Author Default
In a recent case Vikram Puri (Suspended Director) Vs. Universal Buildwell Pvt. Ltd., reported at (2022) ibclaw.in 189 NCLAT, where NCLAT upheld decision of the Adjudicating Authority.
In this case, the Appellant- Suspended Board of Directors of the Corporate Debtor did not co-operate with the Resolution Professional, hence, an application under Section 19(2) of the Code was filed by the Resolution Professional. By order dated 16.07.2021 passed by the Adjudicating Authority, Suspended Directors were directed to surrender before the Tribunal on 20.07.2021 and Non-Bailable Warrants were also issued. On 03.08.2021, Suspended Directors moved an Application for cancellation of the Non-Bailable Warrants which Application was dismissed by the Adjudicating Authority on 03.08.2021. By the same order, Suspended Board of Directors were again directed to surrender before the Registrar, NCLT on or before 06.08.2021 and they were also directed to handover all the documents. On 30.09.2021, Application filed by the Suspended Directors for exemption of appearance and surrender, since Suspended Directors failed to surrender, was heard and rejected.
The question to be answered by NCLAT is as to whether the Adjudicating Authority while exercising jurisdiction under the Code have any jurisdiction to issue Non-Bailable Warrant against any person or party.
Decision of the NCLAT
a. Power to issue Non-Bailable Warrant under the Code
Rule 77 of NCLAT Rules, 2016 which is contained in Part-XIII of the Rules provides for ‘Procedure for examination of witnesses, issue of Commissions’. This Rule specifically provides that the provisions of Order XVI of the Code of Civil Procedure, 1908 shall apply in the matter of summoning and enforcing attendance of any person. Order XVI Rule 10 of the Code of Civil Procedure, 1908 specifically empowers the Court to issue in its discretion at any time warrant either with or without bail for arrest of such person who without any lawful excuse, failed to attend or to produce the document in compliance with such summons.
From the facts of the case, it is clear that in spite of several opportunities given to Suspended Directors, they refused to surrender even though their prayer for cancellation of the Non-Bailable Warrants was rejected. The provision of Rule 77 of the NCLAT Rules, 2016 read with Order XVI Rule 10 of Civil Procedure Code fully empowers the Adjudicating Authority to issue a Non-Bailable Warrant for enforcing attendance of a person. The power exercised by the Adjudicating Authority in issuing a Non-Bailable Warrant to the Appellants is thus well within jurisdiction of the Adjudicating Authority and the submission of the Counsel for the Appellants that Adjudicating Authority is not clothe with any power to issue Non-Bailable Warrant has to be rejected. The Appellants who are the Suspended Directors of the Corporate Debtor are required to submit the relevant documents and co-operate in the proceeding and are avoiding to comply with the direction and in the order dated 03.08.2021, the Adjudicating Authority had again directed the Suspended Directors to surrender and fresh Non-Bailable Warrants were issued but they have not surrendered rather press their Application for cancellation of warrant which was rightly rejected.
b. ex-parteproceeding and personal appearance of the parties
The submission of the Counsel for the Appellants that the Adjudicating Authority could have proceeded ex-parte and passed order against the Corporate Debtor and Suspended Directors and it was not necessary to ask the presence of the Suspended Directors cannot be accepted. The proceedings under the IBC are proceedings of special nature object of which is resolution of insolvency of Corporate Debtor. The Resolution Professional for discharging various statutory duties as entrusted under the Code should have access to necessary documents and records without which the proceedings under the IBC cannot proceed as per the objective of the Code. The Code empowers the Adjudicating Authority to take appropriate measures for ensuring compliance of the provisions of the Code and for ensuring that all personnel extend co-operation to IRP/ RP. Section 19 specifically empowers the Adjudicating Authority to issue appropriate direction for compliance. The powers under Section 19 has been given to authority for purpose and object and the Suspended Directors cannot escape their liability to submit necessary documents and to explain before the Court, their contention by saying that ex parte order ought to have been passed and their personal appearance should not have been asked for, cannot be accepted.
The submission of the Counsel for the Appellants is that there is no provision which requires that a person against whom enforcement is sought must be physically present. The present is a case where Tribunal to effectively discharge function by the Resolution Professional under the Code has to issue appropriate direction in the interest of Insolvency Resolution Process. For ensuring personal appearance of the parties, the Tribunal was fully competent to issue Non-Bailable Warrant and other mode for enforcing order of Tribunal were not necessary to be adopted. The condition that such person has without lawful excuse, failed to attend or to produce the document in compliance with such summons were fully met and it cannot be said that conditions for issuance of Non-Bailable Warrant were not satisfied.
c. Principles of natural justice
Insofar as submission of the Learned Counsel for the Appellants that the Tribunal is bound to follow the principles of natural justice, there can be no two opinions about the said principle. Section 424(1) of the Companies Act, 2013 specifically provides that the Tribunal while disposing of any proceeding before it shall be guided by the principles of natural justice. Present is a case where principles of natural justice have not been violated. The Appellants were issued notice on 02.08.2018 in response to which they failed to appear. Thereafter, Bailable Warrants were issued on 29.08.2018 and 17.10.2018 but the presence of the Appellants could not be secured and it was thereafter on 19.10.2018, Non-Bailable Warrants were issued. Issuance of Non-Bailable Warrants were repeated thereafter as noticed above. When the Appellants in spite of notices and Bailable Warrants chose not to appear before the Tribunal, the Tribunal was left with no option except to issue Non-Bailable Warrants.
d. Procedures laid down under the CPC
The Submission of the Learned Counsel for the Appellants is that Tribunal is not bound by procedures laid down under the CPC, NCLAT have already noticed that Rule 77 of the NCLAT Rules, 2016 applies various provisions of Civil Procedures Code. NCLAT held that we in the present case are only concerned with the procedure where a person fails to comply with summons which we have already dealt above. The procedure adopted by the Tribunal is in conformity with the NCLT Rules, 2016 as well as order XVI Rule 10 of the Code of Civil Procedure, 1908.
e. Section 70 of the Code
Further submission of the Counsel for the Appellants is that due to non-compliance with Section 19 of the Code, the Appellant could have been prosecuted under Section 70 of the Code. The prosecution under Section 70 is separate and independent proceedings which in no manner fetter the power of the Tribunal under the Code.
f. Decision
NCLAT holds that we, thus, do not find any error in the impugned judgment of the Adjudicating Authority rejecting the Application for recall of cancellation of Non-Bailable Warrants. The Appeal is dismissed.
It also holds that we may further observe that in addition to enforcement of Non-Bailable Warrants, it shall be also open for the Adjudicating Authority to recommend for initiation of prosecution against the Suspended Directors of the Corporate Debtor in event of commission of an offence within meaning of Code.
