2017 (11) TMI 43 - Tri - Insolvency and Bankruptcy

Corporate Insolvency resolution process - mandatory on the adjudicating authority to issue notice to the Respondent Corporate Debtor ignored - Held that - Before admitting an application filed under Sections 7 and 9 of the Code ex parte, it is mandatory on the adjudicating authority to issue notice to the Respondent Corporate Debtor, in addition to the statutory notices provided under the Code and Rules. In the present case neither the Respondent Corporate debtor has appeared nor has a limited notice as stated above been issued by this Tribunal to the respondent corporate debtor in the line of precedent laid down by the Hon ble NCLAT. As a sequel to the above discussion, let a notice be served at the registered office of the Respondent Corporate debtor by way of speed post and also on registered e-mail id of the corporate debtor returnable on 6th October, 2017. Process Dasti as well. The applicant shall file affidavit of proof of service of notice by the ensuing date of hearing.

Summary

Issues:
- Application under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency resolution process.
- Requirement of notice to the Corporate Debtor before admitting the application.
- Compliance with principles of natural justice in insolvency resolution process.

Analysis:
1. The judgment pertains to a joint application filed under section 7 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency resolution process concerning a Respondent corporate debtor. The Tribunal noted the absence of the Respondent corporate debtor during the proceedings and highlighted the importance of providing a reasonable opportunity and following the rules of natural justice before passing any order, as mandated by Section 424 of the Companies Act, 2013.

2. Referring to the case of "Innovative Industries Ltd. v. ICICI Bank," the Tribunal emphasized the necessity of issuing a limited notice to the Corporate Debtor before admitting any application for the initiation of corporate resolution process under sections 7 and 9 of the I & B Code. The judgment highlighted the obligation of the adjudicating authority to ascertain the existence of default and completeness of the application, ensuring adherence to the principles of natural justice.

3. Citing the case of "P. K. Oras (P) Ltd. v. Tractors India (P.) Ltd.," the Tribunal reiterated the requirement of providing a reasonable opportunity to the Corporate Debtor before passing any order in adherence to the principles of natural justice. The judgment emphasized that despite the absence of a specific provision in the Code to provide a hearing to the corporate debtor in a petition under Sections 7 and 9, the adjudicating authority must ensure procedural fairness.

4. In light of the precedents and legal principles discussed, the Tribunal concluded that before admitting an application under Sections 7 and 9 of the Code ex parte, it is mandatory for the adjudicating authority to issue a notice to the Respondent Corporate Debtor. As the Respondent had not appeared, the Tribunal ordered the service of notice at the registered office and via email, setting a returnable date for the Respondent to appear and directing the applicant to file an affidavit of proof of service. The matter was listed for further proceedings on the specified date.