Axis Bank Limited vs National Company Law Tribunal
2021 Latest Caselaw 16218 Guj

      C/SCA/15369/2021                           ORDER DATED: 14/10/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/SPECIAL CIVIL APPLICATION NO. 15369 of 2021

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                          AXIS BANK LIMITED
                                Versus
              NATIONAL COMPANY LAW TRIBUNAL & 12 other(s)
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Appearance:
MR DEVEN PARIKH, SENIOR ADVOCATE WITH MR TEJAS P
SATTA(3149) for the Petitioner(s) No. 1
 for the Respondent(s) No. 1
MR MIHIR H JOSHI, SENIOR ADVOCATE with MS TANAYA G SHAH, for
the Respondent No.10
MR SHALIN N MEHTA, SENIOR ADVOCATE WITH MS TANAYA G
SHAH(8430) for the Respondent(s) No.12
MR ARJUN SHETH, for the Respondent No.2
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 CORAM:HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
                  Date : 14/10/2021
                   ORAL ORDER

Mr. Deven Parikh, learned Senior Counsel has submitted that the present writ petition, has been filed, inter alia, only for the limited protection to the petitioner against the respondents pending adjudication of the interlocutory application before the tribunal. It is submitted that the Application (F) No.2401105/01356/2021 has been filed in Company Petition No.(I.B.) No.759(AHM) 2019 by the petitioner, however, owing to unavailability of the bench at Tribunal, the petitioner is constrained to approach this Court seeking interim protection.

1.1 It is submitted that the petitioner has invoked the jurisdiction of this Court under Article 227 of the Constitution of India, as it has superintendence over all the Courts and Tribunals and the jurisdiction is Plenary in nature. It is submitted that under Article 227 of the Constitution of India, the power of superintendence by the High Court is not only of an administrative nature but, is also of judicial nature. It is submitted that if a person is non-suited for want

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of a forum, this Court is well within its power either to designate a forum or if there is no Jurisdictional forum available, this Court, would grant relief so that the party concerned, is not rendered remediless.

1.2 It is submitted that the petitioner proposes not to touch the merits of the case; however, only to substantiate that the petitioner has a arguable case, certain factual aspects are required to be gone into. It is submitted that the petitioner, had advanced discounting facility to the corporate debtor with an aggregate limit of INR 250 crores in 2017, and which was renewed in 2019 by executing an undertaking dated 26.2.2019; categorically agreeing that the process of Stake Sale in Sintex NP Group France and Sintex BAPL Ltd. shall be first used towards the sales bill discounting limit of Sintex BAPL Ltd. with Axis Bank. Thereafter, the petitioner had filed Commercial Civil Suit No.379 of 2019 against the corporate debtor before the Small Causes Court, Ahmedabad, inter alia, praying for declaration, declaring undertaking dated 26.2.2019 given by the corporate debtor to be valid, subsisting and binding. The Small Causes Court, Ahmedabad has passed an order dated 13.09.2019 and modified the same on 19.09.2019, which led to filing of the Special Civil Application No.18466 of 2019 before this Court. This Court, was kind enough to allow the writ petition formulating the issues, to be determined, namely, the rights, liabilities and obligations of the defendants towards the Axis Bank by virtue of the agreement; rights, liabilities and obligations of the defendants, i.e., the respondents towards the applicants in accordance with the terms of the agreement in writing. It is therefore, submitted that the rights, liabilities and obligations of the parties, upon remand of the suit, are yet to be adjudicated.

1.3 It is submitted that the Sintex NP Group France is a wholly owned subsidiary of Sintex Holding BV-Netherlands and Sintex Holding BV is a wholly owned subsidiary of Sintex BAPL Ltd. The

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corporate debtor, had entered into a settlement agreement agreeing that Sintex Holding BV shall open a bank account to deposit the sale proceeds and how the amount, so deposited, would be utilised. It is submitted that considering the e-mails exchanged between the respondent no.10 on one hand and respondent no.12 on the other hand, it is likely that the fund may be transferred to the specified account. It is submitted that such stance is strengthened by the communication dated 28.9.2021 whereby, the respondent nos.10 and 11 have instructed to transfer the net amount from the designated bank account to the specified account or any other bank account as may be designated by the trustee.

