w2 Act

THE HON’BLE SRI JUSTICE SANJAY KUMAR
I.A. NO.2 OF 2018 IN C.R.P. NO.4077 OF 2018

AND
CIVIL REVISION PETITION NO.4077 OF 2018
ORDER
This civil revision petition under Article 227 of the Constitution was
originally filed by the corporate-debtor aggrieved by the order dated
13.07.2018 passed by the National Company Law Tribunal, Hyderabad
Bench, Hyderabad (hereinafter, ‘the Tribunal’), in C.P.(IB)
No.56/9/HDB/2018. By the said order, the Tribunal admitted the petition
filed against it under Section 9 of the Insolvency and Bankruptcy Code,
2016 (for brevity, ‘the Code of 2016’) and passed a moratorium order
while appointing an Insolvency Resolution Professional.
By order dated 17.07.2018, this Court took note of the fact that the
corporate-debtor had produced original demand drafts for the sums of
Rs.69,82,000/- and Rs.57,70,887/- respectively, which sum, in total, was
stated to be sufficient to cover the claim of the respondent-company, the
petitioner in C.P.(IB) No.56/9/HDB/2018. Taking note of the financial
liquidity of the corporate-debtor, this Court granted interim suspension of
the order under revision, subject to deposit of the said demand drafts with
the Registrar (Judicial) of this Court.
As noted supra, the corporate-debtor itself filed this civil revision
petition in the first instance. However, realising that it may not be proper
on its part to do so after the admission of the company petition, the
Managing Director of the corporate-debtor, being one of its shareholders,
filed I.A.No.2 of 2018 seeking to be substituted in its place as the
petitioner in this revision petition. As there is no opposition to this

2
application, the same is ordered. Registry shall ensure that the
substitution is carried out before issuing a copy of this final order.
Sri D.Prakash Reddy, learned senior counsel appearing for Sri
Avinash Desai, learned counsel for the petitioner, would contend that the
order under revision is unsustainable on two grounds. He would point out
that the respondent-company filed C.P.(IB) No.56/9/HDB/2018 based on
the Memorandum of Understanding dated 18.06.2014 and the Tribunal
admitted the company petition on the strength thereof. He would assert
that the said Memorandum of Understanding did not suffer stamp duty
and was therefore inadmissible in terms of Section 35 of the Indian Stamp
Act, 1899, but despite this aspect being raised, the Tribunal ignored the
same and admitted the company petition.
The second ground urged by the learned senior counsel is that the
Tribunal brushed aside the issue of limitation raised by the
corporate-debtor. He would point out that though Section 238A was
introduced in the Code of 2016 with effect from 06.06.2018, the mere
absence of any provision in the Code hitherto in relation to the Limitation
Act, 1963 (for brevity, ‘the Act of 1963’), did not have the effect of
obviating the applicability of the provisions thereof in the light of Section
29(2) of the Act of 1963. Learned senior counsel would assert that the
Tribunal ought to have allowed a further opportunity of hearing on this
issue instead of baldly concluding that the provisions of the Act of 1963
were not applicable and that the ground urged in that regard had no
substance.
This Court finds merit in these contentions.
No doubt, the Liquidator would have an opportunity to verify and
reject a claim made by a creditor at a later point of time under Section 39

3
of the Code of 2016. However, the very admission of the company petition
on the strength of an inadmissible document would perhaps be of fatal
import. This aspect of the matter therefore required to be looked into by
the Tribunal. An order of admission of a company petition filed under
Section 9 of the Code of 2016, with its inevitable consequences, would
seriously impact the corporate-debtor and such an exercise ought not to
be undertaken lightly by the Tribunal. Presently, neither of the grounds
urged by the corporate-debtor, though adverted to in the order of
admission, was specifically addressed by the Tribunal. The order of
admission therefore suffers on this count and is liable to be set aside.
Further, Sri D.Prakash Reddy, learned senior counsel, and Sri
M.V.Hanumantha Rao, learned counsel appearing for the respondent-
company, the petitioner in C.P.(IB) No.56/9/HDB/2018, would inform this
Court that the entire amount due and payable by the corporate-debtor to
the respondent-company has been paid in full separately, in terms of a
compromise arrived at by and between them.
In that view of the matter, it is evident that the admission of the
petition and the consequential orders are, in any event, no longer
warranted. However, as already noted supra, the very admission of the
petition suffers for want of application of mind by the Tribunal to the two
specific grounds urged by the corporate debtor.
The civil revision petition is accordingly allowed setting aside the
order dated 13.07.2018 passed by the Tribunal in C.P.(IB)
No.56/9/HDB/2018.
As the amount due has already been paid separately by the
corporate-debtor to the respondent-company, the Registrar (Judicial) of
this Court is directed to return the demand drafts bearing Nos.016091 and
4
016092, both dated 16.07.2018, for the sums of Rs.69,82,000/- and
Rs.57,70,887/- respectively, to Sri Avinash Desai, learned counsel.
Pending miscellaneous petitions, if any, shall stand closed in the
light of this final order. No order as to costs.
_______________
SANJAY KUMAR, J
14th SEPTEMBER, 2018
Svv/PGS

