Guntur District, A.P.
3. Mr. Kapa Srinivasa Rao, Occ: Seed Organizer, R/o. 17-194, Bus
Stand Road, Nuzvid Mandal, Krishna District, A.P. - 521201.
... RESPONDENTS
Date of Judgment pronounced on : 30.09.2022
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
1. Whether Reporters of Local newspapers : Yes/No
May be allowed to see the judgments?
2. Whether the copies of judgment may be marked : Yes/No
to Law Reporters/Journals:
3. Whether The Lordship wishes to see the fair copy : Yes/No
Of the Judgment?
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W.P.No.15743 of 2022
*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
*HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
+ W.P.No.15743 of 2022
% Dated:30.09.2022
# M/s. Tulasi Seeds Private Limited,
A Company incorporated under the provisions of the
Companies Act, 1956 and having its registered office at
Tulasi House, #6-4-6, Arundel Pet, Guntur - 522002, A.P.,
Rep. by its Authorised Signatory,
Sri Kondaveeti Nagavara Prasad.
... Petitioner
AND
$ 1. The Union of India, rep. by its Secretary, Corporate Affairs, New
Delhi.
2. National Company Law Tribunal, rep. by its Member, Amaravathi
Bench, APIIC Tower, 2nd floor, Mangalagiri, Guntur District, A.P.
3. Mr. Kapa Srinivasa Rao, Occ: Seed Organizer, R/o. 17-194, Bus
Stand Road, Nuzvid Mandal, Krishna District, A.P. - 521201.
... RESPONDENTS
! Counsel for Petitioner : Sri C. Raghu, Sr. counsel appearing
On behalf of Sri L. Sai Radha Krishna
^Counsel for Respondent Nos.1&2: Solicitor General
^Counsel for Respondent No.3 : Sri S.V. Rama Krishna
<GIST :
>HEAD NOTE:
? Cases referred:
1. (2021) 6 SCC 771
2. (2019) 4 SCC 17
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W.P.No.15743 of 2022
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
W.P.No.15743 of 2022
ORDER:
The 3rd respondent had initiated a Corporate Insolvency Resolution
Process against the petitioner herein, before the National Company Law
Tribunal Amaravati Bench (for short 'NCLT'), by way of
CP(IB)No.28/9/AMR/2020, under Section 9 of the Insolvency and
Bankruptcy Code, 2016. This application was filed on the ground that the
petitioner had defaulted an operational debt of Rs.8,98,12,678/-.
2. While the matter was pending before the NCLT, the petitioner
and the 3rd respondent executed a Memorandum of Understanding, dated
20.07.2020, under which it was recorded that :-
a) The 3rd respondent agreed to withdraw the application filed
before the NCLT immediately.
b) On withdrawal of the application, the petitioner was to pay
an amount of Rs.5,00,00,000/- to the 3rd respondent as full
and final settlement.
c) This amount of Rs.5,00,00,000/- was to be paid in
installments of Rs.20,00,000/- each in 25 installments,
within 45 days from the date of withdrawal of the
application.
d) The mode of payment was to be online banking through
RTGS to the account of the 3rd respondent.
3. The Memorandum of Understanding also contained a term
that the above compromise was towards full and final settlement of all the
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W.P.No.15743 of 2022
claims of the parties against each other and no further claims would
remain.
4. On the basis of the above Memorandum of Understanding,
the 3rd respondent filed a memo of withdrawal before the NCLT. In this
memo of withdrawal it was stated that the parties had entered into a joint
Memorandum of Understanding dated 20.07.2020 and the details of the
understanding were set out. The Memo also stated that the 3rd respondent
be permitted to withdraw the application with liberty to continue the
proceedings, if the above Memorandum of Understanding failed for any
reason. The NCLT passed an order on 23.07.2020 recording the amicable
settlement, with the observation that the case is disposed of as withdrawn
with a liberty to the petitioner to come back, in case of default by the
respondent.
