No prohibition on advocate to represent different company in separate proceedings filed under Section 7 IBC: NCLAT

NCLAT

   

National Company Law Appellate Tribunal: While dealing with a matter seeking expunging the adverse remake made against the appellant, a bench comprising of Ashok Bhushan*, J., Dr. Alok Srivastava and Barun Mitra (Technical Members), held that there is no prohibition according to the statutory provision governing appearance of an advocate in representing a different company in separate proceedings filed under S. 7 of Insolvency and Bankruptcy Code, 2016.

Factual Matrix

The Appellant, Anand Varma was appointed as the Resolution Professional in the Corporate Insolvency Resolution against the Corporate Debtor ‘National Plywood Industries Ltd.'. The appellant invited Expressions of Interest (EOIs) and respondent no.1 and respondent no.4 submitted their respective EOI's. Respondent no. 4 was the only one who submitted the Resolution Plan as discussed by the Committee of Creditors (CoC) and which was then approved and sent for approval before the Adjudicating Authority.

An Application under S. 7 IBC was filed by authorised signatory of ‘Damayanti Tea Industries' through its Advocate, the appellant. The CoC once again considered the Resolution Plans submitted by both respondent nos. 1 and 4 and like before the resolution plan submitted by respondent no. 4 was approved.

Respondent no.1 approached the Adjudicating Authority alleging a conflict of interest and filed an I.A No. 43/2021 praying to remove respondent no. 2 as the Resolution Professional and set aside all acts of the Resolution Professional in which the Resolution Professional had been instrumental, as unfair, biased, motivated and lacking in transparency. Vide order dated 08-04-2022, the Adjudicating Authority disposed of I.A and issued some directions.

According to the appellant, the Adjudicating Authority made some “prejudicial observations” against him. The present appeal was filed by the appellant for expunging the adverse remarks made against him by the Adjudicating Authority.

Contention of the parties

The appellants contended that the Adjudicating Authority has observed that the appellant has appeared for the Resolution Professional in the CIRP of the Corporate Debtor and has also appeared on behalf of ‘Damayanti Tea Industries' by filing an application under S. 7 IBC. The very basis of observations by the Adjudicating Authority that Appellant has appeared for respondent no. 2 and 4 is unfounded. The appellant was not representing respondent no. 4 in the CIRP of the Corporate Debtor.

The respondents contended that the promoter of the Corporate Debtor and is also promoter of ‘Damayanti Tea Industries' and the appellant filed an application under S. 7 IBC on behalf of ‘Damayanti Tea Industries' when Resolution Plan submitted by respondent no.4 was pending consideration before the NCLT. The appellant was representing both the parties which is clearly conflict of interest.

Tribunal's Observation

The Tribunal observed that according to the Adjudicating Authority the appellant has appeared both for Resolution Professional and Resolution Applicant in the CIRP of the Corporate Debtor, but it is not the correct fact. The appellant was not appearing for respondent no.4 which is a Resolution Applicant in the CIRP of the Corporate Debtor but had filed an application under S. 7 IBC on behalf of ‘Damayanti Tea Industries' which is a separate company registered under the Companies Act.

“…‘Damayanti Tea Industries' is a unit of ‘M/s. Chandrabali Commercial India Pvt. Ltd.' incorporated on 27.07.2000 with its separate identification number. Respondent No.4 who was the Resolution Applicant in the CIRP of the Corporate Debtor is ‘PLBB Products Pvt. Ltd.' which is registered company having separate registration number and entity. The Section 7 Application filed by ‘Damayanti Tea Industries' has no concern with the subject matter of CIRP of the Corporate Debtor.”

The Tribunal opined that the appellant had not appeared for Resolution Professional and Resolution Applicant i.e., respondent no. 4 in the CIRP of the Corporate Debtor and there is no prohibition on advocate to represent different company in separate proceedings filed under S. 7 IBC.

“No prohibition can be read in the statutory provision governing appearance of an Advocate in representing a different company in separate proceedings filed under Section 7.”

Discussing Rr. 14 and 33 of Bar Council of India Rules, 1975, the Tribunal observed that there is no violation of any Rules of Etiquette or conflict of interest in the CIRP of the Corporate Debtor as ‘Damayanti Tea Industries' is a separate company and has initiated separate proceeding under S. 7 against different Corporate Debtor.

The Tribunal mentioned, Neeraj Garg v. Sarita Rani, (2021) 9 SCC 92, where it was observed that

“While it is of fundamental importance in the realm of administration of justice to allow the judges to discharge their functions freely and fearlessly and without interference by anyone, it is equally important for the judges to be exercising restraint and avoid unnecessary remarks on the conduct of the counsel which may have no bearing on the adjudication of the dispute before the Court.”

The Tribunal noted that the observations made by the Adjudicating Authority in the judgment were not necessary for deciding the issues and the observations made against the appellant were uncalled for.

Allowing the appeal, the Tribunal directed the expunging of all adverse observations made against the appellant.

[Anand Varma v. Piyush Periwal, 2022 SCC OnLine NCLAT 455, order dated 04-11-2022]


Advocates who appeared in this case :

Mr. Maninder Singh, Mr. Krishnendu Datta (Senior Advocate) and Mr. Kaustubh Prakash, Counsel for the Appellants;

Mr. Abhijit Sarkar, Mr. Rishi Kumar Singh Gautam and Mr. Manish Verma, Counsel for the Respondent No. 1;

Mr. Abhijeet Sinha, Counsel for the Respondent No. 4.


*Ritu Singh, Editorial Assistant has put this report together

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