Kerala High Court

John Zachariah vs Union Of India on 16 February, 2022

        IN THE HIGH COURT OF KERALA AT ERNAKULAM
                        PRESENT
          THE HONOURABLE MR.JUSTICE N.NAGARESH
WEDNESDAY, THE 16TH DAY OF FEBRUARY 2022/27TH MAGHA, 1943
                 WP(C) NO. 3081 OF 2022
PETITIONERS:

    1    JOHN ZACHARIAH
         AGED 56 YEARS
         MARIKUDIYIL HOUSE, PAZHANGANAD,
         KIZHAKKAMBALAM, ERNAKULAM 683101

    2    MRS REENA PAUL
         MARIKUDIYIL HOUSE, PAZHANGANAD,
         KIZHAKKAMBALAM, ERNAKULAM 683101

    3    MRS ANNU MATHEW
         MARIKUDIYIL HOUSE, PAZHANGANAD,
         KIZHAKKAMBALAM, ERNAKULAM 683101

    4    MR MATHEW JOHN
         MARIKUDIYIL HOUSE, PAZHANGANAD,
         KIZHAKKAMBALAM, ERNAKULAM 683101

    5    MR K.G PAUL
         HOUSE NO. D-31, ANNA NAGAR (EAST),
         CHENNAI 600 102

         BY ADVS.
         G.HARIKUMAR (GOPINATHAN NAIR)
         AKHIL SURESH


RESPONDENTS:

    1    UNION OF INDIA
         MINISTRY OF CORPORATE AFFAIS, LOK NAYIK BHAVAN,
         3RD FLOOR, C WING, KHAN MARKET,
         NEW DELHI 110 003 REPRESENTED BY ITS SECRETARY

    2    NATIONAL COMPANY LAW TRIBUNAL
         KOCHI BENCH, COMPANY LAW BHAVAN BMC ROAD,
         THRIKKAKARA P.S, KAKKANAD, KOCHI 682 021
 W.P.(C) No.3081/2022
                              :2:


    3      J M FINANCIAL ASSET RECONSTRUCTION COMPANY
           LIMITED
           7TH FLOOR, CNERGY, APPASAHEB MARATHE MARG,
           PRABHADEVI, MUMBAI 400 025


           SRI.S.MANU, ASGI

     THIS WRIT PETITION (CIVIL) HAVING COME UP          FOR
ADMISSION ON 16.02.2022, THE COURT ON THE SAME          DAY
DELIVERED THE FOLLOWING:
 W.P.(C) No.3081/2022
                                             :3:




                                  N. NAGARESH, J.

             `````````````````````````````````````````````````````````````
                          W.P.(C) No.3081 of 2022

                 `````````````````````````````````````````````````````````````
                    Dated this the 16th day of February, 2022

