M/S WIZAMAN IMPEX PVT. LTD. versus KEDRION BIOPHARMA INC. on 7 February 2022

1. Having regard to the short point involved and the contestingparties being represented, we have heard learned counsel for the partiesfinally at this stage itself.B

2. By way of this appeal, the appellant-company, said to be thecorporate debtor within the meaning of the Insolvency and BankruptcyCode, 2016[1], has questioned the judgment and order dated 15.12.2021,as passed in Company Appeal (AT) Insolvency No. 981 of 2020 whereby,the National Company Law Appellate Tribunal, Principal Bench, NewCDelhi[2] has set aside the order dated 06.10.2020, as passed by the NationalCompany Law Tribunal, New Delhi Bench- V[3] in CP(IB) 841(ND) of2020 and has also allowed the application moved by the applicant(respondent herein) under Section 9 of the Code.

3. The said application under Section 9 of the Code was filed byDthe applicant-respondent on 30.06.2020, in its capacity as an operationalcreditor of the corporate debtor while claiming, inter alia, that there hadbeen a distribution agreement whereby, the corporate debtor was to sellthe pharmaceutical products of the applicant company only until itssubsidiary by the name “Kedrion India” was capable of doing so. Severalinvoices were raised in duration and credit notes were also issued. It hasEbeen the case of the applicant-respondent that as regards the debts due,a notice dated 25.07.2019 was sent, demanding a sum of USD 9,01,000but, the said demand notice was returned undelivered. Thereafter, on07.08.2019, another demand notice was sent at the new registered officeaddress of the corporate debtor. The applicant alleged that on 17.08.2019,Fthe corporate debtor replied to the said demand notice disputing theadmitted and acknowledged the dues payable, with reference to its pendingdispute with the Directorate of Health Services, Maharashtra with regardto the supply of short shelf-life products. The applicant contended thatthe corporate debtor had committed a default within the meaning ofGSection 3(12) of the Code and the outstanding amount qualified as anoperational debt within the meaning of Section 3(11) read with Section5(21) of the Code.

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1 Hereinafter also referred to as ‘the Code 2 Hereinafter also referred to as ‘the Appellate Tribunal’ or ‘the NCLAT’.

3 Hereinafter also referred to as ‘the Adjudicating Authority’ or‘the NCLT’.

4. In its order dated 06.10.2020, the NCLT considered thedocuments referred by the applicant in support of its contention thatthere had been acknowledgment of debt and thereby the period oflimitation would shift from the date of acknowledgment. The NCLTobserved that the document dated 15.12.2017 was a credit memo, issuedby the applicant and not by the respondent and thus, it could not betreated as an acknowledgment of debt. As regards document dated07.07.2016 carrying the signatures of the Director of the Company andaddressed to the Bank regarding payment of pending invoices, the NCLTobserved that even if the said letter was treated as an acknowledgmentof debt, the limitation would run from its date, i.e., 07.07.2016. The NCLTfurther considered another letter dated 02.02.2017 and observed thateven if the said document was taken as an acknowledgement of debt,the limitation would run from 02.02.2017. Hence, the NCLT came to theconclusion that, viewed from any angle, the application filed on 30.06.2020was beyond the period of three years in terms of Article 137 of theLimitation Act, 1963. Thus, the NCLT proceeded to reject the applicationso made by the respondent.

5. It appears from the perusal of the record that the applicant-respondent, in appeal against the aforesaid order of the NCLT, movedan application (I.A. No. 2685 of 2020) before the Appellate Tribunal andthereby, sought permission to produce the exchanges of e-mails from03.11.2017 to 11.01.2019 with respect to the propositions for settlementof dues. Admittedly, the said documents were not on record before theNCLT.

6. However, the Appellate Tribunal found it just and proper togrant permission to the applicant (appellant before the NCLAT) to placesuch additional documents on record; but accorded such permission onlyin the impugned order dated 15.12.2021. Thereafter, on the basis of thesaid additional documents taken on record, the Appellate Tribunal cameto the conclusion that the corporate debtor had admitted its liability andhad shown its readiness to make payment as also to revise the settlementproposal. All such suggestions, admissions and offers evidenced by thesaid e-mails were taken by the Appellate Tribunal as acknowledgementby the corporate debtor within time and thus, it was held that theAdjudicating Authority erred in holding the applicant’s claim to be barredby time.

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A7. Though several contentions have been urged by the learnedcounsel for contesting parties as regards effect of the said documentsplaced before the Appellate Tribunal by way of I.A. No. 2685 of 2020but, we are clearly of the view that the impugned order allowing theappeal and even admitting the application under Section 9 of the Codecannot be sustained on a short point that the said additional documentsBwere taken on record only while finally deciding the appeal and withoutadequate opportunity of response to the corporate debtor. However, atthe same time, due consideration of the said documents also appearsrequisite and the documents i.e., the said e-mails, cannot be removedout of consideration only because they were not on record before NCLT.

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8. For what has been discussed and observed hereinabove, in ourview, the appropriate course in this matter would be to set aside theimpugned order dated 15.12.2021 passed by NCLAT to the extent it hasallowed the application under Section 9 of the Code filed by the applicant-respondent but while retaining the other part of the impugned order takingDthe documents filed with I.A. No. 2685 of 2020 on record. After takingthe said documents on record, for the appropriate process of adjudicationin the matter, it is also considered just and proper that the order dated06.10.2020 passed by NCLT be also set aside and the NCLT be directedto re-consider the application under Section 9 of the Code as filed by theapplicant-respondent while taking into consideration the additionalEdocuments now taken on record and at the same time, while extendingan adequate opportunity of hearing to the corporate debtor.

9. We may, of course, observe that at the outset Mr. Nakul Dewan,learned senior counsel appearing for the respondent has attempted toquestion the maintainability of this appeal at the instance of the corporateFdebtor because NCLAT had, by the impugned order, allowed theapplication under Section 9 of the Code. We have overruled such objectionfor the simple reason that the said application had been rejected by NCLTand was allowed only by way of impugned order and until the said orderwas examined by this Court and attained finality, the right and locus ofGthe corporate debtor to challenge the correctness thereof, could not havebeen denied. In any case, in the present matter, the impugned order waspassed on 15.12.2021 and admittedly, no other steps had been taken inthe matter including that of appointment of resolution professional. Inthe given set of facts, we overruled the objections raised by the learnedsenior counsel for the respondent.

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10. Accordingly, this appeal is allowed to the extent and in themanner indicated hereinabove. The application under Section 9 of theCode in CP(IB) 841(ND) of 2020 stands restored for re-considerationby the Adjudicating Authority keeping in view the observations andrequirements foregoing.

11. It goes without saying that we have not pronounced on themerits of the case either way and not even on the evidentiary value andeffect of the documents in question. All the aspects are left open forexamination by the Adjudicating Authority in accordance with law.

12. Having regard to the circumstances of the case and the factthat the application under Section 9 of the Code was filed way back on30.06.2020, we would expect the Adjudicating Authority to assign areasonable priority to the matter and to proceed expeditiously.

Bibhuti Bhushan Bose

Appeal partly allowed.

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