Tareekh par tareekh!!! Adjournments in proceedings under IBC – By Adv. Pratik Sarkar: Part-II Long-Extended hearing & Groundless filing

Tareekh par tareekh!!!
Adjournments in proceedings under IBC

A recent incident at Karkardooma Court Complex – New Delhi has not only reminded us of the famous scene from ‘Damini’, but also has highlighted an age-old malaise of long-drawn judicial proceedings, which has plagued our Justice Delivery Institutions. Unfortunately, from which even proceedings under Insolvency & Bankruptcy Code (which was intended to be a law providing for time-bound resolution of Companies who are unable to pay-off their debts) could not remain immune. The undersigned author by this article series highlights the settled position in law and the binding precedents, relying on which can help minimise the delays in Court proceedings.

Part-II

Long-Extended hearing & Groundless filing

Pertinent to point out that Audi alteram partem does not mean that the Hon’ble Tribunal is obligated to entertain filibuster & ultracrepidarianism on the part of litigants who argue for reliefs which are groundless and ultra-vires as per the settled position in law, Hon’ble Supreme Court in Sohan Lal Gupta V/s Asha Devi Gupta (2003) 7 SCC 492 ruled:

Para 22: …. In Russ ell on Arbitration, 22nd Edn. the law is stated thus:

“5-057. Managing the hearing.—Similarly, a Tribunal cannot be expected to sit through extended oral hearings listening to long-winded submissions on irrelevant matters. The Tribunal is entitled, and under Section 33 is obliged and encouraged, to avoid the unnecessary delay and expense that would be caused by such an approach. The Tribunal should take a grip on the proceedings and indicate to the parties those areas on which it particularly wishes to be addressed and those which it does not consider relevant to the real issues in dispute. If a party fails to heed such guidance, the Tribunal might seek to focus the proceedings by allocating the remaining hearing time between the parties. This the Tribunal is entitled to do, provided it will allow a reasonable time for both parties to put forward their arguments and evidence.”

Hon’ble Delhi High Court in Kusum Kumria V/s Pharma Venture (India) Pvt. Ltd., 2015 SCC OnLine Del 13042 severely castigated the litigants for taking pleas contrary to law. This ruling throws light on how to deal with dishonest litigants profiteering from delays in Judicial Proceedings. It is important to delve on the said ruling in detail:

Para 2: The instant appeal challenging the order dated 15th May, 2014 of the learned Single Judge directing issuance of the sale certificate manifests the dishonest extremes to which an unscrupulous litigant can use and exploit the judicial processes in order to perpetuate the occupation of a valuable property in a posh colony. When the suit property is of the nature of the suit property being W-152, Greater Kailash-I, New Delhi (except its first floor), it is obviously difficult to let go. However, neither the methodology adopted by the appellants in the present case of filing this appeal (challenging a sale certificate confirming the sale after a public auction with the total consent and active participation of the appellants) nor the end, is either fair or justified. It is certainly completely malafide and, most importantly, contrary to law.

Para 79: Once a pleading has been made, a course of action opted for, the plaintiff cannot in law, from the admission, resile. In the interest of justice & equity, to circumvent such malafide behavior, the courts must enforce the principles of estoppel assertively. Allowing a litigant to take two inconsistent stands in any litigation would amount to nothing short of travesty of justice. In the present case, the stand has been reiterated repeatedly by the plaintiffs, however, they now seek to plead a completely inconsistent stand after direction of issuance of the sale certificate have been made. The plaintiff shall therefore, be estopped from contradicting a previous stand with a different newer stand.

Para 126: In AIR 1968 SC 534, Sita Ram v. Radha Bai, the court reiterated the well settled principle as contained in the maxim in pari delicto potior est conditio defendentis holding that the court would refuse to enforce an illegal agreement at the instance of a person who was himself a party to an illegality of fraud.

Para 127: Similarly in AIR 1965 SC 1364, Smt. Surasaibalini Devi v. Phanindra Mohan, the Supreme Court refused to assist the litigant seeking assistance of the court to effectuate an illegal transaction.

Para 128: In AIR 1968 SC 1165, Nair Service Ltd. v. Rev. Father K.C. Alexander, it was held that the court would refuse assistance to a litigant who was relying upon his own illegality.

