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Judgment
Justice Rakesh Kumar Jain: (Oral)
This appeal is directed against the order dated 07.09.2022, passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Court VI, New Delhi), by which an application bearing No. I.A. 4143 of 2022 in Company Petition No. (IB) – 2340 (ND)/2019 filed by ‘Akasa Finance Limited’ (Financial Creditor), has been allowed and ‘Corporate Insolvency Resolution Process’ (CIRP) proceedings against Auto Needs (India) Private Limited (Corporate Debtor) has been revived.
The facts in brief are that the Financial Creditor filed an application under Section 7 of ‘Insolvency and Bankruptcy Code, 2016’ (in short ‘Code’) against the Corporate Debtor before the Adjudicating Authority which was admitted on 20.12.2019. The said order was challenged by the present Appellant by way of appeal bearing Company Appeal (AT) (Ins) 152 of 2020 in which a settlement was arrived at on 27.01.2020 on the basis of which the appeal was allowed on 11.02.2020 and application filed under Section 7 of the Code was withdrawn. Thereafter, the Financial Creditor filed an application bearing IA No. 1124 of 2021 before the Adjudicating Authority for revival of the application filed under Section 7 of the Code on the ground that the settlement arrived at between the parties has fizzled out. The said application was dismissed on 10.11.2021, the said order was challenged before this Tribunal bearing No. CA(AT) (Ins) No. 103 of 2022 by the Financial Creditor and the same was allowed on 18.07.2022 by this Tribunal. Counsel for the Appellant has pointed out that the order dated 18.07.2022 has further been challenged by the Corporate Debtor by way of ‘Civil Appeal No. 5896 of 2022’ before the ‘Hon’ble Supreme Court’ in which notice has been issued on 23.09.2022. The order of the Hon’ble Supreme Court reads thus:
“Issue Notice, returnable in two weeks.”
While the aforesaid proceeding was going on at the instance of the Corporate Debtor, an application bearing no. IA 4143 of 2022 was filed by the Financial Creditor before the Adjudicating Authority which was listed on 01st September, 2022. On that date, the following order was passed in the said application:
“This is an application under Section 60(5) of IB Code, 2016 read with Rule 11 of NCLT Rules, 2016 alongwith verifying affidavit.
In this application the Applicant has prayed for passing an order in compliance with the directions given by the Hon’ble NCLAT in its order dated 18.07.2022 for revival of this petition. The order of Hon’ble NCLAT has been passed by the Corporate Debtor. The Applicant has also prayed for the following:-
(a) Pass an order and re-impose moratorium on the Corporate Debtor in terms of Section 14 of the Insolvency and Bankruptcy Code, 2016;
(b) Pass an order directing the current Interim Resolution Professional Shri Vinay Kumar Jaidrath to resume his obligations and duties under the Insolvency and Bankruptcy, 2016; or appoint Shri Ajay Kumar Kathuria, Insolvency Professional, as the Interim Resolution Professional of the Corporate Debtor.
The Counsel for the Applicant had also submitted that they are now pressing for appointment of Shri Ajay Kumar Kathuria in place of Shri Vinay Kumar Jaidrath. We have heard the Counsel for the Applicant and perused the order of the Hon’ble NCLAT. The Counsel of the Corporate Debtor is also present. The order in this matter is reserved.”
According to the Appellant, he got the information from the Registry of the Adjudicating Authority about listing of the said application on the same day i.e. 01.09.2022 at 3:20PM through email but he was not aware of the order. However, as soon as he came to know that the order was reserved and his presence was wrongly recorded, he filed an application bearing IA No. 4453 of 2022. But before the said application could have been decided, the impugned order dated 07.09.2022 was passed. However, the said application was incidentally allowed with following orders by the Adjudicating Authority on 22.09.2022:
“We have heard the submissions made by the Ld. Counsel for the Financial Creditor as well as Ld. Counsel of the Corporate Debtor. Ld. Counsel for the Corporate Debtor has sought for correction of the order dated 01.09.2022. In the last paragraph of the order it is recorded that Ld. Counsel for the
Corporate Debtor was present. Ld. Counsel for the Corporate Debtor as well as Ld. Counsel for the Financial Creditor both have submitted that Ld. Counsel for the Corporate Debtor was not present on that day. Therefore, typographical error crept in the said order now stands correction and this Tribunal confirms that Corporate Debtor was not present before this Adjudicating Authority on 01.09.2022. Therefore, the IA/4453/2022 stands allowed.
