Rajratan Babulal Agarwal Vs Solartex India Pvt. Ltd. & Ors - The cause list for pronouncement of the impugned order was published on the same day i.e. 28.05.2020. It may be an irregularity but not an illegality.

NCLAT (27.05.2021) in Rajratan Babulal Agarwal  Vs Solartex India Pvt. Ltd. & Ors. [Company Appeal (AT)(Ins.) No. 546 of 2020] held that;

• It is an admitted fact that the Corporate Debtor has received the statutory notice on 08.02.2018. Pursuant to the said notice, they sent the reply to notice on 17.02.2018. Thereafter, the Corporate Debtor filed a Civil Suit for damages against the Operational Creditor on 26.03.2018. Section 8 (2) of IBC reads as under: -

• “existence of a dispute, if any, or record of the pendency of the suit or Arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute”

• The cause list for pronouncement of the impugned order was published on the same day i.e. 28.05.2020. It may be an irregularity but not an illegality. It is not the case of the Appellant that he could not access the order on 28.05.2020.

 

Excerpts of the order;

The Appellant ‘Raj Ratan Babulal Agarwal’, Ex-Director of Honest Derivatives Pvt. Ltd. (Corporate Debtor/ Respondent No. 2) filed this Appeal against the order dated 28.05.2020 passed by Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench, Ahmedabad) in CP(IB) 393/9/NCLT/AHM/2018 whereby the application filed by Solartex India Pvt. Ltd. (Operational Creditor/ Respondent No. 1) under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘IBC’) was admitted and Corporate Insolvency Resolution Process (hereinafter referred toas ‘CIRP’) was initiated against the Corporate Debtor. Mr. Kailash T Shah (Respondent No. 3) was appointed as the Interim Resolution Professional (IRP).

# 3. Brief facts of this Appeal are that Corporate Debtor (Respondent No. 2) placed an order for supply of 500 MT Indonesian Coal vide their purchase order No. HDPL/16-17/586 dated 27.10.2016. Pursuant to this order the Operational Creditor, Solartex India Pvt. Ltd has supplied the required quantity of coal as per specifications to the Corporate Debtor’s factory at Jamner District, Jalgaon, Maharashtra and issued 20 invoices from 28.10.2016 to 02.11.2016 for a total amounting to Rs. 15,73,279/-. The Corporate Debtor has not made any payment for supply of goods against the aforesaid invoices. As per the terms of the agreement, the Corporate Debtor is also liable to pay interest @ 30% p.a. from the date of default till date of actual payment. The Corporate Debtor is liable to pay the principal amount 15,73,279 plus interest amounting to Rs. 5,84,421.38 up to 31.01.2018, the total of which amounts to Rs. 21,97,700.38/-. The Corporate Debtor failed to pay the dues; therefore, the Operational Creditor issued a demand notice on 05.02.2018, which was delivered to Corporate Debtor on 08.02.2018. The Operational Creditor received a reply to the notice from the Corporate Debtor on 19.02.2018 which expressed complete denial of Operational Debt. Instead, the Corporate Debtor demanded an amount of Rs. 4,44,17,438/- towards damage and loss caused to them. Therefore, the Operational Creditor on 30.07.2018 filed an Application under Section 9 of the IBC against the Corporate Debtor.

# 5. The Adjudicating Authority after hearing Ld. Counsel for the parties held that the Corporate Debtor has failed to establish pre-existing dispute. Admittedly the default has occurred on 10.11.2016 which is above Rs. 1 lakh. A statutory notice has been duly served. Thus, the Adjudicating Authority admitted the application under section 9 of the IBC and appointed Shri Kailash T Shah as the IRP and declared a moratorium, for the purposes referred to in Section 14 of the IBC.

# 8. Ld. Counsel for the Appellant further submitted that the both Members of Adjudicating Authority (Mr. Harihar Prakash Chaturvedi and Prashanta Kr. Mohanty) were transferred with immediate effect vide separate orders dated 12.05.2020 and 30.04.2020. They have passed the impugned order on 28.05.2020 which is in contravention to Rule 152 of the NCLT Rules 2016. It was pointed out that the impugned order was passed more than six months after being reserved, which violates Rule 150 of the NCLT Rules, 2016 which mandates that the orders have to be passed within 30 days of such order being reserved. Hon’ble Supreme Court in the case of Anil Rai Vs. State of Bihar (2001) 7 SCC 318 laid down guidelines regarding the pronouncement of judgments which shall be followed by all concerned. As per the guidelines, after conclusion of the arguments in civil matters the judgment must be pronounced within a period of two months. However, it was submitted that in the present case, the impugned order has been pronounced after six months from the date of conclusion of the arguments. Therefore, on this ground, the impugned order is liable to be set aside.

