Impleadment Of Party After Closure Of Initial CIRP Plea Against Corporate Debtor: NCLAT Chennai Protects Operational Creditor's Claims

Brief Facts:

M/s RDC Concrete India Pvt. Ltd. (“RDC”) filed an interlocutory application before the National Company Law Appellate Tribunal (“NCLAT”) for its impleadment as a party in the matter of M/s Ozone Projects Pvt. Ltd. (“Ozone/Corporate Debtor”). RDC claimed that it was involved in certain business transactions with Ozone for supplying ready-mix concrete between May 2019 to October 2021. Ozone defaulted in payments and the unpaid dues amounted to Rs. 4.48 Crore.

The Corporate Insolvency Resolution Process (“CIRP”) had already been initiated against Ozone. Further, the Interim Resolution Professional (“IRP”) was also appointed. RDC contended that Ozone committed fraud against its Operational Creditors. It first defaulted in the payment of dues and once the proceedings to recover dues were initiated, it entered into settlements to get the proceedings dropped. After the proceedings were dropped, it failed to honour the terms of such settlements.

RDC also contended that it was necessary to implead it as a party to protect its claim and interest. It was submitted that RDC also filed a petition to initiate CIRP proceedings against Ozone. However, since the CIRP proceedings were initiated against Ozone by another creditor, RDC was directed to file its claim before the IRP. The subject matter of the proceedings also included claims of RDC against Ozone. Therefore, RDC wanted to be impleaded as a party in the matter.

On the other hand, Ozone contended that the appeal concerned only the dispute between M/s. Shapoorji Pallonji and Co. Ltd. (“Shapoorji”) and Ozone. Further, the inclusion of additional parties could prolong the proceedings.

Observations of the NCLAT:

The NCLAT observed RDC's contentions that the impleadment application was justified under Order 1 Rule 10 of the Code of Civil Procedure (“CPC”), which gives the direction to the Tribunal to implead third parties after considering the facts and circumstances of each case. This discretion is exercised to ensure effective adjudication or protection of rights involved in the litigation.

The NCLAT further noted that RDC had previously initiated CIRP proceedings against Ozone, which were closed due to CIRP being initiated under another application by another creditor. Since RDC was directed to file claims in the ongoing CIRP, the NCLAT found it to be a necessary party for effective adjudication.

Consequently, the interlocutory application was allowed and the appeal's cause title was directed to be amended to include M/s RDC Concrete India Pvt. Ltd. as a respondent. The amendment was required to be completed within 48 hours.

Case Title: Sathya Moorthy Sai Prasad vs Shapoorji Pallonji and Company Pvt. Ltd. & Anr.

Case No.: Company Appeal (AT) (CH) (Ins) No.134/2023 (IA Nos. 449/2023, 446/2023, 447/2023, 448/2023, 450/2023, 889/2023, 161/2024, 999/2024 & 1134/2024)

Advocate for the Appellant (Ozone): Mr Chandramouli Prabhakar

Advocate for the Respondents: Ms Anusha Peri (for Respondent 1), Ms Elamathi (for Respondent 2) and Ms Revathi Manivannan (for Proposed Respondent - M/s RDC Concrete India Pvt. Ltd.)

Date of Pronouncement: 20th November 2024