Para 130: Again in AIR 1960 SC 213, Kedar Nath v. Prahlad Rai, it was held that public policy demands that a party resting its case upon an illegality should not be allowed to take advantage of the position. There can be no dispute with this well settled principle….

Para 274: It would be truly unfortunate if such litigation and unscrupulous litigants as the present plaintiffs are not discouraged from their ulterior designs. These plaintiffs have managed to desist finalization of the sale and dispossession for a tedious amount of time since 17th November, 2011 under one pretext or the other. The amount of judicial time expended on their diverse & repeated frivolous applications & appeals cannot be measured in monetary terms. There cannot be an iota of justification for the conduct that the plaintiffs have resorted to. …

Para 275: This court has had the opportunity to extensively deal with the concept of costs, statutory provisions governing it, its objective and quantum in the pronouncements reported at:

(i) 2015 SCC OnLine Del 11528, Harish Relan v. Kaushal Kumari Relan, RFA(OS) 162/2014 – (pronounced on 3rd August, 2015, Paras 61-126);

and

(ii) 2015 SCC OnLine Del 11515, Sicpa India Private Limited v. Kapil Kumar, RFA(OS) 127/2014 – (pronounced on 26th August, 2015 – Paras 24.1-24.70).

Para 277: Imposition of heavy costs is the only medium to send a glaring message to restrict the unscrupulous and frivolous litigants from wasting valuable judicial time for wrongful gains. Actual realistic costs should be imposed as a matter of practice to discourage such frivolous litigation.

Para 278: The importance of imposing costs on those unscrupulous litigants who seek equity with unclean hands and engage in frivolous litigation has been dealt with in several pronouncements of the Supreme Court (Ref: (2012) 6 SCC 460 – Padmawati v. Harijan Sewak Sangh; (2011) 8 SCC 249 – Ramrameshwari Devi v. Nirmala Devi; and (2012) 5 SCC 370 – Maria Margarida Sequeira Fernandes v. Erasmo Jack De Sequiera). It was mandated that costs must be awarded to discourage the dishonest and unscrupulous litigants from abusing the judicial system. It was observed that, the court was recommending imposition of costs “not out of anguish”, but following the fundamental principle that “wrongdoers should not get benefit out of frivolous litigation”.

Para 279. In Ramrameshwari Devi on the aspect of awarding costs to disincentivize such unscrupulous litigants from wasting the scarce judicial time, the Supreme Court noted thus:

“43. … We are clearly of the view that unless we ensure that wrongdoers are denied profit or undue benefit from the frivolous litigation, it would be difficult to control frivolous and uncalled for litigations. In order to curb uncalled for and frivolous litigation, the courts have to ensure that there is no incentive or motive for uncalled for litigation. It is a matter of common experience that court’s otherwise scarce and valuable time is consumed or more appropriately, wasted in a large number of uncalled for cases.”

Para 280: The object of imposition of costs is that is it should act as a deterrent to frivolous litigation and when a party is sued without cause, costs should invariably follow. They should be in the nature of incidental damages allowed to a party for successfully vindicating their rights in court and the party to blame shall pay costs to the party without fault. (Ref: ILR (1921) 48 Cal 427 – Manindra Chandra Nandi v. Aswini Kumar Acharjya and (2010) 8 SCC 1 – Vinod Seth v. Devinder Bajaj)

Para 282: This court has also noted the huge strain caused by unnecessary and dishonest litigation on the limited judicial resources, which it is compelled to spread unnecessarily and valuable time thereon. (Ref: 138 (2007) DCT 62, Goyal MG Gases Pvt. Ltd. v. Air Liquid Deutschland Gmbh and ILR (2012) IV DEL 110, Punjab National Bank v. Virendra Prakash.)

Para 283: In Ashok Kumar Mittal v. Ram Kumar Gupta, (2009) 2 SCC 656, expounding on the object and scope of the jurisdiction to impose costs, the Supreme Court emphasized that a more realistic approach relating to costs needs to be adopted to act as a deterrent to vexatious litigation. It observed thus:

“9. The present system of levying meagre costs in civil matters (or no costs in some matters), no doubt, is wholly unsatisfactory and does not act as a deterrent to vexatious or luxury litigation borne out of ego or greed, or resorted to as a “buying-time” tactic. More realistic approach relating to costs may be the need of the hour.”

