2019 (1) TMI 28 - AT - Insolvency and Bankruptcy

Corporate insolvency process - Orders passed by the Adjudicating Authority were ex-parte - Adjudicating Authority did not serve Notice on the Corporate Debtor and violated principles of Natural Justice - whether we should send back the matter for want of such procedure being followed by the Adjudicating Authority? - Held that - Looking to the admitted facts in this matter and where we find that there is no dispute regarding the amount due and as we find that the Appellant is unable to demonstrate that before Section 8 Notice was issued any dispute existed, we find no propriety in sending back this matter to the NCLT. The Appellant in spite of having Notice and knowledge of the proceeding cannot sit on the hedge to take advantage of the technical requirement of Adjudicating Authority sending a Notice through its mechanism. The Appellant had sufficient Notice and still chose not to appear before the Adjudicating Authority. We do not find that remitting back the matter will serve any purpose. The application has been rightly admitted by Adjudicating Authority. 8

Summary

Issues:
Admission of insolvency application without proper notice and violation of natural justice principles.

Detailed Analysis:
The judgment revolves around an appeal filed by the Managing Director of a Corporate Debtor against the admission of an insolvency application by the National Company Law Tribunal (NCLT). The main contention raised in the appeal is that the orders passed by the Adjudicating Authority were ex-parte, as the Corporate Debtor was not served notice, thus violating principles of natural justice. The Corporate Debtor had an agreement with the Operational Creditor for the supply of material, and disputes arose regarding the quality of the supplied material. The Corporate Debtor claimed to be solvent and willing to clear the undisputed debt, emphasizing the lack of notice which could have been used to present this information before the Adjudicating Authority.

The Operational Creditor had sent legal notices regarding the outstanding amounts, to which the Corporate Debtor responded raising disputes about the quality of the goods supplied. The Counsel for the Operational Creditor highlighted emails from the Corporate Debtor accepting to clear outstanding amounts without disputing the quality of goods supplied. The Adjudicating Authority admitted the application under Section 9 based on the undisputed amount claimed by the Operational Creditor, despite the Corporate Debtor's attempts to show payments made towards certain invoices.

The appeal also referenced judgments from the Tribunal regarding the necessity of proper notice before admission of insolvency applications. The Counsel for the Appellant argued that the Corporate Debtor had received notice through its advocate and had knowledge of the legal proceedings, but contended that the notice should have been served by the Adjudicating Authority through its registry. The Tribunal found no merit in the appeal, stating that the Corporate Debtor had sufficient notice and knowledge of the proceedings but chose not to appear before the Adjudicating Authority, leading to the rejection of the appeal and upholding the admission of the insolvency application.

In conclusion, the Tribunal rejected the appeal, finding no reason to interfere with the impugned order and stating that the application had been rightly admitted by the Adjudicating Authority. No costs were awarded in the matter.