1.4 It is submitted that even otherwise, it is the stand of the respondent nos.10 and 11 that the amount has been transferred on 30.9.2021. It is therefore, submitted that the communications and e- mails exchanged during the period from 28.9.2021 to 4.10.2021, clearly suggest that the amount is likely to be transferred or might have been transferred and if the amount is further transferred to any other account, nothing would be left for the petitioner, being a secured creditor, to agitate before the Tribunal. It is therefore, submitted that the powers under Article 227 of the Constitution of India being wide in nature, this Court may extend the protection to the petitioner till the time the application of the petitioner is adjudicated by the Tribunal. If such protection is not granted, the petitioner would be non-suited only on the ground of non-availability of the forum.

2. On the other hand, Mr. Mihir H. Joshi, learned Senior Advocate with Ms. Tanaya G. Shah, learned advocate appearing for the respondent no.10 at the outset, submitted that the edifice on which the submissions are made that the respondent nos.10 and 11 are culprits, is misconceived. It is further submitted that a bare perusal of the averments contained in the writ petition, suggest that there is not a whisper that the respondent nos.10 and 11 have tried to steal

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a march over the petitioner. It is submitted that the conduct of the petitioner is not bona fide because, it filed a commercial suit and got the orders dated 13.09.2019 and 19.09.2019 which led to filing of the writ petition before this Court. This Court, while allowing the writ petition, has observed that the Sintex BAPL and its subsidiaries have arrived at a consensus with the petitioner and got the ex parte order of injunction modified accordingly. It has also been prima facie observed that Sintex BAPL and its subsidiaries only with a view to protecting their own interest, conveniently overlooked or rather turned a blind eye to the liabilities towards the petitioner. It is submitted that this Court has therefore, quashed and set aside the orders, remanding the matter back to the Commercial Court for fresh consideration. Therefore, it is not the respondent nos.10 and 11 who are the culprits but, it is the petitioner, who knowing fully well, executed the undertaking, then filed a suit seeking declaration, declaring undertaking as valid, got the order passed in a surreptitious manner.

2.1 It is further submitted that by the present writ petition, the petitioners are praying for interim protection till the adjudication of the interlocutory application before the Tribunal; however, if one sees the prayers prayed for in the writ petition, they are not simple prayers for seeking interim protection but, also a direction to the Interim Resolution Professional not to act on the e-mail dated 4.10.2021. It is prayed that the Interim Resolution Professional and other respondents shall not transfer, distribute or alienate the sale proceeds. The interlocutory application has been filed and the petitioner is seeking stay till the interlocutory application is adjudicated by the Tribunal.

2.2 In support of this, reliance is placed on the judgment of the Apex Court in the case of The State of Orissa vs. Madan Gopal Rungta reported in AIR 1952 SC 12. It is submitted that the Apex Court has held that an interim relief can be granted only in aid of,

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and as ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceeding. It has also been observed that when the Court declines to decide on the rights of the parties, holding that they should be investigated more properly in a civil suit, it could not, for the purpose of facilitating the institution of such suit, issue directions in the nature of temporary injunctions, under Article 226 of the Constitution of India. It is submitted that the prayer, as is discernible, is seeking direction to protect the petitioner against the respondents, such prayer cannot be granted to facilitate the petitioner to institute such suit.

2.3 It is further submitted that the petition under Article 226 of the Constitution of India is not at all maintainable inasmuch as, except the Tribunal, rest of the respondents are private parties. The Tribunal has been arraigned only with a view to bringing it within the purview of Article 227 of the Constitution of India.

2.4 It is further submitted that in the application before the Tribunal, it has been prayed that the sale proceeds, which may be received from the Stake Sale of Sintex NP Group France, should be deposited in the account with the corporate debtor handled by the Interim Resolution Professional. It is submitted that Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'the Code'), provides for moratorium. Sub-clause (b) of sub-section (1) of Section 14 of the Code, prohibits transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein. Therefore, what has been prohibited is the assets of the corporate debtor. Further, Section 18 of the Code provides for performance of duties by the Interim Resolution Professional; and one of the duties is to take control and custody of any asset over which the corporate debtor has ownership rights. However, explanation attached to Section 18 provides that the term "assets" shall not include the assets of any

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Indian or foreign subsidiary of the corporate debtor. Therefore, foreign subsidiary has been excluded from the provisions of the Code and the shares of the sale proceeds of the foreign company would be beyond the provisions of the Code.

