2019 (4) TMI 1926 - Tri - Insolvency and Bankruptcy

Impleadment of the applicants in the pending application filed under 7 of Insolvency and Bankruptcy Code, 2016 - HELD THAT - The directors who have filed the impleadment application cannot be regarded as a third party as they are part and parcel of the financial creditor. Once, the resolution dated 18.12.2018 itself is under challenge and which constituted the basis of filing petition under Section 7 of the Code namely (IB)-377(PB)/2019 then the issue has to be decided with regard to the competence of filing of the instant petition. It is needless to emphasise that in the corporate sector the whole affair of a company are run on the basis of resolution passed. The applicant are permitted to intervene in the matter and address arguments at the time of admission without permitting them to join as a party - application disposed off.

Summary

Issues:
1. Impleadment of directors in a pending application under the Insolvency and Bankruptcy Code, 2016.

Analysis:
The judgment deals with an application for impleadment of directors in a pending insolvency application. The directors sought impleadment as the Board Resolution filed with the main petition was under challenge in another proceeding before the NCLT. The non-applicant-petitioner did not file a reply to the application, and the applicant-directors argued that if the resolution is challenged by the majority of directors, the petition itself would be questionable. The learned counsel for the directors contended that this circumstance warranted allowing the impleadment. However, the non-applicant-petitioner's counsel cited previous judgments emphasizing that no third party, including interveners, needs to be heard at the admission stage of a Section 7 petition. The Tribunal noted that the directors were not third parties but integral to the financial creditor, and since the resolution forming the basis of the petition was under challenge, the competence of the petition needed to be assessed. The Tribunal distinguished previous judgments cited and permitted the directors to intervene and present arguments at the admission stage without joining as a party.

The judgment carefully considered the arguments presented by both parties regarding the impleadment of directors in the pending insolvency application. It highlighted the significance of the challenged Board Resolution and the necessity to evaluate the competence of the petition in light of the resolution being under dispute. The Tribunal distinguished previous judgments that stated no third party, including interveners, needed to be heard at the admission stage, emphasizing that the directors, being integral to the financial creditor, were not third parties in this context. By permitting the directors to intervene and present arguments without joining as parties, the Tribunal balanced the interests of all parties involved while ensuring a fair assessment of the petition's competence.

The judgment concluded by disposing of the impleadment application and scheduled the main case for a future hearing. The Tribunal's decision to allow the directors to intervene in the matter without joining as parties showcased a nuanced approach to addressing the unique circumstances presented in the case. By recognizing the directors' integral role in the financial creditor entity and the contested nature of the Board Resolution, the Tribunal ensured a thorough examination of the petition's validity while upholding principles of procedural fairness and due process.