                                   JUDGMENT

~~~~~~~~~

The petitioners are personal Guarantors to the

Corporate Debtor Unitek Power Solutions India Limited. The

petitioners seek to quash Ext.P11 Order of the National

Company Law Tribunal, Kochi Bench. The petitioners further

seek to adjudicate CP(IBC)13/KOB/2021, CP(IBC)/14/

KOB/2021, CP(IBC)/15/KOB/2021, CP(IBC)/16/KOB/2021,

CP(IBC)/17/KOB/2021, CP(IBC)/19/KOB/2021 de novo after

considering the submissions made by the petitioners in their

counter affidavit.

2. The petitioners state that the Corporate Debtor

availed certain financial facilities from the Federal Bank

Limited. The facilities were secured by the 1 st petitioner W.P.(C) No.3081/2022

executing several agreements of guarantee. The agreement

of guarantee executed by the 1st petitioner stated that the

liability shall not exceed a sum of ₹18 Crores. The Corporate

Debtor failed to service its debts. By a registered assignment

agreement, the financial assets of the Corporate Debtor

along with all the rights, title, interest and underlying security

interest, were assigned by the Federal Bank Limited to the 3 rd

respondent, which is an asset reconstruction company.

3. Consequently, the 3rd respondent became a

secured creditor to the Corporate Debtor. The 3rd

respondent filed application under Section 7 of the

Insolvency and Bankruptcy Code as CP/91/IB/2018 before

the National Company Law Tribunal, Chennai. The said CP

was allowed. The petitioners state that the applications filed

before the NCLT against the personal guarantor were prima

facie not maintainable since the claims were barred by

limitation. According to the petitioners, by 23.06.2015, the

claim against the Company stands extinguished in law.

Without considering the same, the NCLT admitted the W.P.(C) No.3081/2022

application filed by the 3rd respondent.

4. The order of the Tribunal was challenged by the

Corporate Debtor filing OP(C) No.268 of 2019 before this

Court. This Court dismissed the said OP(C) as per order

dated 25.09.2019. Though the Corporate Debtor raised the

ground of limitation, this Court held that the Corporate Debtor

had at no point of time raised the question of limitation before

the NCLT, Chennai. Subsequently, the NCLT, as per Ext.P7

order dated 06.12.2019, directed liquidation of the Corporate

Debtor.

5. The 3rd respondent had filed application under

Section 95(1) of the Insolvency and Bankruptcy Code against

the petitioners herein before the NCLT, Kochi Bench for

initiating insolvency resolution process. Petitioners 1, 2, 4, 5

and 6 filed their counter affidavit. The petitioners submitted

before the Tribunal that one of the respondents, Susan

Zachariah, passed away even before filing of the applications

against the Corporate Debtor. Without considering the

submissions made by the petitioners, the NCLT passed W.P.(C) No.3081/2022

Ext.P11 order dated 27.09.2021 and appointed an

Insolvency Resolution Professional.

6. The petitioners challenge Ext.P11 order. The

petitioners state that the impugned Ext.P11 order

demonstrates clear non-application of mind. This is evident

from the fact that proceedings were initiated against a dead

person. The petitioners further contended that the principles

of audi alteram partem were violated by the Tribunal. The

petitioners submit that the proceedings against the personal

guarantors are not maintainable in law as the claim is clearly

barred by the law of limitation. Furthermore, the personal

guarantee was limited to an amount of ₹18 Crores.

7. The petitioners challenge Sections 95, 97, 99 and

100 of the Insolvency and Bankruptcy Code as arbitrary,

discriminatory and violative of Article 14 of the Constitution of

India. According to the petitioners, the procedure prescribed

thereunder confers on the Resolution Professional the