3. Mr. Shalin N. Mehta, learned Senior Advocate with Ms. Tanaya G. Shah, learned advocate appearing for the respondent no.12 has submitted that the judgment/principle cannot be made applicable to the facts of the present case. Article 227 of the Constitution of India provides that the High Court shall have superintendence over all Courts and Tribunals throughout the territories in relation to which it exercises jurisdiction. It is submitted that so far as the other two clauses are concerned, they would not apply; however, so far as the clause (a) is concerned, there are no pleadings in the writ petition. It is further submitted that artificial urgency has been created, when there exists none. The apprehension raised that the amount if appropriated by the respondent nos.10 and 11, situation would become irreversible, is misconceived inasmuch as, the Tribunal has wide powers to restore the position. Therefore, the present writ petition is totally impermissible. It is also submitted that contention that the respondent nos.10 to 14 have tried to overreach the Court process, is also misconceived inasmuch as, it is the petitioner who had filed the suit behind the back of the respondent nos.10 to 14, got the order which, is clear from the observations made by this Court in the writ petition being Special Civil Application No.18466 of 2019.

3.1 It is submitted that it is well settled principle of law that the companies and/or its subsidiaries are distinct and independent in the eyes of law. It is also submitted that so far as the contention of lifting of veil is concerned, same is also impermissible considering the fact that neither fraud is alleged nor the case is of tax evasion. It is only in these two eventualities, that the lifting of corporate veil is permissible. It is further submitted that writ is a public law remedy,

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however, only with a view to making it maintainable that the Interim Resolution Professional has been roped in, but the fact remains that Interim Resolution Professional has no money at all as the money is lying overseas.

4. Mr. Arjun Sheth, learned advocate appearing for the respondent no.2, while referring to the calendar of the Tribunal, submitted that so far as the month of October is concerned, holidays were declared for 12th, 13th and 14th. Further, as per the order dated 10.6.2021, the benches for Tribunal has been constituted to take up urgent matters and as per the said order, the members would be attending the bench only on Mondays and Tuesdays. It is further submitted that recently on 10.10.2021, another order has been passed, constituting the Division Bench which would be available on Monday, Tuesday and Wednesday with effect from 18.10.2021. It is therefore, urged that in view of non- availability of bench, till the time the application is heard, the parties be directed to maintain status quo so that irreversible situation is not created, rendering the petitioner remediless.

5. Heard the learned advocates appearing for the respective parties.

6. Issue notice, returnable on 25.10.2021.

7. The present writ petition is filed under Articles 226 and 227 of the Constitution of India, inter alia, praying for writ, order or direction to protect the petitioner against the respondents, pending adjudication of interlocutory application before the Tribunal. The reason why the present petition has been filed is non-availability of the bench in the Tribunal. The said fact, has not been disputed by any of the learned counsel appearing for the respective parties.

8. Mr. Arjun Sheth, learned advocate, who has been permitted to appear for respondent no.2 has placed on record the calendar as

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well as the orders dated 10.6.2020 and 10.10.2021. As per the order dated 10.6.2021, benches are constituted to take up urgent matters on every Monday and Tuesday. Further, as is discernible from the calendar of 2021 of the Tribunal, 11th to 14th October were holidays, including restrictive holidays. Recently, order dated 10.10.2021, of the Tribunal has been passed wherein, the benches have been reconstituted and would be available with effect from 18.10.2021 on every Monday, Tuesday and Wednesday. Therefore, since the benches were not available, the petitioner has been compelled to file the present writ petition with the prayer of seeking protection.

9. This court, is mindful of the fact that the Code is a Code unto itself. It is equally true that a party cannot be rendered remediless and non-suited only by the reason of non-availability of the bench. Hence, in the interest of justice, in the interregnum, let the parties maintain status quo as it exists today, till 22.10.2021. It is clarified that this Court, has not examined the merits of the case and the Tribunal shall decide the interlocutory application without being influenced by the present order and strictly in accordance with law.

10. Direct service is permitted.

(SANGEETA K. VISHEN,J) BINOY B PILLAI