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-I||:||Arguing Counsel/Senior appearing in the matter is addressing another Court|
|Part-II||:||Long-Extended hearing & Groundless filing|
|Part-III||:||Copies of pleadings not served to the other side/ not available with the Bench|
|Part-IV||:||False statements & Groundless allegations made by Litigants|
Copies of pleadings not served to the other side/ not available with the Bench
During the VC-Proceedings dt/- 26th July 2021 at Principal Bench, when one of the Advocate was taking too much time for screen-sharing, the whole proceedings got held-up. Hon. Acting President of NCLT – Sh. B.P. Mohan expressed his anguish at such sorry state of affairs & remarked ‘Fifty Percent of the judicial time gets wasted for this…’. Unfortunately, many matters listed for the day could not have a detailed hearing/detailed appreciation of contention/s & evidence/s due to paucity of time, thanks such wastage of judicial time.
[PS – It is indeed incumbent on we Advocate/s, as nationals of a country which will soon celebrate 75 years of its Independence & which rightly takes pride in the advancements in Information & Communications Technology achieved, that we must adopt those achievements in our justice delivery mechanisms in its true sense & spirit. The challenges for the task at hand & the desired objectives have been discussed in great detail by Parliamentary Panel in its interim report on Functioning of Virtual Courts/ Court Proceedings through Video Conferencing.]
A practise which I have witnessed being followed in NCLT – New Delhi Bench, Court VI is, in case if any document is required to be screen-shared, the Court Master once informed about the filing number shares it almost instantly thereby saving a lot of time (and it is desirable that this practice be adopted uniformly in the Benches across the country). If the copies of pleadings/Case Laws have already been shared to the other side, there hardly any rationale as to why any litigant/lawyer/professional has to waste precious judicial time by screen-sharing the document and hold-up the proceedings due to technical issues. The issue is not just about saving time in screen-sharing; the issue is that when any litigant is screen-sharing, there is no way the other side can ascertain that whether the document being relied upon is genuine or fraud & the fair opportunity to rebut the contents of the document being relied upon by the other side gets diminished since they may not be having the copy of the document being relied upon [certainly, such act being one of the highest order of violation of natural justice]. Moreover, the restricted view of the document/s the Bench Members have when the document/s are screen-shared, confines the display only to what is being tried to be shown and not the overall document, which may uncover the falsities in the submissions being made. And Unscrupulous Litigants will certainly take such opportunity of restricted view in screen-sharing to prevent the Bench from seeing the skeletons in their closet.
Thus, the undersigned author believes that when some litigant requests screen-sharing, it is desirable that the Bench must first ask whether the litigant has filed the copies of the pleading with the Bench & served the same on the other side in advance. If YES, then there may not be any requirement to screen-share. If NO, then the party must be directed to tender explanation as to why the mandate of NCLT Rules, 2016 was not followed. Excerpts of some of the Rules are reproduced under:
Rule 24: Number of copies to be filed – The appellant or petitioner or applicant or respondent shall file three authenticated copies of appeal or petition or application or counter or objections, as the case may be, and shall deliver one copy to each of the opposite party.
Rule 41: Filing of Reply and other Documents by the Respondents – (1) Each respondent may file his reply to the petition or the application and copies of the documents, either in person or through an authorised representative, with the registry as specified by the Tribunal.
(2) A copy of the reply or the application and the copies of other documents shall be forthwith served on the applicant by the respondent.
(3) To the reply or documents filed under sub-rule (1), the respondent shall specifically admit, deny or rebut the facts stated by the applicant in his petition or application and state such additional facts as may be found necessary in his reply.
Rule 55: Pleadings before the Tribunal – No pleadings, subsequent to the reply, shall be presented except by the leave of the Tribunal upon such terms as the Tribunal may think fit.
Rule 94: Statutes or citations for reference — The parties or legal practitioners shall, before the commencement of the proceedings for the day, furnish to the Court Master a list of law journals, reports, statutes and other citations, which may be needed for reference or photocopy of full text thereof.