w2 Act

Uploaded by

Copyright:

Available Formats

w2 Act

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

w2 Act

Uploaded by

Copyright:

Available Formats

THE HON’BLE SRI JUSTICE SANJAY KUMAR

I.A. NO.2 OF 2018 IN C.R.P. NO.4077 OF 2018

originally filed by the corporate-debtor aggrieved by the order dated

13.07.2018 passed by the National Company Law Tribunal, Hyderabad

Bench, Hyderabad (hereinafter, ‘the Tribunal’), in C.P.(IB)

No.56/9/HDB/2018. By the said order, the Tribunal admitted the petition

filed against it under Section 9 of the Insolvency and Bankruptcy Code,

while appointing an Insolvency Resolution Professional.

corporate-debtor had produced original demand drafts for the sums of

Rs.69,82,000/- and Rs.57,70,887/- respectively, which sum, in total, was

stated to be sufficient to cover the claim of the respondent-company, the

petitioner in C.P.(IB) No.56/9/HDB/2018. Taking note of the financial

liquidity of the corporate-debtor, this Court granted interim suspension of

the Registrar (Judicial) of this Court.

As noted supra, the corporate-debtor itself filed this civil revision

on its part to do so after the admission of the company petition, the

Managing Director of the corporate-debtor, being one of its shareholders,

filed I.A.No.2 of 2018 seeking to be substituted in its place as the

petitioner in this revision petition. As there is no opposition to this

application, the same is ordered. Registry shall ensure that the

substitution is carried out before issuing a copy of this final order.

Sri D.Prakash Reddy, learned senior counsel appearing for Sri

order under revision is unsustainable on two grounds. He would point out

that the respondent-company filed C.P.(IB) No.56/9/HDB/2018 based on

the Memorandum of Understanding dated 18.06.2014 and the Tribunal

admitted the company petition on the strength thereof. He would assert

and was therefore inadmissible in terms of Section 35 of the Indian Stamp

same and admitted the company petition.

Tribunal brushed aside the issue of limitation raised by the

corporate-debtor. He would point out that though Section 238A was

absence of any provision in the Code hitherto in relation to the Limitation

obviating the applicability of the provisions thereof in the light of Section

Tribunal ought to have allowed a further opportunity of hearing on this

This Court finds merit in these contentions.

No doubt, the Liquidator would have an opportunity to verify and

reject a claim made by a creditor at a later point of time under Section 39

on the strength of an inadmissible document would perhaps be of fatal

import. This aspect of the matter therefore required to be looked into by

the Tribunal. An order of admission of a company petition filed under

Section 9 of the Code of 2016, with its inevitable consequences, would

seriously impact the corporate-debtor and such an exercise ought not to

be undertaken lightly by the Tribunal. Presently, neither of the grounds

urged by the corporate-debtor, though adverted to in the order of

admission, was specifically addressed by the Tribunal. The order of

admission therefore suffers on this count and is liable to be set aside.

Further, Sri D.Prakash Reddy, learned senior counsel, and Sri

M.V.Hanumantha Rao, learned counsel appearing for the respondent-

company, the petitioner in C.P.(IB) No.56/9/HDB/2018, would inform this

the respondent-company has been paid in full separately, in terms of a

compromise arrived at by and between them.

In that view of the matter, it is evident that the admission of the

petition and the consequential orders are, in any event, no longer

warranted. However, as already noted supra, the very admission of the

specific grounds urged by the corporate debtor.

The civil revision petition is accordingly allowed setting aside the

order dated 13.07.2018 passed by the Tribunal in C.P.(IB)

As the amount due has already been paid separately by the

corporate-debtor to the respondent-company, the Registrar (Judicial) of

016092, both dated 16.07.2018, for the sums of Rs.69,82,000/- and