Documents Not Filed Before NCLT Cannot Be Considered As Evidence At Appeal Stage: NCLAT Chennai
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Member–Judicial) and Jatindranath Swain (Member–Technical), has held that any document available but not filed before the National Company Law Tribunal (NCLT) cannot be entertained as evidence at the appellate stage. The Tribunal emphasized that such documents cannot be relied upon unless they satisfy the limited exceptions provided under Order 41 Rule 27 of the Civil Procedure Code (CPC), which governs the admission of additional evidence in appeals.
The case arose out of a liquidation proceeding initiated against a corporate debtor after the failure of the Corporate Insolvency Resolution Process (CIRP). Since no viable resolution plan was received, the NCLT, Kochi Bench, ordered the liquidation of the company and appointed a liquidator. During the liquidation process, the liquidator discovered certain transactions that allegedly involved siphoning of funds by the suspended directors. Consequently, the liquidator filed an application under Section 66(1) of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking to recover a sum of ₹1.2 crore from the suspended directors for fraudulent trading.
The NCLT, after examining the material on record, found that the directors had acted with intent to defraud creditors and allowed the liquidator’s application. Aggrieved by this decision, the suspended directors filed an appeal before the NCLAT, challenging both the finding of fraud and the reliance on documents that they claimed were insufficient to prove any wrongdoing.
Before the Appellate Tribunal, the directors argued that the liquidator had failed to produce substantial evidence to establish fraudulent intent. They contended that in the absence of a forensic audit report, the transactions in question could not be declared void or fraudulent. Citing the precedent set in Jayesh Sanghrajka v. Divine Investments (MA/1061/2019), the appellants maintained that there was no proof of siphoning of funds and that the NCLT had erred in drawing adverse inferences.
The appellants also claimed that they were not given sufficient opportunity by the NCLT to produce relevant documents. They attempted to submit new documents for the first time before the NCLAT, arguing that these materials were necessary for a proper adjudication of the matter.
On the other hand, the liquidator contended that the directors had made deliberate misrepresentations. They had falsely informed the erstwhile Resolution Professional that certain vehicles were scrapped, while in reality, they were sold by the directors. This, according to the liquidator, was a clear act of deceit demonstrating fraudulent intent. The liquidator further pointed out that the directors had never sought any opportunity before the NCLT to produce additional evidence and that their attempt to introduce documents at the appellate stage was an afterthought.
The NCLAT observed that as per the ruling in Union of India v. Ibrahim Uddin & Another [(2012) 8 SCC 148], additional documents can be admitted at the appellate stage only in exceptional circumstances—such as when the evidence was not available despite due diligence or when the lower forum wrongfully refused to admit it. In the present case, the documents sought to be produced were already in existence and could have been filed before the NCLT. Since the appellants failed to do so, they could not now seek to rely on them before the NCLAT.
The Bench noted that under Section 424(2) of the Companies Act, 2013, the principles of natural justice and procedural fairness apply to NCLT and NCLAT proceedings, and therefore, the limitations imposed by Order 41 Rule 27 CPC on the introduction of new evidence at the appellate stage are equally applicable. It emphasized that permitting new documents at this stage would effectively convert the appellate forum into a trial court, which is not permissible.
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Upholding the findings of the NCLT, the Appellate Tribunal held that the directors had failed to discharge their fiduciary duties and were indeed involved in transactions intended to defraud the creditors. Consequently, the appeal was dismissed, and the order directing the recovery of ₹1.2 crore from the suspended directors was affirmed. The Tribunal concluded that “documents that were available during the trial but not filed before the Adjudicating Authority cannot be entertained at the appellate stage, except in narrowly defined circumstances.” It further reiterated that such attempts to introduce new evidence at the appellate level would undermine the integrity and finality of the NCLT’s proceedings.
Appearance
For Appellant: Mr. M. Krishna Dath, Advocate For Mr. MS. Viswanathan, Advocate
For Respondent: Mr. Chandramouli Prabhakar, Advocate
Cause Title: Anish Lawrence & Anr. v. Mr. Renahan Vamakesan, Liquidator of Axiomata Elevators Pvt. Ltd
Case No: Company Appeal (AT) (CH) (Ins) No.377/2023 (IA No.1150/2023)
Coram: Justice Sharad Kumar Sharma (Member-Judicial), Jatindranath Swain (Member-Technical)