5. The 3rd respondent had subsequently filed I.A.(IBC).No.5 of
2021 in CP(IB).No.28/9/AMR/2020 on 27.01.2021, under Section 60(5) of
the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT
Rules, 2016, to restore and reopen CP(IB).No.28/9/AMR/2020, on the
ground that the petitioner herein had only paid an amount of
Rs.2,65,00,000/- leaving a balance of Rs.2,35,00,000/- out of the amount
of Rs.5,00,00,000/- and as such the petitioner herein had defaulted.
6. The petitioner herein opposed the said application
contending that -
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a) A petition, which has been withdrawn, cannot be restored and a
fresh petition has to be filed.
b) Once a Memorandum of Understanding is executed without
any default conditions, the 3rd respondent herein would be entitled to
claim the entire amount if the petitioner commits default, if the petition is
restored and that would be contrary to the terms of the Memorandum of
Understanding.
c) Execution of the Memorandum of Understanding outside the
Tribunal, has resulted in a fresh contract between the parties, which
supersedes the earlier transactions and as such the 3rd respondent would
seek to traverse beyond the conditions in the Memorandum of
Understanding, if the petition is restored and such a course of action
would result in Memorandum of Understanding being frustrated.
7. The National Company Law Tribunal Amaravati Bench, after
considering the rival submissions and the judgments cited by the
respective parties, held that the contention of the petitioner that the
applicant would be entitled to claim the entire amount mentioned in the
claim petition, which he cannot do, in view of the fresh Memorandum of
Understanding is not cogent, and upon failure of the terms of the
Memorandum of Understanding, the situation, as before the Memorandum
of Understanding, would revive in toto. In that view of the matter, the
NCLT had restored the main petition by order dated 28.04.2022.
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W.P.No.15743 of 2022
Aggrieved by the said order of restoration, the petitioner has approached
this Court by way of the present writ petition.
8. Sri C. Raghu, learned Senior Counsel appearing on behalf of
Sri L. Sai Radha Krishna, learned counsel for the petitioner, would submit,
on the question of maintainability of the writ petition, that a writ petition is
maintainable against an order passed by the NCLT and relies upon a
judgment of the Hon'ble Supreme Court in the case of Radha Krishan
Industries vs. State of Himachal Pradesh and Ors.,1 (paragraphs 24
to 28). Learned Senior Counsel would also rely upon the judgment of the
Hon'ble Supreme Court dated 24.09.2021 in Civil Appeal No.5728 of
2021 in the case of M/s. Magadh Sugar & Energy Ltd., vs. The
State of Bihar and Ors., to contend that a writ petition would be
maintainable in such circumstances.
9. Smt. S.V. Rama Krishna, learned counsel appearing for the
3rd respondent would submit that the petitioner has an effective
alternative remedy under Section 61 of the Insolvency and Bankruptcy
Code, 2016, which provides an appeal before the NCLAT. He would further
contend that the petitioner has already filed such an appeal before the
NCLAT and has now chosen to approach this Court without pursuing the
alternative remedy, which has already been exercised by the petitioner.
10. Sri C. Raghu, learned Senior Counsel, does not dispute the
fact that the petitioner had filed an appeal before the NCLAT. He submits
(2021) 6 SCC 771
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that this appeal was never intended to be pressed and had not been
pressed before the NCLAT and as such, the filing of the said appeal cannot
be taken to mean that the petitioner had availed of the alternative remedy
available to the petitioner.
11. The Hon'ble Supreme Court in Radha Krishan Industries
vs. State of Himachal Pradesh and Ors., while considering the
question of maintainability of a writ petition in the presence of an
alternative remedy, had held as follows:
27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to
issue writs can be exercised not only for the enforcement of
fundamental rights, but for any other purpose as well.
27.2. The High Court has the discretion not to entertain a
writ petition. One of the restrictions placed on the power of
the High Court is where an effective alternate remedy is
available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where:
(a) the writ petition has been filed for the enforcement of a
fundamental right protected by Part III of the Constitution;
(b) there has been a violation of the principles of natural
justice; (c) the order or proceedings are wholly without
jurisdiction; or (d) the vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High
Court of its powers under Article 226 of the Constitution in an
appropriate case though ordinarily, a writ petition should not
be entertained when an efficacious alternate remedy is
provided by law.
