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NCLT Rules 43 Only Empowers AA To Seek Production Of A Document, Not Parties : NCLT Hyderabad

Pallavi Mishra
6 Oct 2022 2:51 AM GMT
NCLT Rules 43 Only Empowers AA  To Seek Production Of A Document, Not Parties : NCLT Hyderabad
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The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), while adjudicating an application filed in Ind Barath Power Infra Ltd. v India Infrastructure Finance Co. Ltd., has held that Rule 43 of the NCLT Rules 2016 only empowers the Adjudicating Authority...

The National Company Law Tribunal ("NCLT"), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Veera Brahma Rao Arekapudi (Technical Member), while adjudicating an application filed in Ind Barath Power Infra Ltd. v India Infrastructure Finance Co. Ltd., has held that Rule 43 of the NCLT Rules 2016 only empowers the Adjudicating Authority and not the Parties to seek production of documents/further information. Accordingly, the Bench dismissed an application filed by Corporate Debtor, seeking direction to the Financial Creditor to produce a Corporate Guarantee Deed.

Background Facts

India Infrastructure Finance Co. Ltd. ("Financial Creditor") had filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Ind Barath Power Infra Ltd. ("Corporate Debtor"). The Financial Creditor claimed that the Corporate Debtor had executed in its favour a Corporate Guarantee Deed on 20.05.2015, undertaking to discharge the liability of the borrower i.e. Ind Barath Power (Madras) Ltd.

The Corporate Debtor filed an application before the Adjudicating Authority, seeking direction to Financial Creditor to produce original copy of the Corporate Guarantee dated 20.05.2015, for verification by the Adjudicating Authority. The Corporate Debtor contended that in pursuance of modification of loan vide letter dated 20.05.2015, the Financial Creditor had agreed to execute Corporate Guarantee. Though the Corporate Guarantee was executed but was never furnished to the Financial Creditor. For the same reason, Financial Creditor neither furnished nor confirmed that it is in possession of the said Corporate Guarantee before the Tribunal, which is a material document. Further, the question raised is disputed question of fact, which can be decided in trial, therefore the petition u/s 7 was liable to be rejected.

CONTENTIONS OF RESPONDENT

The Financial Creditor contended that the Corporate Debtor admitted the execution of the Corporate Guarantee dated 20.05.2015, wherein the latter had undertaken to discharge the liability of the borrower i.e. Ind Barath Power (Madras) Limited. The Deed is admittedly irrevocable and Corporate Debtor is bound by the terms of the guarantee. Further, Corporate Debtor cannot insist the Financial Creditor to produce the original Corporate Guarantee deed for verification by the Tribunal. In a petition under Section 7 of IBC, the Tribunal has to ascertain the existence of a default from the evidence, either primary or secondary, furnished by the financial creditor under Section 7(3) of IBC. The Corporate Debtor cannot insist that a particular document be produced by the Financial Creditor.

Relevant Law

"43. Power of the Bench to call for further information or evidence. –

(1) The Bench may, before passing orders on the petition or application, require the parties or any one or more of them, to produce such further documentary or other evidence as it may consider necessary:-

(a) for the purpose of satisfying itself as to the truth of the allegations made in the petition or application; or (b) for ascertaining any information which, in the opinion of the Bench, is necessary for the purpose of enabling it to pass orders in the petition or application…xxxx"

Issue

Whether Corporate Debtor is entitled to invoke the power of the Adjudicating Authority under Rule 43 of the NCLT Rules, to call upon the Financial Creditor to produce the original Corporate Guarantee deed which was executed but allegedly not submitted to the Financial Creditor for verification of this Tribunal?

Decision Of The NCLT

Relying on Rule 43 of NCLT Rules 2016, the Bench observed that, "Thus, it is clear from the above provision that for the purpose of satisfying itself as to the truth of the allegations made in the petition or application before passing the order, if the Adjudicating Authority require the parties to produce such further documentary or other evidence as it may consider necessary, the Adjudicating Authority may pass a direction to produce the document, as such a direction to produce a document at the behest of the opposite party is neither contemplated nor be given at the behest of the party under this Rule."

The Bench held that Rule 43 of NCLT Rules only empowers the Adjudicating Authority and not the Parties to seek production of a document. Accordingly, the Bench dismissed the application while concluding that the original of the Corporate Guarantee is essential for the disposal of the Section 7 petition and the Adjudicating Authority will not hesitate to invoke its power under Rule 43 of NCLT Rules.

Case Title: Ind Barath Power Infra Ltd. v India Infrastructure Finance Co. Ltd.

Case No.: CP (IB) No.363/7/HDB/2020

Counsel For Applicant: Shri Yogesh Kumar Jogia and Shri DVAS Ravi Prasad, Advocates.

Counsel For Respondent: Sr. Adv. D.V. Sitaram Murthy and Adv. Amir Bavani.

Click Here To Read/Download Order

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