1. The impugned Application presently sub-judice for adjudication, is submitted by the Corporate Debtor (Videocon Industries Limited) dated 22.03.2018 seeking Order to strike off the Amendments carried out by the Financial Creditor (State Bank of India) and on that ground dismiss the main Petition (CP 02 of 2018) submitted on 01.01.2018 as also the Amended Petition submitted on 23.02.2018.
2. To elaborate the relief sought few salient features are that the Financial Creditor had carried out certain Amendments which according to the Applicant is beyond the scope of the Insolvency Code. As per the Application, the Amendments carried out were illegal and in violation of an Order of this Bench dated 24.01.2018. At this juncture it is worth to mention that the observation made in the said Ad-Interim-Order dated 24.01.2018 was that the name of the proposed IRP was allowed to be replaced. Hence the Applicant has contested that the Amendment was directed to be made to the extent of replacement of the name of the IRP and not beyond that. According to the Applicant a plethora of Amendments have actually been carried out for which no permission was obtained, hence not permissible under The Code.
2.1 In this Application the Applicant has reproduced the Amendments took place and tried to explain that those Amendments were not in the nature of rectification but altogether changing the context of the main Petition, hence the main Petition as well as the Amended Petition, both deserves rejection.
2.2 The Applicant has narrated the Amendments which were carried out and for ready reference few are quoted below extracted from the Application:—
“Amendments regarding the contents of the Particulars of Financial Debt in Part IV of Form 1 of the Code:
7.1 At page No. 11 of the Original Company Petition the following paragraph is provided:
“Further, the Corporate Debtor has, pursuant to a Confirmation Agreement dated June 20, 2016 Confirmation Agreement”), become a party to a Rupee term loan agreement dated August 8, 2012 (“VTL agreement”) as a co-obligator and assumed all obligations of the obligators therein towards the Videocon Group Lenders (as defined therein), which include 5BI, SBM, 5BBJ and SBP.”
However, at page No.ll of the Amended Application the following is provided:
“Further the Corporate Debtor has, pursuant to a Confirmation Agreement dated June 20, 2016 Confirmation Agreement”) become a party to a Rupee term loan agreement dated May 31, 2010 (“VTL Agreement”) as a co-obligator and assumed all obligations of the obligors therein towards the VTL Lenders (as defined therein), which include SBI, SBM, SBBJ and SBP.”
7.2. The words indicated in bold and underline hereinabove have been replaced by the Financial Creditor.
7.3. Column 2 of Sr. No. 2 of the Particulars of Financial Debt being the “Amounts under default and dates of default under the SBI Facilities” has been amended by the Financial Creditor.
At Sl. No. 1 at page No. 12 of the Original Petition, the following appears—
“The first date of default under this facility was May 1, 2016.”
However, at Serial No. 1 at page No. 12 of the Amended Application the following appears:
“The first default under this facility for which the account of the Corporate Debtor was reported as SMA - 2 occurred on May 31, 2016. However the Corporate Debtor defaulted and/or failed to pay the principal and interest under this facility from March 2017 and January 2017 respectively.”
7.10. The Financial Creditor has also changed the date of one of the Notices from July 25, 2017 to July 25, 2016 at page 17 of the Amended Application.
7.11. Exhibit S at page 22 of the Amended Application and at page 48 of the Original Petition are also totally different altering the days and date of default in question.
7.12. In the Column - “Date of Default'with regard to the SBI RU facility/SBI Term Loan, the contents have been amended by substituting “01.05.2016” with “31.01.2017”.
7.14. In the Column - “Date of Default” with regard to the SBBJ RTL facility/SBBJ Term Loan, the contents have been amended by substituting “01.05.2016” with “31.01.2017”.
7.15. In the Column - ‘Days of Default till December 27, 2017’ with regard to the SBBJ RL facility/SBBJ Term Loan, the contents have been amended by substituting “607”days with “331” days.
7.16. In the Column - Date of Default with regard to the SBH RTL facility/SBH Term Loan, the contents have been amended by substituting “01.05.2016” with 31.01.2017”.
7.17. In the Column - ‘Days of Default till December 27, 2017’ with regard to the SBH TRL facility/SBJ Term Loan, the contents have been amended by substituting “607” days with “331” days.