Para 284: On the aspect of what should constitute costs and quantum thereof, in the pronouncement reported at (2005) 6 SCC 344 Salem Advocate Bar Association v. Union of India, the Supreme Court observed that costs awarded should be the actual realistic costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental costs besides the payment of the court fee, lawyer’s fee, typing and other costs in relation to the litigation. It was also articulated that these ‘actual realistic costs’ should be realistic and nominal.

Para 296. It is also necessary to advert to the power of the court under Section 151 of the CPC. This statutory provision specifically states that “Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court”. … Section 151 therefore, enables a court to pass orders as may be necessary for the ends of justice, or to “prevent abuse of process of the court” which is beyond the “false and vexatious” litigation covered under Section 35A and are wide enough to enable the court to pass orders for full restitution. It is trite that an order imposing reasonable and realistic costs is necessary to do the right and undo the wrong by an unscrupulous litigant in the course of administration of justice. This court, constituted for the purpose of doing justice,* must be deemed to possess the power to pass an order necessary to prevent the abuse of the process of the court in exercise of its appellate jurisdiction under the Delhi High Court Act and the Code of Civil Procedure

*(and likewise, NCLT is constituted for the purpose of rendering justice, ref.: Prakash K. Pandya V/s Ruby Arya & Ors., NCLT Mumbai Bench Order dt/- 28^th June 2021 ).

Para 297: The instant case manifests abuse of judicial process of the worst kind. Filing of frivolous application, adopting dilatory tactics by taking adjournments time and again, pleading contradictory stands before this court, non-payment of costs imposed and pressing pleas contrary to settled legal positions tantamount to the grossest abuse of the judicial process. More so, the entirety of this litigation is misconceived and without any merit. It has had the effect of entangling valuable rights of the defendants in this legal tussle.

Hon’ble Supreme Court in T. Arivandandam V/s T.V. Satyapal, (1977) 4 SCC 467 held:

Para 5: … if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order 10, CPC. An activist Judge is the answer to irresponsible law suits. The trial courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men, (Cr. XI) and must be triggered against them. In this case, the learned Judge to his cost realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi:

“It is dangerous to be too good.”

The afore-stated ruling/s emphatically set the touchstone with which it is desirable that every Application filed before any Tribunal must be dealt with i.e. the issues of law must be decided as preliminary issue [ref.: Hon’ble Rajasthan High Court ruling in Amir Chand V/s Harji Ram 1986 RLR 985]. If the application is sans backing of any statute, certainly at the very threshold, it is desirable that the application must be dismissed/disposed off with suitable costs imposed on the unscrupulous litigant. However, it is also trite law that the dismissal must be backed with a reasoned order [CCT V/s Shukla (2010) 4 SCC 785], guided by the settled position in law and all case-laws/authorities cited in the submission/s must be discussed in detail qua their applicability or in-applicability. The role of Advocates in this context is extremely important and has been emphatically stated by the Hon’ble Supreme Court in D.P. Chadha V/s Triyugi Narain Mishra (2001) 2 SCC 221 read with T. Arivandandam V/s T.V. Satyapal (1977) 4 SCC 467 – Para 7.

One of the major reasons cited by advocates as a ground for adjournment is for taking appropriate instructions. In this context, Hon’ble Odisha High Court in Biranjan Panda V/s Bank of India (2009) 3 BC 149 (by relying upon Hon’ble Supreme Court ruling) held:

Para 11: Adjournment cannot be sought as a matter of right; not even on the ground that the counsel has no instruction from his client (vide Mary Alvares v. Roy Alvares (2004) 9 SCC 578).

The practice of Advocates/Professionals when faced with unanswerable questions qua maintainability of their applications start praying for adjournment on grounds of taking instructions for withdrawal runs contrary to the settled position in law stated supra. Moreover, the very fact that the litigant is opting to ‘withdraw’ is good enough ground to show that a frivolous application was filed, ref.: Indian Council for Enviro-Legal Action V/s Union of India, (2011) 8 SCC 161, Para 189 (which relied upon Kalabharati Advertising V/s Hemant Vimalnath Narichania (2010) 9 SCC 437, Para 15), reproduced subsequently.