[It is a settled law that NCLT Rules are applicable in proceedings under IBC, reliance on Hon’ble Bombay High Court ruling in Kamal K Singh V/s Union of India 2019 SCC OnLine Bom 5609
Para 65: … We cannot read sub-rule (1) of Rule 10 as suggested by Mr. Kadam. He would argue that Rules 20 to 26 of Part III of the NCLT Rules, 2016 shall apply and rest of the NCLT Rules, 2016 would not apply. This argument overlooks the fact that the rules of procedure for conduct of proceedings under the Code have yet to be notified, the framers of the rules and the legislature itself did not want a vacuum to be created. Otherwise, there would be no guide at all. A pre-existing or pre-established tribunal functional much before the Code came into force has been chosen for adjudication of the applications under section 7. That is how the term “adjudicating authority” is defined in the Code. Therefore, until the rules of procedure in relation to the conduct of proceedings under the IBC are notified, the NCLT Rules, 2016 would be the governing rules. When the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 were notified, the legislature was aware that it will have to frame and notify separate rules enabling filing of application under section 7(1), section 9(1) and section 10(1) of the IBC. If they are not notified as yet, then, Rule 10 allows filing of application under the NCLT Rules, 2016 and particularly Rules 20 to 26. However, that does not mean that the rest of the NCLT Rules already notified and governing procedural aspects and guiding the NCLT would cease to apply. That is not the mandate flowing from the language of Rule 10. We, therefore, do not find any merit in the argument of Mr. Kadam in this behalf. ]
If a litigant has no plausible rationale for non-adherence to NCLT Rules, and still insists on placing the document for adjudication, a question arises – Would the NCLT be justified in rejecting acceptance of such document on grounds of inordinate delay. The answer to this can be found in Hon’ble Supreme Court ruling in Collector & Controller of Court of Ward V/s G.N. Ghorpade (1973) 4 SCC 94, wherein the decision of High Court refusing to accept the affidavit on the ground of inordinate delay was upheld. It ruled:
Para 11: … In these circumstances the High Court cannot be blamed when it rejected a fresh attempt to have the matters adjourned to enable the appellants to file an affidavit. The High Court also cannot be blamed for refusing to accept the affidavit on July 13, 1965 on the ground of inordinate delay. If, on that ground the High Court refused in its discretion to permit the affidavit to be filed, it is impossible to say that that discretion was exercised wrongly or in breach of any principal or practice. It was, no doubt, a pity that in such a case the High Court had to proceed with the special civil applications without the aid of a reply to them. But for that the appellants had clearly to blame themselves. … In these circumstances it is impossible to find any fault with the High Court for refusing to allow the counter-affidavit to go on record at that belated stage. Apart from the question as to delay, that would have also meant a further adjournment to enable Respondent 1 to prepare and file his rejoinder.
Para 12: There being thus no reply to the two special civil applications, the High Court had to accept the statements made on affidavit by Respondent 1 therein as prima facie evidence of its right to possession of the lands in question. Mr Desai frankly told us that that was the inevitable result flowing from the absence of any counter-affidavit denying the assertions made on affidavit by Respondent I. The consequence of the absence of any reply affidavit was that Mr Desai could not urge any specific ground upon which the judgment of the High Court could be challenged by him.
Para 13: That being the position, there is no alternative except to dismiss the appeals with costs. …
In addition to NCLT Rules, adherence to the rules governing submission of pleadings, plaint, Written statement in The Code of Civil Procedure can also help greatly in preventing unwarranted/groundless adjournments for want of documents and NCLT/NCLAT for the purpose of discharging their functions under Companies Act or Insolvency & Bankruptcy Code has the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 as per 424(2) of Companies Act. One argument in this context can be made that as per 424(1) of Companies Act, the Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or be bound by the procedure laid down in the Code of Civil Procedure, but is to be guided by the principles of Natural Justice. But in this context, Hon’ble Odisha High Court in Biranjan Panda V/s Bank of India AIR 2009 Ori 6 relying upon a catena of Hon’ble Supreme Court rulings has held:
Para 6: … No explanation has been furnished by the learned counsel for the petitioners as to why a new medical certificate had not been filed and why alternative arrangement of the counsel was not made and why the counsel who was present to press the application for adjournment could not advance the arguments on merit. Undoubtedly the provisions of Code of Civil Procedure are not applicable before the Tribunal. However, the principles enshrined therein can be pressed into service (vide Beniram v. Gaind, AIR 1982 SC 789; Sarguja Transport Service v. State Transport Appellate Tribunal, M.P. Gwalior, AIR 1987 SC 88; and Upadhya & Co. v. State of U.P., AIR 1999 SC 509).
Further, Hon’ble Bombay High Court in Rajkumar V/s Debts Recovery Appellate Tribunal (2004) 4 Mah LJ 492 held:
Para 6: … We must also observe that the technicalities of the Code of Civil Procedure are not made applicable to the proceedings before the Tribunal, but at the same time the underlying principles of the Code of Civil Procedure cannot be ignored at all by the Tribunal as the underlying philosophy of the Code of Civil Procedure is nothing but elaborate codification of the principles of natural justice. What is contemplated under the Code of Civil Procedure and also by the principles of natural justice is a fair, reasonable and adequate opportunity to be afforded to the parties to put up their respective contentions before the Court/Tribunal. There is no doubt that the Tribunal has to regulate its own procedure, but the Tribunal must remember that while regulating such procedure, it does not violate the basic principles of natural justice of granting reasonable and adequate opportunity to the parties. Besides, even the Tribunal is vested with certain powers of a Civil Court …
[The undersigned author is advocating the cause of application of principles of Civil Procedure Code only to the extent it helps preventing delays in proceedings under IBC and not in its entirety, Ref.: Hon’ble NCLAT ruling in Gopalpur Ports Ltd. V/s. Sri Avantika Contractor (I) Ltd. (2021) ibclaw.in 349 NCLAT]
Moreover, the Hon’ble Supreme Court Constitution Bench in Union of India V/s Tulsiram Patel, (1985) 3 SCC 398, has ruled:
Para 99: Again in Union of India v. Col. J.N. Sinha [(1970) 2 SCC 458 : (1971) 1 SCR 791] it was said (at p. 794-95): (SCC p. 460, para 8)
“As observed by this Court in A.K. Kraipak v. Union of India [(1969) 2 SCC 262 : (1970) 1 SCR 457] “the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law but supplement it.” It is true that if a statutory provision can be read consistently with the principles of natural justice, the courts should do so because it must be presumed that the Legislatures and the statutory authorities intend to act in accordance with the principles of natural justice. But if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the principles of natural justice then the court cannot ignore the mandate of the Legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred and the effect of the exercise of that power.”