7.18. In the Column - ‘Date of Default’ with regard to the SBM RTL facility/5BM Term Loan, the contents have been amended by substituting “01.05.2016” with “31.01.2017”.
3. Learned Counsel appearing on behalf of the Applicant had made an opening remark that under the provisions of the Insolvency Code the NCLT has no power to grant a Petitioner a liberty to amend the Petition. Learned Counsel has pleaded that the First Proviso to Section (1) of Section 7 provides that an Adjudicating Authority shall before rejecting the Application give a notice to the Applicant to rectify the defect in his Application within 7 days of receipt of such notice. The term “rectification” has limited scope, therefore, do not apply to the extent the amendment took place in the Petition filed U/s. 7 of the I&B Code. The Amendments carried out by the Petitioner have almost changed the entire context of the Petition as if a fresh Petition is filed.
3.1 To supplement his arguments, Learned Counsel has referred Rule-10 of the Insolvency and Bankruptcy (Application To Adjudicating Authority) Rules, 2016 which prescribes that till such time Rules of procedure for conduct of proceedings under the Code are notified, an application made U/s. 7(1), or U/s. 9 or U/s. 10(1) shall be filed before the AA in accordance with Rules 20, 21, 22, 23, 24 and 26 of Part III of the NCLT Rules, 2016. According to the arguments the said Rules do not subscribe such type of amendment as carried out by the Petitioner. It is further explained that under Rule 155 of NCLT Rules, 2016 “General Power to Amend” is prescribed. However, this Rule does not fall under any of the Rules as listed in Rule 10 supra, therefore, as consequence, in the absence of any authority the NCLT does not have jurisdiction to allow amendment in the Petition. He has concluded that since these NCLT Rules have not given any authority for such amendment hence the AA has no jurisdiction to entertain the amended Petition. Although not a direct decision covering this controversy but on the issue that in a situation when date of default is wrongly quoted, the Petition is liable to be dismissed; a decision of the Coordinate Bench is cited titled as “Satyaprakash Agarwal v. Vistar Metal Industries Pvt. Ltd., (CP No. 1331/I&BP/2017) Order dated 15.02.2018.
4. From the side of the Petitioner it is vehemently argued that by the Amendments no prejudice is caused to Debtor because while incorporating the Amendment an amount received against the outstanding Debt had been adjusted and therefore the Corporate Debtor had been given due credit of the said repayment. Further it is elaborated, by citing certain instances of Amendment, that the existence of Loan has not been disturbed but only the supporting Loan Agreement such as Rupee Loan, Agreement, date of execution etc. have been incorporated in the Amendment only to clarify the Debt position. Rather the amendments are ciarificatory in nature. Likewise, the dates of defaults have been specified to fully explain the existence of Debt and the Default committed by the Respondent Debtor, pleaded by the Ld. Representative. To buttress case law cited is: Union of India (Applicant) v. Paras Laminates (P) Ltd. (Respondent) - Civil Appeal No. 3955 of 1990 decided on August 17, 1990 - [(1990) 4 SCC 453]. Relevant Paragraph 8 is reproduced below for reference:—
“8. There is no doubt that the Tribunal functions as a court within the limits of its jurisdiction. It has all the power conferred expressly by the statute. Furthermore, being a judicial body, it has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory powers. Certain powers are recognized as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdiction is efficaciously and meaningfully exercised. The powers of the Tribunal are no doubt limited. Its area of jurisdiction is clearly defined, but within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. The implied grant, is of course, limited by the express grant and, therefore, it can only be such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective. As stated in Maxwell on Interpretation of Statutes (11 edn.) “where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to is execution”.”
5. FINDINGS: Heard both the sides. Case record perused. The Petition and the Amended Petition are compared. The Amendments carried out have been examined. Before I proceed to examine the provisions of the I & B Code applicable under the present facts, it is worth to remove the misgiving about the noting made by the Bench on the Attendance cum Order Sheets maintained. On 24111 January 2018 the noting is that the Representative of SBI had asked for change of the name of the IRP. Also sought time to file the consent of the substituted IRP. As a consequence, the matter was adjournment to 21.02.2018. The Noting on 21.2.2018 are that again the Petitioner sought time to place on record the name of the IRP and to carry out some clerical corrections in the Petition. On the other hand, Respondent Debtor was permitted to file the Reply by 21.03.2018. The case posted for hearing on 27.03.2018 i.e. today. The conjoined reading thus reveals that not only the change of IRP but clerical corrections were also demanded by the Petitioner, not objected by the Respondent Debtor, hence the Bench had also not made any adverse observation on the said suggestion.