[With regard to the contention of seeking adjournment on grounds of seeking instruction, one can argue that this is an accepted practice adopted across the courts spread across the country and hence denial of adjournment on such ground will be denial of the entitlement under Article 14 of our Constitution!!! The rebuttal to this contention lies in the Hon’ble Supreme Court ruling in State of U.P. V/s Neeraj Awasthi (2006) 1 SCC 667,

Para 75 – … Article 14 has a positive concept. No equality can be claimed in illegality is now well settled. (See State of A.P. v. S.B.P.V. Chalapathi Rao [(1995) 1 SCC 725], SCC para 8; Jalandhar Improvement Trust v. Sampuran Singh [(1999) 3 SCC 494], SCC para 13 and State of Bihar v. Kameshwar Prasad Singh [(2000) 9 SCC 94 : 2000 SCC (L&S) 845], SCC para 30.).

Therefore, if the very entitlement of adjournment on grounds of taking instruction is illegal, given the settled position in law, there cannot be any equality before law in the Tribunal granting the same as well. Moreover, Hon’ble Supreme Court in K.S. Bhoir V/s State of Maharashtra, (2001) 10 SCC 264 ruled:

Para 12: In A.P. Christians Medical Educational Society v. Govt. of A.P. [(1986) 2 SCC 667] it was held thus: (SCC p. 678, para 10)

“… We cannot imagine anything more destructive of the rule of law than a direction by the court to disobey the laws.”                                                                                                                                                                               

Even if any Tribunal passes directions to disobey laws*, the same is not a Binding Precedent, reliance on Vijay Singh V/s State of U.P., 2004 SCC OnLine All 1656

Para 92: Article 14 is not meant to perpetuate an illegality nor it provides for negative equality. Therefore, no one can be forced to repeat the wrong action done by him earlier. This view stands fortified by the judgments of the Hon’ble Apex Court e.g. Snehprabha v. State of U.P. [(1996) 7 SCC 426 : AIR 1996 SC 540.] , Secretary, Jaipur Development Authority v. Daulat Mal Jain [(1997) 1 SCC 35.] , State of Haryana v. Ram Kumar Moan [1997 (76) FLR 746.] and Faridabad Ct. Scan Centre v. Director General, Health Services [(1997) 7 SCC 752.] , Yogesh Kumar v. Government of NTC, Delhi [2003 (97) FLR 146 (SC) : 2003 (4) AIC 82 (SC).].

Para 94: In Jalandhar Improvement Trust v. Sampuran Singh [(1999) 3 SCC 494 : AIR 1999 SC 1347.] , and Union of India v. Rakesh Kumar [2001 (89) FLR 599.], the Hon’ble Supreme Court held that Court cannot issue direction to perpetuate a mistake on the ground of discrimination of hardship.

Para 95: Any action/order contrary to law does not confer any right upon any person for similar treatment. Vide State of Punjab v. Dr. Rajeev Sarwal [(1999) 9 SCC 240.]. Yogesh Kumar v. Government of NCT, Delhi [2003 (97) FLR 146 (SC): 2003 (4) AIC 82 (SC).] , and Union of India v. International Trading Company [2003 (7) AIC 305 (SC) : 2003 (51) ALR 598 : (2003) 5 SCC 437.].

*[Rules Governing Advocates (PART – VI), Standards of Professional Conduct and Etiquette (CHAPTER – II), Duty to the Court (Section I), Rule 1 of Bar Council of India Rules: An advocate shall, during the presentation of his case and while otherwise acting before a court, conduct himself with dignity and self-respect. He shall not be servile and whenever there is proper ground for serious complaint against a judicial officer, it shall be his right and duty to submit his grievance to proper authorities. In R.R. Parekh V/s High Court of Gujarat (2016) 14 SCC 1, Para 16, it was ruled – … A wanton breach of the governing principles of law or procedure may well be indicative in a given case of a motivated, if not reckless disregard of legal principle. …]

In fact, there must not be any situation where the Advocate appearing before the Tribunal is having incomplete briefing about the facts of the case. The Hon’ble Bombay High Court (Nagpur Bench) in Asgar Sheikh V/s Jail Superintendent 2021 SCC OnLine Bom 931 reiterated the duty on Advocates to double check and verify position of law and facts of the case before making any presentation to the Court. It was ruled:

Para 14: When an advocate makes statement before the Court, it is assumed that it is made in his capacity as the officer of the Court and not an effort to get a favourable order by suppressing the material fact or binding precedent. Large number of matters involving intricate questions of law are often disposed of by Courts on the basis of the statement made by the advocate appearing for the parties. Normally the statement of advocate being officer of the Court is accepted as true and correct. Notwithstanding the easy availability of numerous legal software for research, reliance was placed upon a judgment of this Court which was passed without noticing earlier Full Bench judgment. This is akin to relying on an overruled judgment which results in a waste of judicial time. We are of the view that in a given case, it may be due to negligence of the advocate, but the consequences would be an erroneous judgment having precedential value, possibly requiring constitution of Larger Bench to correct the error of law which crept in due to failure on the part of the advocate to perform his duty. Such failure in duty is a wrong against the justice delivery system in the country. We reiterate the duty of the advocate, at all levels, to double check and verify position of law and facts of the case before making any presentation to the Court. Time has come that message must be sent to each of the advocate playing vital role in justice delivery system to be responsible and careful in what he presents to the Court. As a responsible officer of the Court, the advocate owes a duty to the Court. He has to be fair to ensure that justice is done.

Para 15: It is the duty of advocate to bring to the attention of the Court all the relevant precedents and orders, whether for or against his client’s case. He must never be a party to deceiving the Court, even if his client would obtain some advantage or favourable order. Advocates are a class with a unique complex of duties to their clients and to the Court. An advocate cannot have regard solely to the instructions or even always to the narrow interests of his client. Quick decisions must be reached in Court and an advocate should not be inhibited from taking a free and independent decision, even against immediate instructions, and should not be afraid of freely meeting his obligations. …

Further, Hon’ble Supreme Court in Lal Bahadur Gautam V/s State of UP 2019 SCC OnLine SC 687 ruled:

Para 9: Before parting with the order, we are constrained to observe regarding the manner of assistance rendered to us on behalf of the respondent management of the private college. Notwithstanding the easy access to information technology for research today, as compared to the plethora of legal Digests which had to be studied earlier, reliance was placed upon a judgment based on an expressly repealed Act by the present Act, akin to relying on an overruled judgment. This has only resulted in a waste of judicial time of the Court, coupled with an onerous duty on the Judges to do the necessary research. We would not be completely wrong in opining that though it may be negligence also, but the consequences could have been fatal by misleading the Court leading to an erroneous judgment.

Para 10: Simply, failure in that duty is a wrong against the justice delivery system in the country. Considering that over the years, responsibility and care on this score has shown a decline, and so despite the fact that justice is so important for the society, it is time that we took note of the problem, and considered such steps to remedy the problem. We reiterate the duty of the parties and their counsel, at all levels, to double check and verify before making any presentation to the court. The message must be sent out that everyone has to be responsible and careful in what they present to the court. Time has come for these issues to be considered so that the citizen’s faith in the justice system is not lost. It is also for the courts at all levels to consider whether a particular presentation by a party or conduct by a party has occasioned unnecessary waste of court time, and if that be so, pass appropriate orders in that regard. After all court time is to be utilised for justice delivery and in the adversarial system, is not a licence for waste.

Pertinent to indicate, imposition of costs on unscrupulous litigants who intend to profiteer from the delays in Tribunal proceedings is the need of the hour. In this regard, Hon’ble Supreme Court in Indian Council for Enviro-Legal Action V/s Union of India, (2011) 8 SCC 161 held:

Para 149: It is settled principle of law that no one can take advantage of his own wrong. Unless courts disgorge all benefits that a party availed by obstruction or delays or non-compliance, there will always be incentive for non-compliance, and parties are ingenious enough to come up with all kinds of pleas and other tactics to achieve their end because they know that in the end the benefit will remain with them.

Para 177: This Court in Alok Shanker Pandey v. Union of India [(2007) 3 SCC 545] observed as under: (SCC p. 547, paras 8 and 9)

“8. We are of the opinion that there is no hard-and-fast rule about how much interest should be granted and it all depends on the facts and circumstances of each case. We are of the opinion that the grant of interest of 12% per annum is appropriate in the facts of this particular case. However, we are also of the opinion that since interest was not granted to the appellant along with the principal amount, the respondent should then in addition to the interest at the rate of 12% per annum also pay to the appellant, interest at the same rate on the aforesaid interest from the date of payment of instalments by the appellant to the respondent till the date of refund on this amount, and the entire amount mentioned above must be paid to the appellant within two months from the date of this judgment.