Further, 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 sum, the application of the Principles of Natural Justice is not an unbridled power conferred on the Tribunal/Appellate Tribunal, but it is fettered by the provisions of Civil Procedure Code (Ref.: Biranjan Panda V/s Bank of India supra). Excerpts of some governing provisions of CPC which can facilitate expedited hearing are reproduced as under:
- Section 27: Summons to defendants –
Where a suit has been duly instituted, a summons may be issued to the defendant to appear and answer the claim and may be served in manner prescribed on such day not beyond thirty days from date of the institution of the suit.
- Section 30: Power to order discovery and the like –
Subject to such conditions and limitations as may be prescribed, the Court may, at any time, either of its own motion or on the application of any party,—
(a) make such orders as may be necessary or reasonable in all matters relating to the delivery and answering of interrogatories, the admission of documents and facts, and the discovery, inspection, production, impounding and return of documents or other material objects producible as evidence;
(b) issue summons to persons whose attendance is required either to give evidence or to produce documents or such other objects as aforesaid;
(c) order any fact to be proved by affidavit.
- Order I, Rule 10, (2): Court may strike out or add parties. –
The Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added.
- Order VI, Rule 4: Particulars to be given where necessary –
In all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading.
- Order VIII, Rule 1: Written Statement –
The Defendant shall, within thirty days from the date of service of summons on him, present a written statement of his defence:
Provided that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the same on such other day, as may be specified by the Court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons.
- Order VIII, Rule 1A: Duty of defendant to produce documents upon which relief is claimed or relied upon by him-
(1) Where the defendant bases his defence upon a document or relies upon any document in his possession or power, in support of his defence or claim for set-off or counter-claim, he shall enter such document in a list, and shall produce it in Court when the written statement is presented by him and shall, at the same time, deliver the document and a copy thereof, to be filed with the written statement.
(2) Where any such document is not in the possession or power of the defendant, he shall, wherever possible, state in whose possession or power it is.
(3) A document which ought to be produced in Court by the defendant under this rule, but, is not so produced shall not, without the leave of the Court, be received in evidence on his behalf at the hearing of the suit.
(4) Nothing in this rule shall apply to documents –
(a) produced for the cross-examination of the plaintiff’s witnesses, or
(b) handed over to a witness merely to refresh his memory.
- Order VIII, Rule 2: New facts must be speacially pleaded –
The defendant must raise by his pleading all matters which show the suit not be maintainable, or that the transaction is either void or voidable in point of law, and all such grounds of defence as, if not raised, would be likely to take the opposite party by surprise, or would raise issues of fact not arising out of the plaint, as, for instance, fraud, limitation, release, payment, performance, or facts showing illegality.
- Order VIII, Rule 2: Denial to be specific –
It shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth, except damages.
- Order VIII, Rule 4: Evasive-denial –
Where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Thus, if it is alleged that he received a certain sum of money, it shall not be sufficient to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received. And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances.
- Order VIII, Rule 5: Specific denial –
(1) Every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability:
Provided that the Court may in its discretion require any fact so admitted to be proved otherwise than by such admission:
[Provided further that every allegation of fact in the plaint, if not denied in the manner provided under Rule 3A of this Order, shall be taken to be admitted except as against a person under disability.]
(2) Where the defendant has not filed a pleading, it shall be lawful for the court to pronounce judgment on the basis of the facts contained in the plaint, except as against a person under a disability, but the Court may, in its discretion, require any such fact to be proved.
(3) In exercising its discretion under the proviso to sub-rule (1) or under sub-rule (2), the Court shall have due regard to the fact whether the defendant could have, or has, engaged a pleader.
(4) Whenever a judgment is pronounced under this rule, a decree shall be drawn up in accordance with such judgment and such decree shall bear the date on which the judgment was pronounced.
This list is indicative and not exhaustive… Any addition/deletion may be made contingent upon the facts of the case at hand.
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