27.5. When a right is created by a statute, which itself
prescribes the remedy or procedure for enforcing the right or
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W.P.No.15743 of 2022
liability, resort must be had to that particular statutory
remedy before invoking the discretionary remedy under
Article 226 of the Constitution. This rule of exhaustion of
statutory remedies is a rule of policy, convenience and
discretion.
27.6. In cases where there are disputed questions of fact,
the High Court may decide to decline jurisdiction in a writ
petition. However, if the High Court is objectively of the view
that the nature of the controversy requires the exercise of its
writ jurisdiction, such a view would not readily be interfered
with.
28. These principles have been consistently upheld by this
Court in Chand Ratan v. Durga Prasad [Chand Ratan v. Durga
Prasad, (2003) 5 SCC 399], Babubhai Muljibhai
Patel v. Nandlal Khodidas Barot [Babubhai Muljibhai
Patel v. Nandlal Khodidas Barot, (1974) 2 SCC 706]
and Rajasthan SEB v. Union of India [Rajasthan SEB v. Union
of India, (2008) 5 SCC 632] among other decisions.
12. In the present case, there is an effective alternative remedy
of appeal before the NCLAT. On account of this availability, paragraph
27.3 of the judgment in Radha Krishan Industries vs. State of
Himachal Pradesh and Ors., would have to be considered. The Hon'ble
Supreme Court, in Paragraph 27.3, had held that a challenge to the
jurisdiction of the authority passing the impugned order can be considered
by the court, even in the presence of an alternative remedy. In the
present case, the jurisdiction of the National Company law tribunal, to
recall it's earlier orders is under challenge. Accordingly, this writ petition
is maintainable.
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W.P.No.15743 of 2022
13. The contention of the writ petitioner is that, the NCLT does
not have power under Section 60(5) of the Insolvency and Bankruptcy
Code or under Rule 11 of the NCLT Rules, to retore a petition which has
been withdrawn.
14. Sri S.V. Rama Krishna, learned counsel appearing for the
unofficial respondent, would submit that the application filed by the
unofficial respondent was for withdrawal of the petition, with an
opportunity to continue the proceedings, if the MOU failed for any reason,
and the Tribunal while allowing the withdrawal had granted liberty to the
unofficial respondent to come back in case of default by the writ
petitioner. In the circumstances, he would submit that the restoration of
the petition is in line with the terms of the application for withdrawal and
the order permitting withdrawal. The NCLT has the inherent power to
restore the applications which had been withdrawn earlier.
15. Section 60(5) of the Insolvency and Bankruptcy Code reads
as follows:
"60 (5) Notwithstanding anything to the contrary contained
in any other law for the time being in force, the National
Company Law Tribunal shall have jurisdiction to entertain
or dispose of--
(a) any application or proceeding by or against the
corporate debtor or corporate person;
(b) any claim made by or against the corporate debtor or
corporate person, including claims by or against any of its
subsidiaries situated in India; and
10 RRR,J
W.P.No.15743 of 2022
(c) any question of priorities or any question of law or facts,
arising out of or in relation to the insolvency resolution or
liquidation proceedings of the corporate debtor or corporate
person under this Code."
16. Rule 11 of the NCLT Rules reads as follows:
"11. Inherent Powers.- Nothing in these rules shall be
deemed to limit or otherwise affect the inherent powers of
the Tribunal to make such orders as may be necessary for
meeting the ends of justice or to prevent abuse of the
process of the Tribunal."
17. Under the provisions of the Insolvency and Bankruptcy Code,
the insolvency resolution process, of a company, commences when the
petition by a creditor, under Sections 7 to 9 is admitted. Subsequently,
any application by the corporate debtor to withdraw the proceedings, on
the ground that the claim of the corporate debtor is settled, is permissible
after the committee of creditors, constituted under the resolution process,
is consolidated. The provisions of the Code also stipulate that the
committee of creditors is to be constituted within 30 days from the date of
admission / appointment of an interim resolution professional.