powers of a judicial authority and the role of the Tribunal is

reduced to a mere rubber stamp. The net result is that legal W.P.(C) No.3081/2022

issues on the claims will have to be addressed solely before

the Resolution Professional who is not even a judicial

authority.

8. The Assistant Solicitor General of India, who

appeared for the 1st respondent, submitted that writ petition is

not maintainable against Ext.P11 order of the National

Company Law Tribunal since the IBC and Companies Act,

2013 provide for efficacious alternative remedy.

9. I have heard the learned counsel for the

petitioners and the learned Assistant Solicitor General of

India representing the 1st respondent.

10. The prime arguments of the petitioners are based

on non-application of mind by the National Company Law

Tribunal and the law of limitation. Section 61 of the

Insolvency and Bankruptcy Code provides that

notwithstanding anything to the contrary contained under the

Companies Act 2013, any person aggrieved by the order of

the Adjudicating Authority under this part may prefer an

appeal to the National Company Law Appellate Tribunal. The W.P.(C) No.3081/2022

petitioners, therefore, have an efficacious alternate remedy.

The proceedings under challenge are under the Insolvency

and Bankruptcy Code. When the Code itself provides for an

appellate remedy, this Court would not be justified in

adjudicating on the sustainability of the order passed by the

NCLT in writ proceedings.

11. The learned counsel for the petitioners would urge

that constitutionality of Sections 95, 97, 99 and 100 of the

Insolvency and Bankruptcy Code is under challenge and

therefore, this Court would be justified in exercising its

jurisdiction under Article 226 of the Constitution of India. The

petitioners would contend that Sections 95, 97, 99 and 100

of the Insolvency and Bankruptcy Code are unconstitutional

for the reason that the procedure prescribed thereunder

confers on the Resolution Professional the powers of a

judicial authority and the role of the Tribunal is reduced to a

mere rubber stamp. The statute does not provide a fair

opportunity to the Debtors/Personal Guarantors to have a fair

adjudication. Sections 95 and 100 leave no scope for any W.P.(C) No.3081/2022

adjudication by the Tribunal, contend the petitioners.

12. Sections 95, 97, 99 and 100 are included in

Chapter III, Part III of the IBC under the head Insolvency

Resolution Process (IRP). Sections 94 and 95 deal with the

applications by debtor and creditor respectively to initiate

Insolvency Resolution Process. As per Section 95, a

Creditor may apply to the Adjudicating Authority to initiate

IRP. As per Section 97, the Adjudicating Authority may direct

the Board to nominate a Resolution Professional. The

Adjudicating Authority is the appointing authority in respect of

Resolution Professional.

13. Section 99 requires the Resolution Professional to

submit a recommendation either to approve or reject the

application to initiate IRP. The Resolution Professional has to

give reasons in support of his recommendations. The

Adjudicating Authority, under Section 100, is to decide

whether to admit or reject the application for IRP. From a

reading of Chapter III, Part III of the IBC, it is obvious that in

the matter of initiating an IRP, the role of the Resolution W.P.(C) No.3081/2022

Professional is limited to making appropriate

recommendations to the Adjudicating Authority.

14. The Resolution Professional is required to give

reasons in support of his recommendations. The Adjudicating

Authority is the body which takes final decision in the matter.

The Adjudicating Authority is not bound by the

recommendation made by the Resolution Professional. In

fact, a reading of other provisions in the IBC would make it

