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Judgment
Per Justice N. Seshasayee, Member (Judicial)
This appeal is preferred by the 5th respondent challenging the Order dated 28.08.2024, passed by the Adjudicating Authority (NCLT – I, Mumbai), in I.A.5341 of 2023 in C.P. 66/MB/2018 allowing an application filed by the liquidator of the first respondent under Sec.43 of the IBC.
At the outset it may be mentioned that the appeal was directed not against any order on the merit of the allegation of preferential treatment which constitutes the essence of Sec.43 of the Code, but on the ground that the no notice was ever issued on the application. The issue, therefore, is over the sustainability of the alleged procedural lapse attributed to the Adjudicating Authority. The relevant facts are: The first respondent was ordered to be liquidated and a liquidator came to be appointed. He preferred I.A.5341 of 2023 the Order passed in which is now under challenge. On 24.11.2023, this I.A. came to be listed before the bench. No notice, however, was ordered. While so, on 21.12.2023, the IBBI suspended the liquidator and his successor liquidator assumed charge. It is in this backdrop, I.A.5341 of 2023, vide the Order now impugned, came to be allowed exparte.
Heard both sides. The solitary contention of the learned counsel for the appellant is that the impugned Order was passed in breach of the Rule 37 of the NCLT Rules, 2016, which mandates that the “Tribunal shall issue notice to the respondent to show cause against the application or petition on a date of hearing to be specified in the notice.”
The respondent/liquidator in paragraph 14G of the reply has admitted that no notice of I.A.5341 of 2023 was ever issued, but pleads that an advance copy of the said application was served on the appellant by the respondent. The appellant would however, contend that service of advance copy of an application does not satisfy the duty cast on the tribunal to order notice under Rule 37 of the NCLT Rules.
We have also sought the production of the entire diary of the NCLT to ascertain this fact. It was made available and nowhere we find that notice was ever ordered on this application.
Rule 37 of the NCLT Rules reads:
“37.Notice to Opposite Party.- (1) The Tribunal shall issue notice to the respondent to show cause against the application or petition on a date of hearing to be specified in the Notice. Such notice in Form No. NCLT.5 shall be accompanied by a copy of the application with supporting documents.
(2)If the respondent does not appear on the date specified in the notice in Form No. NCLT.5, the Tribunal, after according reasonable opportunity to the respondent, shall forthwith proceed ex-parte to dispose of the application.
(3)If the respondent contests to the notice received under sub-rule (1), it may, either in person or through an authorised representative, file a reply accompanied with an affidavit and along with copies of such documents on which it relies, with an advance service to the petitioner or applicant, to the Registry before the date of hearing and such reply and copies of documents shall form part of the record.”
It is only when notice is directed on any application or petition, the tribunal makes up its mind to invite an objection from the respondent. When it is omitted to be done, its consequences are larger than an ordinary procedural breach as it directly impacts the doctrine of audi alteram partem. Till notice is directed, or at least the respondent is required to respond to an application or petition by the tribunal, a respondent is entitled to hold a bonafide impression that his or its time to respond to an application or petition has not arisen. This precisely has resulted in this case, and necessarily the impugned order has denied the appellant a right to put forth its case.
An order has been passed. May be inadvertently. But given the consequence it has produced, it cannot be sustained. Accordingly, we allow this appeal, set aside the Order dated 28.08.2024 passed in I.A.5341 of 2023, and remand the matter back to the Adjudicating Authority after affording the appellant an opportunity to defend I.A.5341 of 2023. We also direct the appellant to take notice of the said I.A., for this purpose. No costs.