This Tribunal hereby directs the Ld. Counsel for the Corporate Debtor to be invariably present and properly defend his client on all dates of hearing. This will result in mitigating the risk of passing of orders by hearing only Counsel of one party who was present i.e. the Counsel for the Financial Creditor. We also understand that the Ld. Counsel for the Corporate Debtor was not only absent in the hearing on that day but he also preferred an appeal against the order dated 01.09.2022 which could have been easily avoided, if he had been present on the date of hearing and have actively assisted the Court and contributed by defending his client’s interest. Ld. Counsel for the Corporate Debtor has submitted that his appeal against the order dated 07.09.2022 is listed tomorrow i.e. 23.09.2022. Therefore, let this matter be posted after week days. Dasti of this order is allowed. The parties are directed to invite the attention of the Hon’ble Appellant Tribunal to this order for proper appreciation of the facts and circumstances of the matter. Let this matter be listed on 03.10.2022”
Counsel for the Appellant has argued that the Adjudicating Authority has committed a patent error in ‘reserving the order’ on 01.09.2022 showing the presence of the Appellant and pronouncing the impugned order dated 07.09.2022 behind his back, though the Appellant has been contesting the admission of the application filed under Section 7 of the Code tooth and nail before all the forums much less, an appeal has also been filed before the Hon’ble Apex Court bearing No. Civil Appeal No.5896 of 2022 in which notice has also been issued, therefore, there was no reason for the Appellant to have not appeared in the proceedings which was held on 01.09.2022. It is also submitted that the error committed by the Adjudicating Authority was practically accepted in the order dated 22.09.2022. Counsel for the Appellant, thus, argued that the impugned order may be set aside and the matter may be remanded back to the Adjudicating Authority to decide the same after giving an opportunity to the Appellant (Corporate Debtor).
On the other hand, Counsel for the Respondent (Financial Creditor) has vehemently argued that this Tribunal while allowing the appeal - CA(AT) (Ins) No. 103 of 2022 had categorically observed that the Application filed under Section 7 of the Code has been revived. It is also submitted that an advance copy was given of the application to the Appellant who did not choose to appear. Therefore, the impugned has rightly been passed by the Adjudicating Authority.
We have heard counsels for the parties and after examining the record, are of the considered opinion that there is a total fallacy on the part of the Adjudicating Authority in passing the impugned order as it hits the salutary principle of audi alteram partem. The presence of the Appellant was shown in the order dated 01.09.2022 when the order was reserved and at the same time, the order of correction has been passed by the Adjudicating Authority when IA No. 4453 of 2022 was allowed on 22.09.2022 which means that the Appellant was not present when the matter was heard and order was reserved, therefore, there was no representation on behalf of the Appellant before the Adjudicating Authority so that the Appellant could have put forward its case against the admission of the application filed by the Respondent herein.
In view of the aforesaid facts and circumstances of the case, we are of the considered opinion that the Appeal is meritorious and the same is hereby allowed. The impugned order is set aside. The matter is remanded back to the Adjudicating Authority to decide the application again after giving an opportunity of hearing to the Appellant. The parties are directed to appear before the Adjudicating Authority on 14th February, 2023. The Registry is directed to send a copy of this order for compliance to the concerned Adjudicating Authority. The Adjudicating Authority is requested to decide the matter as early as possible but preferably within a period of two months from the date of their appearance. It is also made clear while disposing of this appeal, we have not expressed any opinion on the merit of the case. No costs.