Dismissed

In the matter of Krystal Stone Exports Ltd. I.A. No. 522 of 2020 in C.P.-IB-903-2019

NCLT21 Jun 2023

Case brief

AI extract

What is this about?

Krystal Stone Exports Ltd. applied to set aside a CIRP admission order, relying on NCLAT precedent regarding defective notice service. The Tribunal distinguished that case and rejected the application, holding that service via newspaper publication was valid and noting that only Section 12A applications or 90% COC mandates allow withdrawal.

What did the court decide?

Application rejected on grounds that service of notice via newspaper publication was valid and the cited NCLAT precedent regarding defective service was distinguishable.

In the matter of Krystal Stone Exports Ltd. I.A. No. 522… — Insolvency and Bankruptcy | NCLT (2023)

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NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH COURT-I

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I.A. NO. 522 OF 2020 IN

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C.P./IB/903/2019

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Filed by

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KRYSTAL STONE EXPORTS LTD.

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Office No.8, Blasain Building, 1^st Floor, Amboli Naka, S.V. Road, Andheri (West),

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Mumbai- 400058

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…Applicant/Corporate Debtor Vs.

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VIJAY P. LULLA

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201, Satchitanand Bldg., 12^th Road, Opp. Ram Mandir, Khar (West), Mumbai- 400052 ….Respondent/Financial Creditor

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Reserved for order on: 01.05.2023 Order Pronounced on: 21.06.2023

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Coram:

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Hon’ble Shri H.V. Subba Rao, Member (Judicial) Hon’ble MS. Anu Jagmohan Singh, Member (Technical)

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Appearance :

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For the Applicant : Mr. Shashank Deo, Advocate For the Resolution Professional : Mr. Sandeep Batt

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Per: Shri H.V. Subba Rao, Member (Judicial)

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ORDER

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This Interlocutory Application is filed by the Applicant, Krystal Stone Exports Ltd. who is the corporate debtor in this case praying the following reliefs:

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Page 1 of 5

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NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH I.A. No. 522 of 2020 In C.P./IB/ 903/2019

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i. That this Hon’ble National Company Law Tribunal be pleased to set aside/recall the orders dated 24.09.2019 in the interest of justice.

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ii. Pass any further and other orders as this learned tribunal may deem fit and proper in the interest of justice.

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The main grievance of the of the petitioner is that no notice in the main company petition is served on the Corporate Debtor and the Corporate Debtor came to know about the proceedings on 11.01.2020 when the representative namely Mr. Rahul along with one other person of IRP visited the applicant Company at Jaipur and met the officers of the Corporate Debtor. Thereafter, the Corporate Debtor managed to collect the papers and file the present M.A.

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The Resolution Professional filed detailed affidavit in reply opposing the above application. The Resolution Professional devoted more space in the reply in mentioning the previous litigation between the parties which is not germane for consideration of this application. The relevant para of the affidavit in reply of the Resolution Professional is extracted herein:

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Para: 9.

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I state that by an order dated 28^th May 2019, the Tribunal is pleased to issue Notice of date of Intimation upon the Corporate Debtor. Financial Creditor has served the said Notice by Speed Post and filed the service affidavit dated 25^th June 2019 to that effect. The Registry of NCLT HAS THROUGH Advocates letter dated 25^th June 2019 accepted the Service Affidavit on 26^th June 2019 under Diary No. D11913.

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Para: 10.

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I state that the Service of Deed of Intimation upon the Corporate Debtor was duly effected. The Hon’ble Bench on 2^nd July 2019

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Page 2 of 5

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NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH

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I.A. No. 522 of 2020 In C.P./IB/ 903/2019

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directed the Financial Creditor to served the date of Intimation upon the Corporate Debtor by Publication in two leading newspapers, one in English and one in vernacular language. The Financial Creditor has published the Notice in Times of India and Maharashtra Times on 28^th July 2019 and Notarized the Service Affidavit on 20^th August 2019. The Financial Creditor through their advocate letter dated 09^th September 2019 filed service affidavit dated 20^th August 2019 in the Registry of NCLT on 11^th September 2019 under Diary No. 12275.