9. It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital.”

Para 178: To do complete justice, prevent wrongs, remove incentive for wrongdoing or delay, and to implement in practical terms the concepts of time value of money, restitution and unjust enrichment noted above—or to simply levelise—a convenient approach is calculating interest. But here interest has to be calculated on compound basis—and not simple—for the latter leaves much uncalled for benefits in the hands of the wrongdoer.

Para 179: Further, a related concept of inflation is also to be kept in mind and the concept of compound interest takes into account, by reason of prevailing rates, both these factors i.e. use of the money and the inflationary trends, as the market forces and predictions work out.

Para 189: In another recent judgment of this Court in Kalabharati Advertising v. Hemant Vimalnath Narichania [(2010) 9 SCC 437 : (2010) 3 SCC (Civ) 808] this Court in para 15 observed as under: (SCC p. 446)

“15. No litigant can derive any benefit from the mere pendency of a case in a court of law, as the interim order always merges into the final order to be passed in the case and if the case is ultimately dismissed, the interim order stands nullified automatically. A party cannot be allowed to take any benefit of his own wrongs by getting an interim order and thereafter blame the court. The fact that the case is found, ultimately, devoid of any merit, or the party withdrew the writ petition, shows that a frivolous writ petition had been filed. The maxim actus curiae neminem gravabit, which means that the act of the court shall prejudice no one, becomes applicable in such a case. In such a situation the court is under an obligation to undo the wrong done to a party by the act of the court. Thus, any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court must be neutralised, as the institution of litigation cannot be permitted to confer any advantage on a party by the delayed action of the court.”

Para 190: In consonance with the concept of restitution, it was observed in Kalabharati case [(2010) 9 SCC 437 : (2010) 3 SCC (Civ) 808] that courts should be careful and pass an order neutralising the effect of all consequential orders passed in pursuance of the interim orders passed by the court. Such express directions may be necessary to check the rising trend among the litigants to secure the relief as an interim measure and then avoid adjudication on merits.

Para 192: In consonance with the principles of equity, justice and good conscience Judges should ensure that the legal process is not abused by the litigants in any manner. The court should never permit a litigant to perpetuate illegality by abusing the legal process. It is the bounden duty of the court to ensure that dishonesty and any attempt to abuse the legal process must be effectively curbed and the court must ensure that there is no wrongful, unauthorised or unjust gain for anyone by the abuse of the process of the court. One way to curb this tendency is to impose realistic costs, which the respondent or the defendant has in fact incurred in order to defend himself in the legal proceedings. The courts would be fully justified even imposing punitive costs where legal process has been abused. No one should be permitted to use the judicial process for earning undeserved gains or unjust profits. The court must effectively discourage fraudulent, unscrupulous and dishonest litigation.

Para 193: This Court in a very recent case Ramrameshwari Devi v. Nirmala Devi [(2011) 8 SCC 249] had an occasion to deal with similar questions of law regarding imposition of realistic costs and restitution. One of us (Bhandari, J.) was the author of the judgment. It was observed in that case as under: (SCC pp. 268-69, paras 54-55)

“54. While imposing costs we have to take into consideration pragmatic realities and be realistic as to what the defendants or the respondents had to actually incur in contesting the litigation before different courts. We have to also broadly take into consideration the prevalent fee structure of the lawyers and other miscellaneous expenses which have to be incurred towards drafting and filing of the counter-affidavit, miscellaneous charges towards typing, photocopying, court fee, etc …

This afore-stated ratio was re-iterated by Hon’ble Supreme Court in Dnyandeo Sabaji Naik V/s Pradnya Prakash Khadekar (2017) 5 SCC 496, wherein it was ruled:

Para 14: Courts across the legal system—this Court not being an exception—are choked with litigation. Frivolous and groundless filings constitute a serious menace to the administration of justice. They consume time and clog the infrastructure. Productive resources which should be deployed in the handling of genuine causes are dissipated in attending to cases filed only to benefit from delay, by prolonging dead issues and pursuing worthless causes. No litigant can have a vested interest in delay. Unfortunately, as the present case exemplifies, the process of dispensing justice is misused by the unscrupulous to the detriment of the legitimate. The present case is an illustration of how a simple issue has occupied the time of the courts and of how successive applications have been filed to prolong the inevitable. The person in whose favour the balance of justice lies has in the process been left in the lurch by repeated attempts to revive a stale issue. This tendency can be curbed only if courts across the system adopt an institutional approach which penalises such behaviour. Liberal access to justice does not mean access to chaos and indiscipline. A strong message must be conveyed that courts of justice will not be allowed to be disrupted by litigative strategies designed to profit from the delays of the law. Unless remedial action is taken by all courts here and now our society will breed a legal culture based on evasion instead of abidance. It is the duty of every court to firmly deal with such situations. The imposition of exemplary costs is a necessary instrument which has to be deployed to weed out, as well as to prevent the filing of frivolous cases. It is only then that the courts can set apart time to resolve genuine causes and answer the concerns of those who are in need of justice. Imposition of real time costs is also necessary to ensure that access to courts is available to citizens with genuine grievances. Otherwise, the doors would be shut to legitimate causes simply by the weight of undeserving cases which flood the system. Such a situation cannot be allowed to come to pass. Hence it is not merely a matter of discretion but a duty and obligation cast upon all courts to ensure that the legal system is not exploited by those who use the forms of the law to defeat or delay justice. We commend all courts to deal with frivolous filings in the same manner.

The question now arises that what the Tribunal should do to stop the menace of groundless filing wasting precious judicial time!!! The order passed by NCLT – Mumbai Bench [Sh. Shyam Babu Gautam (Technical Member) & Sh. Ashok Kumar Borah (Judicial Member)] is indeed a desirable precedent in this regard, wherein in an MA filed by Reliance Commercial Finance Ltd. in a matter Galaxy Metal Impex V/s Jigisha Forge & Components Pvt. Ltd. (MA 3401/2019 IN C.P. (IB) 1520(MB)2017, vide order dt/- 13.07.2021), the Hon’ble Bench Members at the very first instance when they heard the matter, dismissed the application; the order reads as:

The Counsel appearing for MA-3401/2019 sought directions against the Operational Creditor i.e. Galaxy Metal Impex without making them party in the present MA-3401/2019. The Application is misconceived and lack clarity in terms of relief sought, hence MA-3401/2019 is dismissed and disposed of. However party is at liberty to file a better Application.

But, the binding precedents of Hon’ble Supreme Court in Dnyandeo Sabaji Naik V/s Pradnya Prakash Khadekar (2017) 5 SCC 496; Enviro-Legal Action V/s Union of India (2011) 8 SCC 161 and Hon’ble Delhi High Court in Kusum Kumria V/s Pharma Venture (India) Pvt. Ltd. 2015 SCC OnLine Del 13042 commend NCLT to impose costs on groundless/frivolous filings. The power of NCLT to impose costs flows from Rule 113 of NCLT Rules reproduced as under:

Award of costs in the proceedings — (1) Whenever the Tribunal deems fit, it may award cost for meeting the legal expenses of the respondent of defaulting party.

(2) The Tribunal may in suitable cases direct appellant or respondent to bear the cost of litigation of the other side, and in case of abuse of process of court, impose exemplary costs on defaulting party.

The word ‘may’ in NCLT Rules in view of the binding precedents assumes character of a ‘mandate’ instead of than just a discretion, lest the orders passed by the Tribunal can possibly violate the implied directions of the Apex Court/s. Even if it is argued that there is an element of discretion which was intended to be conferred on NCLT by the law-giver, as reflected in the choice of the word ‘may’ in NCLT Rules, the answer to the said argument will be – discretion cannot be exercised in conflict with the known position of law; reliance placed on the ruling of Hon’ble Supreme Court Constitution Bench in S.G. Jaisinghani V/s Union of India AIR 1967 SC 1427 held:

Para 14: In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizen should now where he is. …

In any case, how the word in the rules/regulation/statute is to be interpreted must be guided by the fact that it should suppress the mischief and advance the remedy without doing violence to the language, reliance placed on Commr. of Customs (Preventive) V/s M. Ambalal & Co. (2011) 2 SCC 74, wherein it was ruled:

Para 17: … The language used in the notification is plain and unambiguous. Therefore, we are required to consider the same in their ordinary sense. A construction which permits one to take advantage of one’s own wrong or to impair one’s own objections under a statute should be disregarded. The interpretation should as far as possible be beneficial in the sense that it should suppress the mischief and advance the remedy without doing violence to the language. …

Part-I

Part-III

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