TMI Blog2020 (8) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... be. In view of default made by the Respondent-Corporate Debtor, the Appellant filed the Application before the Adjudicating Authority and the Adjudicating Authority admitted the Application and observed that the debt and default is concerned, the Corporate Debtor does not deny the same. Further it is observed that the financial facilities have been duly granted and the amounts have been disbursed. In the facts of the present case, the Adjudicating Authority has already observed that the adverse observation will be subject to final outcome of the investigation. The Hon ble Supreme Court in the matter of ICICI Bank Vs. Shanti Devi Sharma and Others [ 2008 (5) TMI 707 - SUPREME COURT ] held that the Court could have been more careful to note that the facts that it discussed were alleged. Recognising as such, the Court clarified that its observations were not to influence or affect the proceedings. The adverse observations made by Adjudicating Authority, being admittedly subject to correction in investigation, were avoidable. They will not affect investigation in any manner or be basis to hold adversely against Appellant Bank or its officials. For the purpose of finding debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t agreeing upon the precise terms of the lease. The story rings false from beginning to end, and yet the tribunal accepted it by saying, as regards the bonafides of the transactions, in our opinion there is nothing to suspect the same . The Tribunal says, there is a transparency about the entire transaction which nullifies any attempt to make out the transaction as something - unusual and out of the ordinary. That diamonds are not transparent, that they dazzle with a brilliance that blinds the eye seems to have escaped the notice of the tribunal. It undeservingly accepted the glib explanation of the assesse, though teeming with the improbabilities and strenous on credulity. 37. We, therefore, are of the view that the tribunal's conclusions on this issue are perverse and need to be interfered with. We affirm the conclusions arrived at by the assessing officer and the appellate authority to effect that ₹ 70 lakhs were lent to Bharat S. Shah for substantial periods during the previous years pertaining to the relevant assessment years, without interest and without adequate security. 32. Therefore, I am constrained to make an adverse observation, needless to me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 onwards. The Appellant preferred an Application under Section 7 of IBC on 06.01.2008 committing default by the Respondent herein. The Respondent filed Reply Affidavit to the said Application contesting its admission to CIRP. In the Reply, the Respondent alleged that upon an Application of ICICI Bank to the Debt Recovery Tribunal, where recovery proceedings are pending against the Corporate Debtor the Debt Recovery Tribunal, Mumbai-I appointed a Receiver to take possession of the movables. The ICICI Bank subsequently sub-delegated its responsibilities to some of its Officer to work in the capacity as Receiver. The Officer of the ICICI Bank along with Police personnel visited the premises of the Respondent and seized diamonds. The Respondent had further alleged that the High Value Fancy coloured original Diamonds have been replaced with coloured stone having hardly any market value. It is further submitted that while the actual market value of the total stone seized was ₹ 1561.87 Crores at the time of seizure, the valuation report valued the stock only to ₹ 199.51 Crores. The Respondent further contended that the stock has been tampered and misappropriated. The Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. in Civil Appeal No. 1785 of 2014 on 31.01.2014 at paragraphs 13 14 held as under: 13. At this juncture, it may be clearly stated that singularly on the basis of the aforesaid principle the disparaging remarks and directions, which are going to be referred to hereinafter, deserve to be annulled but we also think it seemly to advert to the facet whether the remarks were really necessary to render the decision by the learned single Judge and the finding recorded by the Division Bench that the observations are based on the material on record and they do not cause any prejudice, are legally sustainable. As far as finding of the Division Bench is concerned that they are based on materials brought on record is absolutely unjustified in view of the following principles laid down in Mohammad Naim (supra): It has been judicially recognized that in the matter of making disparaging remarks against persons or authorities whose conduct comes into consideration before courts of law in cases to be decided by them, it is relevant to consider (a) whether the party whose conduct is in question is before the court or has an opportunity of explaining or defending himself; (b) whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose remarks made by subordinate court following the three tests laid down in Mohammad Naim (supra), if it is really necessary to do so or prevent abuse of the process of the court or to secure the ends of the justice in exceptional cases, where those remarks would cause irreparable injury to the witness or party not before the court holding that retention of those undeserving remarks will cause harm to the person referred and the expunction will not affect the judgment rendered by the court 7. In view of the reasons as stated and relying upon the judgment of Hon ble Supreme Court and Hon ble Chhattisgarh High Court, the Appellant prays this Bench to expunge the remarks. 