The Learned Consel-Newsletter

What is the threshold for the trial court to pass a summoning order under Section 319 Cr.P.C?

The Supreme Court in Shankar v. State of Uttar Pradesh [2024 INSC 366], after relying on Hardeep Singhv. State of Punjab, (2014) 3 SCC 92 held that the evidence before the trial court should be such that if it goes unrebutted, then it should result in the conviction of the person who is sought to be summoned.

As is evident from the above referred decision, the degree of satisfaction that is required to exercise power under Section 319 Cr.P.C. is much stricter,considering that it is a discretionary and an extraordinary power.

The appellant was challenging the decision of the High Court, that dismissed the appeal against the trail court decision to summon the appellant based on the statement of a person who was not an eye-witness, held that her deposition was not sufficient enough to invoke the extra-ordinary jurisdiction under Section 319 to summon the appellants.

There are no other witnesses who have deposed against the appellants. There is no documentary evidence that the prosecution had collected against the appellants. When these factors are looked at in a holistic manner, it would be clear that the higher degree of satisfaction that is required for exercising power under Section 319 Cr.P.C. is not met in the present case.

Can the claims of a company be admitted by the Liquidator or Resolution professional, when the Corporate Debtor failed to take delivery of the materials supplied by the company?

Corporate Debtor (CD) issued a purchase order on the Appellant for supply of certain systems for a total value of Rs. 95.17 crore.While the appellant was executing the said contract the CD did not open an irrevocable letter of credit equivalent to Rs. 73.602 crores and did not take delivery of supplies made ready and did not issue clearance for material dispatch of the manufactured items under various pretexts.

When the CD was put under CIRP and the Appellant filed a claim before the Insolvency Resolution Professional (IRP) for a sum of Rs. 71.09.

The IRP confirmed that a sum of Rs.13.47 crore is payable and asked the Appellant to clarify the difference of Rs. 57.65 crore with sufficient supporting documents to corroborate the same. This was later rejected by the IRP.

But this admission of 13.47 crores, was later repudiated by the respondent in the role of RP and later in the role of liquidator and instead, the Respondent / Liquidator issued a reply stating that a sum of Rs.1.51 crore was due and payable by the Appellant to the CD.

The Adjudicating authority rejected the claims of the appellant.

It is the contention of the Appellant that after having accepted the claim in part, it is not open to the Respondent to reject the claim later and that he has failed in his duty as liquidator

It was also argued that the Adjudicating authority failed to consider that the Appellant had performed its obligations under the Contract and the CD cannot walk away from its obligations of payment for the work done.

The respondents argued that the claims of the Appellant is based on non-performance of its part by the CD and therefore the claim for damages would first need to be adjudicated upon by a Civil Court or Arbitrator for the ‘Debt’ to even come into existence.

Further it was stated that in the absence of invoices / dispatch documents existing in the records of CD, the claims of Appellant could not be substantiated.

Reliance was placed by the liquidator on Union of India v Raman Iron Foundry AIR 1974 SC 1265,wherein, it has been held that “it is only when a claim for damages is adjudicated upon by a civil court or an arbitrator and the breach of contract is established and the amount of damages ascertained and decreed that a debt due and payable comes into existence; till then it is nothing more than mere right to sue for damages."

Furthermore, the Corporate Debtor (CD)has been sold as a going concern in auction on as is where is basis and the Plan has been approved by AA.

Thus considering the fact situation, the NCLAT dismissed the claims of the Appellant.