5.1 The Insolvency Code has prescribed the procedure of rectification of a defect, however, it has also incorporated that an incomplete application can also be allowed to be rectified. This observation is made on the basis of a careful reading of Sub-section (5) of Section 7 with the Proviso underneath. For reference, reproduced below:—
“7. Initiation of corporate insolvency resolution process by financial creditor—
(5) Where the Adjudicating Authority is satisfied that—
(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.”
5.2 An interesting situation is that at one place the terminology used in this Legislation is “incomplete” and in the Proviso the terminology used is “to rectify the defect”. In Section 7(5)(b) it is prescribed that where the Adjudicating Authority is satisfied that the Application under Sub-section 2 of Section 7 is “incomplete” or any Disciplinary Proceedings is pending against the proposed Resolution Professional, it may, by order reject such Application. Immediately thereunder, in the First Proviso annexed, it is authorized that the Adjudicating Authority shall before rejecting an Application under Clause (b) of Sub-section (5) of Section 7 give a notice to the Applicant to rectify the defect within 7 days. In my humble opinion and to give a complete meaning to both the Provisions, it is justifiable to interpret that an incomplete Application can also be allowed to be rectified under these Provisions. Although, this Bench is aware about the interpretation that “incompleteness” is distinguishable from “defectiveness”, however, to keep brevity in mind, this is not the right occasion to further elaborate these two terminologies hence to cut it short, this Bench is of the view that even an “incomplete Petition” can be rectified subject to the grant of the Adjudicating Authority.
5.3 Since I have already taken a view that the Amendment so carried out are made within the purview of the Provisions of Section 7 of the Code, therefore, the question of applicability of Rule 10 of the Insolvency and Bankruptcy (Application To Adjudicating Authority) Rules, 2016 is of no consequence. There is no necessity to take shelter of any of the Rules, either NLCT Rules or Insolvency & Bankruptcy Rules, to resolve whether this Bench has judicial authority to entertain an Amended Petition for adjudication as per Law. If the main provisions of the Code itself are unambiquous, then there is no requirement to take shelter of the Rules. The Provisions of any enactment governs the Rules framed therein and not vice-versa.
5.4 The decision cited of Mr. Satyaprakash Agarwal (supra) is not applicable on the facts and circumstances of this case. There was no such controversy revolving around the question of permission of admission of an amended Petition. Merely because of the reason that the date of default was wrong, it was deemed fit by the Respected Coordinate Bench to dismiss the Petition but that decision was within the narrow compass of date of default thus the circumstances of that case, not to apply in general. Moreover, facts of this case are clearly distinguishable hence it is safe to hold that the Amendments taken place have no bearing on the alleged Debt and do not cause prejudice to the other side.
6. I am convinced with the argument that the NCLT is a Judicial Body having both incidental and ancillary powers to give full effect to the Provisions of the Code and to accomplish the intention with which this Code had been enacted. It is worth to quote an observation of the Hon'ble Supreme Court from the decision of Union Bank of India v. Paras Laminates (supra), “Certain powers are recognized as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned Held of jurisdiction is efficaciously and meaningfully exercised.” This view gets further strength because the Preamble is self-explanatory that The Code is formulated to consolidate and amend the Laws relating to reorganization and Insolvency Resolution of Corporate Persons in a time bound manner for maximization of value of assets of such Corporate Body which is under financial stress so as to promote Entrepreneurship side by side balance the interest of all the stakeholders. This primary objective is the guiding force to decide all the Petitions filed for commencement of Insolvency Proceedings. Merely because of a technical reason, that too not sustainable, as discussed above, in the eyes of law, a Litigant must not be thrown out of the Litigation at the very threshold without giving opportunity to explain the merits of the case. Technicalities do not absolve a person from the Liabilities in question. For this reason, a date is hereby granted to discuss the merits of the Amended Petition by dismissing this Miscellaneous Application. No reply of the Respondent Debtor so far on record, however, if deemed fit, can file by 16.04.2018, a copy to the other side, thereafter a Rejoinder by the Petitioner be submitted by 19.04.2018. To be listed for hearing on 23.04.2018.