18. A question arose before the Hon'ble Supreme Court in Swiss
Ribbons (P) Ltd., and Anr., vs. Union of India and Ors.,2 as to what
is to be done if a settlement is arrived at even before the committee of
creditors is constituted. The Hon'ble Supreme Court answered this
question by holding that where the committee of creditors is not yet
(2019) 4 SCC 17
11 RRR,J
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constituted, a party can approach the NCLT directly and the Tribunal, in
exercise of its powers under Rule 11 of the NCLT Rules, may allow or
disallow such an application for withdrawal or settlement.
19. In view of the above observations of the Hon'ble Supreme
Court, in paragraph 82 of the said judgment, the NCLT has the inherent
power, to direct withdrawal of the creditors petition, before the committee
of creditors is constituted. The recognition of such a power, by the Hon'ble
Supreme Court, in a situation, which is not covered or contemplated under
the Statute or the Rules made thereunder, clearly shows that the inherent
powers of the NCLT cannot be interpreted restrictively and a wider and
larger approach need to be taken while interpreting Rule 11 of the NCLT
Rules. Such an expansive interpretation of Rule 11 would clearly mean
that the Tribunal, which has the inherent power to permit withdrawal of a
petition, would also have the inherent power to restore such a petition.
20. There could be a dispute or challenge to the grounds on
which such a power of restoration can be exercised. There cannot be a
dispute on the inherent power of the NCLT to direct restoration of an
application which had been permitted by the Tribunal to be withdrawn
earlier.
21. Apart from this, Section 60(5) c) of the Insolvency and
Bankruptcy Code also empowers the NCLT to entertain or dispose of any
application or proceeding by or against the corporate debtor or corporate
person as well as any claim made by or against the corporate debtor. This
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W.P.No.15743 of 2022
provision is in the nature of a residuary power (ESSAR STEEL (2020) 8
SCC 531). The Hon'ble Supreme court, while considering the contours of
this provision, in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta3, at
page 270, had held as follows;
87. Hence, the residuary jurisdiction conferred by statute
may extend to matters which are not specifically enumerated
under a legislation. While a residuary jurisdiction of a court
confers it wide powers, its jurisdiction cannot be in
contravention of the provisions of the statute concerned.
In A. Devendran v. State of T.N. [A. Devendran v. State of
T.N., (1997) 11 SCC 720 : 1998 SCC (Cri) 220] , a two-Judge
Bench of this Court, while determining the limitations of the
residuary jurisdiction under Section 465 of the Code of
Criminal Procedure, 1973 ("CrPC"), held that a residuary
jurisdiction cannot be invoked when there is a patent defect
of jurisdiction or an order is passed in contravention of any
mandatory provision of the CrPC. Speaking through G.B.
Pattanaik, J., this Court observed that a competent court is
vested with the power to exercise residuary jurisdiction
under Section 465 CrPC in the following terms : (SCC pp.
740-41, para 15)
"15. We may notice also the arguments advanced by Mr
Mohan, learned counsel appearing for the State, that the
conviction and sentence against the appellants should not be
interfered with in view of the provisions of Section 465 of the
Code, inasmuch as there has been no failure of justice. We
are unable to accept this contention. Section 465 of the
Code is the residuary section intended to cure any error,
omission or irregularity committed by a court of competent
jurisdiction in course of trial through accident or
(2021) 7 SCC 209 : (2021) 4 SCC (Civ) 1 : 2021 SCC OnLine SC 194
13 RRR,J
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inadvertence, or even an illegality consisting in the infraction
of any provisions of law. The sole object of the section is to
secure justice by preventing the invalidation of a trial already
held, on the ground of technical breaches of any provisions
in the Code causing no prejudice to the accused. But by no
stretch of imagination the aforesaid provisions can be
attracted to a situation where a court having no jurisdiction
under the Code does something or passes an order in
contravention of the mandatory provisions of the Code. In
view of our interpretation already made, that after a criminal
proceeding is committed to a Court of Session it is only the
Court of Session which has the jurisdiction to tender pardon
to an accused and the Chief Judicial Magistrate does not
possess any such jurisdiction, it would be impossible to hold
that such tender of pardon by the Chief Judicial Magistrate
can be accepted and the evidence of the approver thereafter
can be considered by attracting the provisions of Section 465
of the Code. The aforesaid provision cannot be applied to a
patent defect of jurisdiction. Then again it is not a case of
reversing the sentence or order passed by a court of
competent jurisdiction but is a case where only a particular
item of evidence has been taken out of consideration as that
evidence of the so-called approver has been held by us to be
not a legal evidence since pardon had been tendered by a
court of incompetent jurisdiction. In our opinion, to such a
situation the provisions of Section 465 cannot be attracted at
all. It is true, that procedures are intended to subserve the
ends of justice and undue emphasis on mere technicalities
which are not vital or important may frustrate the ends of
justice. The courts, therefore, are required to consider the
gravity of irregularity and whether the same has caused a
failure of justice. To tender pardon by a Chief Judicial
Magistrate cannot be held to be a mere case of irregularity
nor can it be said that there has been no failure of justice. It
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is a case of total lack of jurisdiction, and consequently the
follow-up action on account of such an order of a Magistrate
without jurisdiction cannot be taken into consideration at all.