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Heard Mr. Shashank Deo counsel appearing for the Applicant and Mr. Sandeep Batt counsel appearing for the Respondent/Resolution Professional and perused the material available on record.

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After hearing on both sides and upon perusing the material available on record, this bench observes that the service of notice in the above case was affected on the Corporate Debtor through paper publication in two leading newspapers one “Times of India” in English and another paper in Vernakular language “Maharashtra Times” in Marathi on 28.07.2019. Upon a specific query raised by this bench to the counsel appearing for the Applicant as to whether this tribunal is empowered to set aside the CIRP order, the counsel appearing for the applicant relied upon a citation of the Hon’ble NCLAT in Company Appeal (AT) (Insolvency) No. 1064 of 2021 (M/s Hacxad Infotech Private Limited vs. M/s Skootr Global Private Limited). Therefore, it is important to extract para 14 of the above order of Hon’ble NCLAT that reads as hereinunder:

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Para: 14

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In the second part of the observation, it was clearly mentioned that the procedural review can very well be availed, if there is

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Page 3 of 5

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NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH

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I.A. No. 522 of 2020 In C.P./IB/ 903/2019

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any procedural defect in passing the order. The present was a case where there was procedural defect, since service was not effected on the Corporate Debtor. Thus, the judgment of the Allahabad High Court, which has been relied by the Adjudicating Authority for non-suiting the Corporate Debtor also does not support the view taken by the Adjudicating Authority. In view of the Company Appeal (AT) (Insolvency) No. 1064 of 2021 14 foregoing, we arrive at a conclusion that orders dated 8th February, 2019 as well as 10th April, 2019 were passed without service of any notice on the Corporate Debtor and both the orders being ex-parte, deserve to be set aside by the Adjudicating Authority by exercising the power under Rule 49, sub-rule (2).

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It is also appropriate to mention the relevant para regarding the service of notice on the corporate debtor in the impugned order dated 24.09.2019 of this tribunal is extracted as under:

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Para-7:

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The Corporate Debtor chose not to appear or file an objection against the admission of this application. By order dated 02.07.2019 it was informed vide affidavit of service, that the notice issued on the corporate Debtor is returned with postal remark “left”. Further, on 17.09.2019 we have recorded that the Corporate Debtor did not appear before this Tribunal even after service of notice by way of publication of notice in the newspaper. There are no objections filed by the Corporate Debtor even after ample opportunities to do the same.

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Therefore, it is very clear from the above para 14 of the order of Hon’ble NCLAT that the Hon’ble NCLAT has set aside the CIRP admission order on the ground that the adjudicating authority has committed a procedural error in passing an order without effecting service of notice on the Corporate Debtor. However in the present

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Page 4 of 5

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NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH I.A. No. 522 of 2020 In C.P./IB/ 903/2019

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case on hand, as rightly contended by the Resolution Professional, the notice was served on the Corporate Debtor through substituted service through paper publication in two leading newspapers as per the procedure prescribed by law and therefore this tribunal is of the view that there was no procedural irregularity or illegality committed by this tribunal and this tribunal has no power to set aside such admission order and the remedy of the Corporate Debtor if at all is only to file an appeal against the above order and not filing the above application. As stated above, the above case law relied upon by the Corporate Debtor of the Hon’ble NCLAT is distinguishable from the facts of the present case on hand and is not applicable. This tribunal is also of the considered opinion that the adjudicating authority has power to withdraw the CIRP order only under two circumstances namely:

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i. Through an application filed under section 12A by the IRP with Form-A submitted by the Financial Creditor/Operational Creditor before constitution of COC.

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ii. With 90% mandate of COC after constitution of COC and not under any other circumstances.

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For the aforesaid reasons, this tribunal is of the opinion that there is no merit in the above application and the above application is liable to be rejected. Accordingly, the above application is rejected .

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Sd/Sd/ANU JAGMOHAN SINGH H. V. SUBBA RAO Member (Technical) Member (Judicial)

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//RKS//

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In the matter of Krystal Stone Exports Ltd. I.A. No. 522 of 2020 in C.P.-IB-903-2019

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In the matter of Krystal Stone Exports Ltd. I.A. No. 522 of 2020 in C.P.-IB-903-2019

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