2020 (11) TMI 968 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - impugned order of admission of application under Section 7 of I B Code passed in ex-parte - HELD THAT - No notice was served upon the Corporate Debtor and even the impugned order does not speak of notice being issued by the Adjudicating Authority. However, since the order is an ex-parte, we deem it appropriate to allow learned counsel for the Appellants to withdraw the appeal with liberty to agitate the matter before the Adjudicating Authority. The appeal is disposed of as withdrawn giving liberty to Appellant to raise the issue before the Adjudicating Authority in regard to notice not being served on the Corporate Debtor and the impugned order being passed in ex-parte without according opportunity to the Corporate Debtor of being heard. Appellants will be at liberty to demonstrate that no notice was served upon the Corporate Debtor before the impugned order came to be passed.

Summary

Issues: Admission of application under Section 7 of I&B Code based on ex-parte order without serving notice to Corporate Debtor.

The Appellate Tribunal considered the case where the Appellants, who were Ex-Directors of the Corporate Debtor, challenged the admission of an application by a Financial Creditor under Section 7 of the I&B Code. The Adjudicating Authority had passed an ex-parte order of admission based on the submission that notice had been served on the Corporate Debtor through paper publication. The Appellants contended that no notice was served on the Corporate Debtor, and the impugned order did not mention any notice being issued by the Adjudicating Authority. The Tribunal allowed the appeal to be withdrawn, granting the Appellants the liberty to raise the issue before the Adjudicating Authority regarding the lack of notice to the Corporate Debtor and the ex-parte nature of the impugned order. The Appellants were permitted to demonstrate that no notice was served on the Corporate Debtor before the impugned order was passed, and the Adjudicating Authority was empowered to review the order if convinced that no notice had been served.

In this judgment, the primary issue revolved around the admission of an application under Section 7 of the I&B Code based on an ex-parte order without serving notice to the Corporate Debtor. The Appellants, who were Ex-Directors of the Corporate Debtor, contested the admission of the application by the Financial Creditor. The Adjudicating Authority had relied on the submission that notice had been served on the Corporate Debtor through paper publication. However, the Appellants argued that no notice was indeed served on the Corporate Debtor, and the impugned order did not mention any notice being issued by the Adjudicating Authority. The Tribunal acknowledged the Appellants' submission and allowed the appeal to be withdrawn, granting them the liberty to address the issue of lack of notice before the Adjudicating Authority. The Appellants were given the opportunity to prove that no notice was served on the Corporate Debtor before the impugned order was passed. The Tribunal emphasized that the Adjudicating Authority could reassess the impugned order if it found merit in the claim that no notice had been served on the Corporate Debtor prior to the order.

Overall, the judgment highlighted the importance of procedural fairness and the right to be heard in matters related to insolvency proceedings under the I&B Code. It underscored the significance of serving proper notice to all parties involved before making decisions that could significantly impact the rights and interests of the Corporate Debtor. The Tribunal's decision to allow the appeal to be withdrawn with liberty to raise the issue before the Adjudicating Authority demonstrated a commitment to upholding principles of natural justice and ensuring that due process is followed in insolvency proceedings.