Judge Recusals On Frivolous Grounds Enable Litigant Manipulation And Bench Selection: NCLT Mumbai

The bench held that recusal cannot be dictated by litigants; it is solely at the judge's discretion. This practice, if allowed, would effectively permit litigants to choose benches to their liking.

Brief Facts:

M/s. Perfect Infraengineers Ltd. (Applicant/Corporate Debtor) sought two primary reliefs from the NCLT: the recusal of the bench from hearing the case, and any further orders deemed appropriate by the bench in the interest of justice and equality. The Applicant claimed that its application under Section 7 of the Technology Development Board (TDB) was never heard from the beginning. The NCLT took the stance that there was no need for a hearing or arguments from the Applicant and suggested that the petition filed by the TDB should be admitted without a hearing.

The Applicant contended that the NCLT, by its order dated March 18, 2024, adjourned the case for pronouncement of orders without hearing the Applicant. Additionally, during the pendency of the case, the Applicant was allegedly contacted by Ms. Mahi Bhatt, who claimed to represent NCLT and demanded a bribe of Rs. 75 Lakhs to dismiss the case. Ms. Bhatt purportedly threatened that failure to pay this amount would result in the approval of TDB's application and the liquidation of the Applicant's company.

Observations by the NCLT:

The NCLT dealt with the first ground of the application, which was that the Applicant was not given an opportunity to be heard before the matter was closed for orders. The NCLT noted that the Corporate Debtor filed a reply to the case on July 13, 2023. The NCLT directed the Corporate Debtor to be present on August 21, 2023, with instructions that if it failed to appear and advance arguments, the matter would be decided based on the material available on record. Despite this directive, the Corporate Debtor remained unrepresented.

On September 5, 2023, the Corporate Debtor was given a final opportunity to submit its reply, and the matter was adjourned to October 9, 2023. However, the Corporate Debtor again failed to appear on that date. In the interest of justice, the NCLT granted another adjournment to November 10, 2023. On November 10, 2023, the Counsel for the Corporate Debtor informed the NCLT that the matter could not proceed further because a writ petition regarding the interpretation of the provisions of the MSME Act concerning the IBC was pending before the High Court with a decision reserved and orders awaited. Despite there being no stay on the proceedings, the NCLT adjourned the matter to December 1, 2023 as the Counsel for the Corporate Debtor was not prepared to advance arguments on the merits of the case.

The NCLT noted that this pattern of seeking adjournments continued on December 1, 2023, and January 23, 2024. On February 8, 2024, the Corporate Debtor was represented by a junior counsel, but the Counsel remained absent. The matter was then adjourned to February 29, 2024. On February 29, 2024, the Counsel for the Corporate Debtor informed the NCLT that its writ petition had been dismissed and a review petition was filed. Despite there being no stay on the proceedings, the Counsel chose to prolong the matter on various pretexts without advancing arguments on the merits of the case.

On March 12, 2024, an adjournment was sought again due to the illness of the arguing counsel. On March 18, 2024, another advocate representing the Corporate Debtor repeated the same submission and sought an adjournment. Given the past conduct of the Counsel and the fact that the High Court already decided that the MSME Act did not override the IBC, the NCLT held that the Corporate Debtor was deliberately dragging the issue. Therefore, it proceeded to hear the Counsel for the Petitioner and reserved the matter for judgment.

The NCLT noted that the facts clearly demonstrated that ample opportunity was given to the Corporate Debtor to argue the matter. The conduct of the Counsel for the Corporate Debtor did not meet the standard of reasonableness, reflecting poorly on the duty of an advocate to both their client and the court.

The NCLT also addressed the second ground and noted that judges should not recuse themselves based on frivolous and baseless allegations as it would allow litigants to choose their preferred benches which would led to forum shopping and bench hunting.

The NCLT held that the Applicant was given every reasonable opportunity to present her case, but this opportunity was not utilized effectively for oblique reasons. Therefore, the applications were dismissed.

Case Title: M/s. Perfect Infraengineers Ltd. Vs Technology Development Board

Case Number: Interlocutory Application No. 3403/2024 IN Company Petition No.(IB) 322 of 2023

For the Applicants : Mr. Mathews Nedumpara, Advocate

For the Respondents : Mr. Sumedh Ruikar, Advocate i/b Mr. Pradip Yadav, Advocate

Date of Judgment: 15.07.2024

Click Here To Read/Download Order or Judgment