2017 (8) TMI 1523 - HC - Insolvency and Bankruptcy

Denial of natural justice - Insolvency procedure - no opportunity to file a written objection or a written document disputing or dealing with the claim put forward by the petitioner in the proceedings before the NCLT - HELD THAT - The respondent no.3 had applied under Section 9 of the Code of 2016. Sree Metaliks Limited (2017 (4) TMI 1248 - CALCUTTA HIGH COURT) is of the view that NCLT has adhere with the principles of natural justice. The respondents before the NCLT is entitled to one opportunity of hearing. Hearing would include an opportunity to file a written objection to the application as a party is heard on the basis of the pleadings before the adjudicating authority. NCLT ought to have granted the petitioner one opportunity to file written objection. Such opportunity was not extended to the petitioner before me. There is an apparent breach of the principles of natural justice in the conduct of the proceeding by the NCLT. There can be an occasion when the NCLT may be required to admit the petition and pass an ex-parte ad-interim order. It can do so for the reasons recorded in writing. NCLT may deny a respondent the opportunity to file a written objection. Again the NCLT has given reasons for the same. Denial of such opportunity should be limited to rare cases. The order passed by the NCLT is appealable. The existence of statutory alternative remedy is not an absolute bar to the maintainability of writ petition, if the writ petitioner is able to demonstrate and substantiate that, there is a breach of fundamental right or that there is breach of principles of natural justice or that the authority has acted without jurisdiction. In the present case, it appears that the NCLT has acted in breach of the principles of natural justice. The impugned order does not contain any reason as to why the petitioner was not allowed an opportunity to file its written objection. In such circumstances, it would be appropriate to set aside the impugned order dated July 31, 2017. As the petitioner submits that, his client will file the written objection to the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 within seven days from date. In such circumstances, the petitioner is allowed to do so.

Summary

Issues: Challenge to order admitting a petition under Section 17 of the Insolvency and Bankruptcy Code, 2016; Violation of principles of natural justice by NCLT.

Analysis:
The judgment concerns a challenge to an order admitting a petition under Section 17 of the Insolvency and Bankruptcy Code, 2016, based on the violation of principles of natural justice by the National Company Law Tribunal (NCLT). The petitioner argued that they were not given an opportunity to file a written objection or dispute the claims made against them during the proceedings before the NCLT. It was contended that this lack of opportunity constituted a grave miscarriage of justice and a violation of the principles of natural justice.

The respondent, on the other hand, asserted that the petitioner had been provided with a hearing and had failed to present any material to suggest a defense in the Section 9 proceeding of the Code of 2016. After considering the arguments from both sides and the available materials, the court found that the NCLT had not granted the petitioner the opportunity to file a written objection, which was essential for a fair hearing and adherence to the principles of natural justice.

The court referred to a previous judgment, Sree Metaliks Limited, which emphasized that a respondent before the NCLT should be given an opportunity to file a written objection as part of the hearing process. While acknowledging that there could be exceptional circumstances where such an opportunity might be denied, the NCLT must provide reasons for doing so. In this case, the NCLT failed to provide any reasons for not allowing the petitioner to file a written objection, leading to a breach of natural justice.

Despite the availability of an appeal process against NCLT orders, the court highlighted that the existence of an alternative statutory remedy does not bar the filing of a writ petition if fundamental rights are violated or if there is a breach of natural justice. Consequently, the court set aside the impugned order dated July 31, 2017, and directed the petitioner to file a written objection within a specified timeframe. The NCLT was instructed to proceed with the matter promptly, ensuring a fair hearing and compliance with the principles of natural justice.

In conclusion, the writ petition was disposed of without any costs, and certified copies of the order were to be provided to the parties upon request. The judgment underscores the importance of upholding natural justice principles in insolvency proceedings and ensuring that all parties are given a fair opportunity to present their case.