In this view of the matter the contention of Mr Mohan,
learned counsel appearing for the State, in this regard has to
be rejected."
(emphasis supplied)
22. The Statute, in the present case, is silent on the issue of
restoration of a petition, which has been withdrawn with the leave of the
tribunal and in such cases, in view of the above observations, the Tribunal
would have the residuary power to restore such petitions.
23. For all the aforesaid reasons, it must be held that the NCLT
has the inherent power under the two provisions mentioned above to
entertain and allow applications for restoration of powers which had
earlier been withdrawn on the permission granted by the NCLT.
24. Sri C. Raghu, learned Senior Counsel appearing for the writ
petitioner would also contend that the grounds on which the application
has been ordered are not in accordance with the provisions of law.
25. The contention of Sri C. Raghu, learned Senior Counsel is
that, the terms of the MOU clearly stipulate that there is a settlement of
dues, between the writ petitioner and the unofficial respondent, capping
the liability of the writ petitioner to Rs.5 crores whereas the petition filed
before the NCLT was on the basis of the claim of Rs.8.9 crores. He would
further submit that there is no default clause in the MOU which stipulates
15 RRR,J
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that the previous dues would revive in the event of any default in the
terms of MOU. He would submit that in such a situation the earlier liability
of the petitioner would not survive and consequently revival of the petition
would not, in any manner, enure to the benefit of the unofficial
respondent.
26. The aforesaid dispute between the petitioner and the
respondent as to the maintainability of the petition filed by the unofficial
respondent before the NCLT on account of the subsequent MOU, capping
the liability of the writ petitioner to Rs.5 crores, and whether the writ
petitioner had remitted the entire amount as claimed by the unofficial
respondent or whether the writ petitioner had not remitted the entire
amount of Rs.5 crores as contended by the unofficial respondent, are all
issues which need to be gone into by the NCLT, without being bound by
its earlier observation that, the situation, as before the Memorandum of
Understanding, would revive in toto.
27. It goes without saying that the NCLT would also go into the
question whether the MOU would in any manner affect the pending
company petition and whether the unofficial respondent can continue the
company petition in the light of the MOU executed between the parties. It
would not be appropriate for this Court to go into those issues at this
stage. These are matters of further enquiry as to the question whether
payments had been made by the writ petitioner, in full, in compliance with
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the terms of MOU and the consequences if such payment has not been
made or demonstrated.
28. Accordingly, this writ petition is disposed of leaving it open
to the writ petitioner to raise all the aforesaid issues before the NCLT , in
the hearing before the NCLT, which would take an appropriate decision on
the objections raised by the writ petitioner. There shall be no order as to
costs.
As a sequel, pending miscellaneous petitions, if any, shall stand
closed.
_________________________
R. RAGHUNANDAN RAO, J.
30th September, 2022
Js.
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W.P.No.15743 of 2022
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
W.P.No.15743 of 2022
30th September, 2022
Js.
