Only Creditors Who Triggered Insolvency Resolution Process Can Be Impleaded As A Party: NCLAT Chennai

BACKGROUND FACTS

Jeypore Sugar Company Ltd. ("Corporate Debtor") was admitted into Corporate Insolvency Resolution Process ("CIRP") by the NCLT, Chennai Bench ("Adjudicating Authority") on an application made by IDBI Bank Ltd. and subsequently liquidation was ordered. Mr. V Venkata Sivakumar was appointed as the Liquidator. While facing difficulties in discharging his duties as a liquidator, an application was moved before the Adjudicating Authority seeking police protection in taking over charge of assets of the Corporate Debtor. The Adjudicating Authority vide an order dated 02.03.2022 had provided Police protection to the Liquidator of the Corporate Debtor, to take over the custody of the School and the Petrol Pump that were functioning on the properties leased out to Rajeswari Educational Society and the Indian Oil Corporation by the Corporate Debtor. The representatives of School and the Petrol Pump ("Applicants") had challenged the order dated 02.03.2022 before the NCLAT Chennai Bench.

Thereafter, on 03.06.2022, the Adjudicating Authority on an application moved by the promoters of the Corporate Debtor, had directed the Liquidator to not to deal with any of the assets of the Corporate Debtor till the disposal of the concerned application. Ultimately on 01.07.2022, Mr. V Venkata Sivakumar was replaced by Mr. S Hari Karthik as the liquidator. The erstwhile Liquidator, Mr. V Venkata Sivakumar, had challenged the order dated 01.07.2022 passed by the Adjudicating Authority before the NCLAT Chennai Bench vide proceedings bearing Company Appeal (AT)(CH)(INS) No. 269 of 2022 and the Applicants have filed an impleadment application in the same matter.

DECISION OF THE NCLAT

The Bench observed that no provision in the IBC enables the creditors, other than those who triggered the Insolvency Resolution Process, to be impleaded as Parties. A party can only be impleaded if it is a necessary party, which means that a person is very much necessary to the constitution of Suit or Appeal in a given proceeding before a Court of Law, Tribunal or Authority.

"In fact, whether a person has an enforceable legal right is to be looked into by a `Tribunal' in regard to the `impleadment of parties'. To array a person as a `prospective / proposed Respondent(s)' is not a `Substantive Right', but undoubtedly, it is one of the `procedure' and the `Tribunal' is to exercise its `judicial discretion', of course, in a subjective manner, diligently. It cannot be gainsaid that, an `Individual' will not be added as a `Party', just because he will be affected by the `Tribunal' incidentally, when it passes an `Order' in a given `proceedings', before it. An `Appellant / Plaintiff' in a given legal proceeding is the `dominus litis'."

The Bench observed that a person cannot be coerced to get included a person as Party against whom he does not want to contest, unless it is a compulsion of Law. A necessary party is one without whom no order can be passed effectively, or in whose absence an effective order can be made but his presence is necessary for arriving at a final decision. Further, a mere interest of a Party in the fruits of litigation cannot be a test for impleading him as a Party.

It was further observed that Mr. V. Venkatasivakumar, the erstwhile Liquidator, had filed Company Appeal (AT) (CH) (INS) No. 269 of 2022 challenging his removal as the liquidator of the Corporate Debtor and hence, the Applicants are not necessary or proper parties, to be arrayed as Respondents in the concerned appeal. Even without the presence of the Applicants the Bench can dispose of the appeal on merits and material available on record. The Application for impleadment was dismissed.

Case Title: V. Venkata Sivakumar v IDBI Bank Ltd., Comp. App (AT) (CH) (INS) No. 269 of 2022

Counsel For Applicants: Sr. Adv. Mr. Sriram Panchu and Sr. Adv. P. Nagesh