abundantly clear that in the matter of issuing public notices

inviting claims from the creditors and approving or rejecting

repayment plan as also in passing Discharge Order, it is the

Adjudicating Authority, who is the decision making authority,

even though the Adjudicating Authority may not be justified in

interfering with commercial wisdom of the Committee of

Creditors.

15. The Hon'ble Apex Court has held in Gujarat Urja

Vikas Nigam Ltd. v. Amit Gupta and others [(2021) 7 SCC

209] that merely because a duty has been imposed on

Resolution Professional, it does not mean that the jurisdiction W.P.(C) No.3081/2022

of NCLT is circumscribed. The argument of the petitioners

that the role of Adjudicating Authority is reduced to that of a

rubber stamp under the context of Sections 95, 97, 99 and

100 of the IBC, is hence not factually correct. This Court

finds no illegality or unconstitutionality in Sections 95, 97, 99

or 100 of the IBC.

The writ petition therefore fails and it is

accordingly dismissed. However, the petitioners are granted

one month's time from today to approach the NCLAT,

Chennai for redressal of their grievances. The

implementation of Ext.P11 should stand deferred for a period

of one month.

Sd/-

N. NAGARESH, JUDGE aks/15.02.2022 W.P.(C) No.3081/2022

APPENDIX OF WP(C) 3081/2022

PETITIONER'S EXHIBITS

Exhibit P1 A TRUE COPY OF AGREEMENT OF GUARANTEE DATED 27-02-2010 Exhibit P2 A TRUE COPY OF ASSIGNMENT AGREEMENT REGISTERED AS DOCUMENT NO. 1405/2013 OF CENTRAL CHENNAI SRO, DATED 26-03-

Exhibit P3 A TRUE COPY OF ORDER OF THE NATIONAL COMPANY LAW TRIBUNAL, CHENNAI IN IB NO. CP /91/1B/2018 DATED 1-1-2019 Exhibit P4 A TRUE COPY OF THE AFFIDAVIT DATED 09-

07-2018

OF 2019 DATED 25-09-2019 Exhibit P6 A TRUE COPY OF ORDER OF THE SUPREME COURT IN SLP NO 26294/2019 DATED 13-

11-2019 Exhibit P7 A TRUE COPY OF ORDER OF LIQUIDATION PASSED BY THE NCLT KOCHI BENCH DATED 6-12-2019 IN MA 33/KOB/2019 Exhibit P8(A) A TRUE COPY OF THE APPLICATION FILED AGAINST THE 1ST PETITIONER NUMBERED A S CP(IBC)/13/KOB/2021 WITHOUT ANNEXURES Exhibit P8(B) A TRUE COPY OF THE APPLICATION FILED AGAINST THE 2ND PETITIONER NUMBERED AS CP(IBC)/15/KOB/2021 WITHOUT ANNUEXURES Exhibit P8 C A TRUE COPY OF THE APPLICATION FILED AGAINST THE 3RD PETITIONER NUMBERED AS CP(IBC)/16/KOB/2021 WITHOUT ANNUEXURES Exhibit P8 D A TRUE COPY OF THE APPLICATION FILED AGAINST THE 4TH PETITIONER NUMBERED AS CP(IBC)/17/KOB/2021 WITHOUT ANNUEXURES Exhibit P8 E A TRUE COPY OF THE APPLICATION FILED AGAINST THE 5TH PETITIONER NUMBERED AS CP(IBC)/19/KOB/2021 WITHOUT ANNUEXURES W.P.(C) No.3081/2022

Exhibit P9 A A TRUE COPY OF COUNTER AFFIDAVIT FILED BY THE 1ST PETITIONER TO THE INSOLVENCY APPLICATIONS FILED UNDER SECTION 95(1) Exhibit P9B A TRUE COPY OF COUNTER AFFIDAVIT FILED BY THE 2ND PETITIONER TO THE INSOLVENCY APPLICATIONS FILED UNDER SECTION 95(1) Exhibit P9C A TRUE COPY OF COUNTER AFFIDAVIT FILED BY THE 3RD PETITIONER TO THE INSOLVENCY APPLICATIONS FILED UNDER SECTION 95(1) Exhibit P9D A TRUE COPY OF COUNTER AFFIDAVIT FILED BY THE 4TH PETITIONER TO THE INSOLVENCY APPLICATIONS FILED UNDER SECTION 95(1) Exhibit P9E A TRUE COPY OF COUNTER AFFIDAVIT FILED BY THE 5TH PETITIONER TO THE INSOLVENCY APPLICATIONS FILED UNDER SECTION 95(1) Exhibit P10 A TRUE COPY OF DEATH CERTIFICATE OF THE SUSAN ZACHARIAH DATED 11-08-2021 Exhibit P11 A TRUE COPY OF IMPUGNED ORDER PASSED BY THE 2ND RESPONDENT IN CP (IBC)13/KOB/2021/CP(IBC)/14/KOB/2021/C F(IBC)/15/KOB/2021,CP(IBC)/16/KOB/2021 , CP(IBC)/17/KOB/2021,CP(IBC)/19/KOB/202 1 DATED 27-09-2021 DATED 11-08-2021 Exhibit P12 A TRUE COPY OF INTERIM ORDER DATED 15-

11-2021 IN WRIT PETITION (CIVIL) NO.

25290/2021 PASSED BY THIS HON'BLE COURT Exhibit P13 A TRUE COPY OF IA NO. 01/2022 IN WRIT PETITION (CIVIL) NO. 25290/2021 FILED BEFORE THIS HON'BLE COURT.

Exhibit P14 A TRUE COPY OF THE JUDGMENT DATED 05-