2018 (12) TMI 1809 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Whether there are sufficient ground to set aside ex-parte order passed against the Corporate Debtor? - HELD THAT - To admit any corporate person into Corporate Insolvency Resolution Process is somewhat harsh order. By virtue of such order, the business of Corporate Debtor is to be taken away from his possession and to be handed over to Resolution Professional and thereafter to propose Resolution Applicant. As far as possible, this Adjudicating Authority does not like to pass such order ex-parte. But if inspite of proper notice, the Corporate Debtor choose to remain absent then this Adjudicating Authority leaves with no option but to pass CIRP order ex-parte. This has exactly happened in this case. The order of admission of Corporate Debtor in CIRP has serious consequences. In this case, Advocate of Corporate Debtor did not appear in the matter and hence, this Adjudicating Authority passed order ex-parte. In fact it was duty of the Advocate of Corporate Debtor to inform this Adjudicating Authority that she has not been instructed by the Corporate Debtor to appear on their behalf. In such a situation, this Adjudicating Authority would have issued notice afresh to the Corporate Debtor - for the fault of Advocate, the Corporate Debtor should not suffer and hence,the exparte passed against the Corporate Debtor is set aside on some terms. The Corporate Debtor directed to deposit sum of ₹ 1,00,000/- in account of Deputy Registrar of NCLT, Kolkata Bench within 7 days and produce receipt thereof because it was also duty of director/ officer of corporate debtor to keep the track of the matter but they appeared to have ignored duty - application disposed off.

Summary

Issues:
Application to set aside an ex-parte order of admission of Corporate Insolvency Resolution Process against the Corporate Debtor based on an application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Service of Notice and Appearance of Advocate:
The Corporate Debtor applied to set aside the ex-parte order, claiming that their advocate failed to appear, resulting in the order being passed ex-parte. The Operational Creditor contended that notice was duly served, and the Corporate Debtor's advocate had appeared on their behalf. The Tribunal found that the notice was served, and the Corporate Debtor's advocate had appeared based on instructions from the directors. Therefore, the first ground for setting aside the ex-parte order was not valid.

2. Failure of Advocate and Opportunity to Contest:
The Corporate Debtor argued that their advocate's failure should not make them suffer the consequences of the CIRP order. The Tribunal acknowledged that the order to admit into CIRP is a harsh decision and observed that the Corporate Debtor had raised disputes but failed to contest them. Despite the delay tactics, the Tribunal considered giving the Corporate Debtor an opportunity to contest the claim by setting aside the ex-parte order.

3. Setting Aside the Ex-Parte Order:
The Tribunal emphasized that admitting a corporate person into CIRP is a severe measure, and proper notice is crucial before passing such orders. In this case, the Corporate Debtor's advocate did not appear, leading to the ex-parte order. The Tribunal believed that the Corporate Debtor should not suffer due to the advocate's fault and decided to set aside the ex-parte order on certain terms, including a deposit of a specified amount and filing an affidavit-in-reply within a given timeframe.

4. Unethical Conduct and Resolution:
The Tribunal noted the unethical conduct of the Corporate Debtor in withdrawing an appeal without disclosure and intervening in the CIRP process. Despite this, the Tribunal allowed the application to set aside the ex-parte order to prevent the Corporate Debtor from undergoing CIRP due to non-appearance of their advocate. The Tribunal directed specific actions to be taken by the Corporate Debtor within a stipulated timeframe to proceed with the resolution process.

In conclusion, the Tribunal set aside the ex-parte order against the Corporate Debtor, emphasizing the importance of proper legal representation and adherence to procedural requirements in insolvency proceedings.