NCLT Empowered Under Rule 43 Of NCLT Rules To Call For Any Information Or Evidence In Its Discretion: NCLAT Delhi

Background Facts

Trident Fabricators Pvt. Ltd. ("Appellant/Operational Creditor") had filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") before NCLT Kolkata Bench, seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against Hiranmayee Energy Ltd. ("Corporate Debtor"). The Appellant also filed an interim application before the NCLT, Kolkata Bench ("Adjudicating Authority") seeking directions to the Corporate Debtor to disclose the following documents for the period of 2015-16 to 2020-2021:

• Detailed Balance Sheet;
• Ledger accounts with regard to transactions of the Operational Creditor;
• Trial Balance maintained by the Corporate Debtor with regard to its dues towards its creditors, including data related to Operational Creditor; and
• Annual accounts of Corporate Debtor.

The Adjudicating Authority dismissed the application vide an order dated 24.05.2022, while observing that there was no privity of contract between the Parties and it seems unusual for Adjudicating Authority to support the Operational Creditor by calling for such information which favours Operational but is detrimental to the Corporate Debtor. It was opined that Adjudicating Authority has limited jurisdiction of looking at the petition containing the information relating to existing outstanding debt and default in repayment thereof by the Corporate Debtor. If the Corporate Debtor has committed a default, the Operational Creditor has to place all documents on record.

"The prayer clause of the Operational Creditor seeking directions upon the Corporate Debtor to produce all the documents by way of an affidavit, so that the Operational Creditor may prove its case against the Corporate Debtor is, to our mind, beyond our jurisdiction. Each Operational Creditor has to prove its own case. It cannot base its claim on the basis of documents to be produced by the opposite party and this Adjudicating Authority would not like to be passing such a direction upon the Corporate Debtor to facilitate the admission of petition filed by the Operational Creditor."

The Appellant filed an appeal before the NCLAT challenging the order of dismissal.

Relevant Law

Rule 43 of NCLT Rules, 2016

"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.

(2) Without prejudice to sub-rule (1), the Bench may, for the purpose of inquiry or investigation, as the case may be, admit such documentary and other mode of recordings in electronic form including emails, books of accounts, book or paper, written communications, statements, contracts, electronic certificates and such other similar mode of transactions as may legally be permitted to take into account of those as admissible as evidence under the relevant laws."

Decision Of NCLAT

The Bench observed that:

"Rule 43 of the NCLT Rules, 2016 deals with powers of the Bench to call further information or evidence. There cannot be any quarrel regarding Bench having such powers. Rule 43 (1) and (2) gives ample powers to the Bench to call any information or evidence as it may consider necessary in its discretion."

The Bench observed that the Adjudicating Authority had given reason for rejecting the Appellant's application that there was no privity of contract between the Parties. The Bench concurred with the decision of Adjudicating Authority and opined that the latter has exercised its discretion in accordance with law after giving due reasons which does not warrant any interference in exercise of Appellate jurisdiction. The Bench clarified that the observations made by the Adjudicating Authority shall not be considered as final conclusive opinion at the time of disposal of Section 9 petition.

Appeal was dismissed.

Case Title: Trident Fabricators Pvt. Ltd. v Hiranmayee Energy Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 989 of 2022

Counsel For Appellant: Mr. Kausik Chatterjee and Mr. Soumya Dutta, Advocates.

Counsel For Respondent: Mr. Shambo Nandy and Mr. Kinjal Sheth, Advocates.

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