8. Learned Counsel for the Respondent submits that the learned Adjudicating Authority at paragraph-32 of the Judgment clearly stated: 32. Therefore, I am constrained to make an adverse observation, needless to mention, subject to correction on the final outcome of the investigation, that the shine/gleam of diamonds have blinded the eyes of the bank authorities that they did not even check the veracity of the securities pledged . 9. Learned Counsel submitted that the said observations will be su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to influence or affect the proceedings. 12. Heard learned Counsel appearing for the respective parties. Perused the pleading and documents filed in their support. Prima facie, we are not dealing with the admission of the Application under Section 7 IBC in this case. We are, however, confined to whether the observations made at paragraphs 31, 32 33 of the impugned order is germane in the context of admission of Application. The Application was filed under Section 7 of IBC by the Appellant. 13. A Financial Creditor, who intends to initiate CIRP, should file an Application before the Adjudicating Authority in Form-I under Section 7 read with Rule-IV of IBC (Application to Adjudicating Authority Rules, 2016). Form-1 contains V parts for adjudication the Application under Section 7 IBC. It is to be seen whether the Applicant is a Financial Creditor and the Debt duly payable in law by the Corporate Debtor. When this Appeal came up for Admission as (Fresh Case), the Bench passed the following order on 06.05.2019. Paragraph-2 of the Order reproduced hereunder: 2. In the present case, we have to decide as to whether the Adjudicating Authority is empower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The observation of the Adjudicating Authority is that the shine/gleam of diamonds have blinded the eyes of the bank authorities that they did not even check the veracity of the securities pledged. Further, it was observed that when the value stock was seized by the authorities, there was no proper record of inventories and without obtaining the clearance of the management of the Debtor Company, and all such allegations are needed to be investigated in depth. 18. It is apparent from the record that the Respondent-Corporate Debtor filed Counter Claims bearing Counter Claim (L) No. 793/2017 and counter Claim (L) No. 156/2018 against Appellant Bank and Members of BOI consortium. The Respondent also filed complaint against Appellant before EOW, Mumbai with respect to inter-alia the theft and criminal misappropriation of the Company s stock of ₹ 1561.87 Crores. Basing on above, the Respondent made allegations against Appellant Bank even before the Adjudicating Authority. It is also stated that the investigation is in progress. It is one of the submissions of the learned Counsel for the Appellant that Debt Recovery Tribunal on an application made by the ICICI Bank appointed a R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, as an integral part of it. 20. Learned Counsel for the Appellant relied upon the above decision. However, in the facts of the present case, the Adjudicating Authority has already observed that the adverse observation will be subject to final outcome of the investigation. The Hon ble Supreme Court in the matter of ICICI Bank Vs. Shanti Devi Sharma and Others reported in (2008) 7 SCC 532 (supra) held in paragraph-9 the Court could have been more careful to note that the facts that it discussed were alleged. Recognising as such, the Court clarified that its observations were not to influence or affect the proceedings. 21. We find that the adverse observations made by Adjudicating Authority, being admittedly subject to correction in investigation, were avoidable. They will not affect investigation in any manner or be basis to hold adversely against Appellant Bank or its officials. For the purpose of finding debt due and default for admitting Application it was not possible to accept defence of valuation claimed in averments vis- -vis valuation done in record of seizure referred. Adjudicating Authority could not have decided such averments. 22. The Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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