2020 (5) TMI 659 - AT - Insolvency and Bankruptcy

Jurisdiction - power of Authority to implead - It is the contention of the Appellant that the impugned order bristles with numerous infirmities and that the Adjudicating Authority does not possess the powers to pass an order which was in the nature of rule under the guise of an order - HELD THAT - It is axiomatic principle in law that if a third party is concerned with a dispute that party is to be arrayed as a necessary or proper party to the adjudication of main issue centering around the dispute. Besides this an opportunity of hearing is to be given to a third party to explain its stand. Suffice it for this Tribunal to make a pertinent mention that the rules of principles of Natural Justice are to be adhered to by the Tribunal because of the latent and patent fact that the act of Tribunal/ Court/ Competent Authority shall cause no harm to any person - Of course the principles of natural justice are not the edicts of a statute. The principles of natural justice are not to be imprisoned in a straight-jacket cast-iron formula. Notwithstanding the same observing the tenets of natural justice is of paramount importance in the considered opinion of this Tribunal. In fact impleadment of parties is only a matter of fact and not a matter of Law. Addition of parties/ striking out parties of course is a matter of discretion to be exercised by a Tribunal/ Court based on sound judicial principles. The said discretion can be exercised either on the application of a Petitioner/ Respondent or suo-motu or on the application of a person who is not a party to any pending proceedings. However the said discretion cannot be exercised in a cavalier and whimsical fashion. In the present case the Ministry of Corporate Affairs was neither arrayed as a party nor impleaded in the subject matter before the Adjudicating Authority. Also that the Registrar of Companies had not filed any response/ reply/ counter (in respect of the clarification sought for) prior to the passing of the impugned order. An Adjudicating Authority (National Company Law Tribunal) has a quasi-judicial one is to abide by the principles of Natural Justice . After providing a reasonable opportunity of being heard to the other side the Tribunal can pass appropriate orders. If an order is passed by the Tribunal without affording an opportunity of hearing to the parties the same is unsustainable in Law. Appeal allowed.

Summary

Issues involved:
Impugned order by Adjudicating Authority, Rule-making power of Central Government, Notice to Union of India, Third party rights, Compliance under Companies Act, 2013, Principles of Natural Justice, Impleadment of parties, Necessity of parties, Ministry of Corporate Affairs as a party, Procedural fairness, Setting aside the impugned order.

Analysis:

1. Impugned Order by Adjudicating Authority:
The Appellant challenged the order dated 22.11.2019 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Principal Bench. The impugned order raised concerns about compliance with directions under the Insolvency and Bankruptcy Code and Company Petition, including updating master data of Corporate Debtors and the role of the board of directors during the moratorium period.

2. Rule-making Power of Central Government:
The Appellant argued that the Adjudicating Authority exceeded its power by issuing directions akin to rules, which fall under the exclusive domain of the Central Government. The Appellant contended that any new rule must be notified before Parliament, emphasizing the importance of proper legal procedures in such matters.

3. Notice to Union of India:
The Appellant asserted that the Adjudicating Authority should have issued notice to the Union of India before passing the impugned order, especially when it involved imposing new rules or directions. The absence of such notice was deemed a violation of procedural fairness and the principles of Natural Justice.

4. Third Party Rights:
Citing the Supreme Court's decision in "Antonio S.C. Preria v. Ricardina Noronha," the Appellant argued that third parties must be heard if they are likely to suffer substantial harm due to a court's decision. The Appellant emphasized the importance of providing adequate opportunities for all concerned parties to present their case.

5. Compliance under Companies Act, 2013:
The Appellant highlighted the issuance of an Office Memorandum to ensure compliance with Companies Act, 2013 provisions related to CIRP, Liquidation, and Master Data. The Appellant raised concerns about the enforceability of certain directions in the impugned order regarding the production of documents and records.

6. Impleadment of Parties:
The Respondent contended that the impugned order did not directly concern the Bank and that the appeal was misfiled against the wrong party. The Tribunal emphasized the importance of proper impleadment of parties for effective adjudication and the need to provide opportunities for all relevant parties to present their positions.

7. Setting Aside the Impugned Order:
After a detailed analysis, the Tribunal concluded that the directions in the impugned order, particularly regarding the impleadment of the Secretary of Ministry of Corporate Affairs, exceeded the Tribunal's authority. The Tribunal set aside the impugned order in the interest of substantial justice, allowing the Company Appeal and closing the related application.

In conclusion, the judgment addressed various legal issues concerning rule-making powers, procedural fairness, impleadment of parties, and compliance with statutory provisions. The Tribunal's decision to set aside the impugned order underscored the importance of adhering to legal procedures and ensuring fair treatment of all parties involved in legal proceedings.