# 9. Ld. Counsel for the Appellant further submitted that as per Rule 89 of the NCLT Rules, 2016, the registry is required to publish the cause list for the next day in advance, however, in the present case, the cause list for pronouncement of the impugned order was published on the same day i.e. on 28.05.2020 and may even have been issued after pronouncement of the order, therefore, there is a clear violation of Rule 89 of the NCLT Rules, 2016. This has caused prejudice to the Appellant as the Appellant did not get an opportunity to claim rehearing which is a substantive right of the Appellant.

# 14. Following issues arise for our consideratin;

• (i) Whether there is any pre-existing dispute?

• (ii) Whether the impugned order is passed in contravention of Rule 152, Rule 150 and Rule 89 of the NCLT Rules 2016?

Issue No. (i)

# 23. With the aforesaid discussion, it cannot be held that there was any dispute in regard to the transaction in question. It seems that in order to avoid the liability, the Corporate Debtor through its reply to notice, tried to impress that there was a pre-existing dispute.

# 25. It is an admitted fact that the Corporate Debtor has received the statutory notice on 08.02.2018. Pursuant to the said notice, they sent the reply to notice on 17.02.2018. Thereafter, the Corporate Debtor filed a Civil Suit for damages against the Operational Creditor on 26.03.2018. Section 8 (2) of IBC reads as under: -

• “existence of a dispute, if any, or record of the pendency of the suit or Arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute”

3 26. In the present case, the Civil Suit has been filed after receipt of statutory notice, therefore, such Civil Suit cannot be treated as existence of dispute.

# 27. Thus, we are of the view that the Corporate Debtor has failed to prove any pre-existing dispute in regard to transaction in question.

Issue No. (ii)

# 28. It is an admitted fact that the NCLT Bench, Ahmedabad consisted of Shri H. P. Chaturvedi Member (Judicial) and Shri Prashanta Kr. Mohanty Member (Technical) who heard the application and reserved for orders on 20.11.2019. Thereafter, the parties have filed their written submission on 06.01.2020 and the impugned order was pronounced by the same Bench on 28.05.2020. Meanwhile, vide order dated 12.05.2020 and 30.04.2020 these members have been transferred. However, due to lockdown they were unable to join their new place of posting. Since the members were physically present at Ahmedabad. Therefore, in public interest vide order dated 21.05.2020, a special Bench was constituted to pronounce the orders reserved by the erstwhile Bench as per Section 419 (3) of the Companies Act, 2013 for the period of 22.05.2020 to 29.05.2020. Thus, it cannot be said that the members have pronounced the impugned order in contravention of Rule 152 of the NCLT Rules, 2016.

# 29. Rule 150 of the NCLT Rules, 2016 provides that “the Tribunal, after hearing the Applicant and Respondent, shall make and pronounce an order either at once or, as soon as, thereafter, as may be practicable but not later than thirty days from the final hearing.” Hon’ble Supreme Court in the case of Anil Rai (Supra) while dealing with a Criminal Appeal framed detailed guidelines regarding expeditious pronounce of judgments. It was held that in Civil matters, the judgment must be pronounced within two months of the close of hearing of the case. It is true that in the present case, the parties have submitted written submissions on 06.01.2020, however, the impugned order was pronounced on 28.05.2020 i.e. after about five months from the conclusion of arguments which is against the aforesaid rule as well as guidelines laid down by the Hon’ble Supreme Court.

# 30. We are of the view that only on this count the impugned order cannot be set aside which is otherwise flawless.

# 31. Rule 89 of the NCLT Rules, 2016 provides that “the registry shall prepare and publish the cause list for the next working day”. Ld. Counsel for the Appellant raised a plea that the cause list for pronouncement for the impugned order was not published in advance and may even have been published after pronouncement of the order. He has placed on record the additional cause list dated 28.05.2020 (Pg. 215 of Appeal Paper Book) which is in regard to pronouncement of impugned order. The cause list for pronouncement of the impugned order was published on the same day i.e. 28.05.2020. It may be an irregularity but not an illegality. It is not the case of the Appellant that he could not access the order on 28.05.2020.

# 32. With the aforesaid, we are of the view that the Appellant has failed to establish that there was a pre-existing dispute and in pronouncing the impugned order, the Adjudicating Authority committed any illegality. We find no merits in this Appeal. Thus, the Appeal is dismissed. However, no order as to costs.

--------------------------------------------------------