2023 (1) TMI 904 - AT - Insolvency and Bankruptcy

Service of order - listing of the application on the same day through email - before the application could have been decided, the impugned order was passed - opportunity for hearing not provided - violation of principle of audi alteram partem (principles of natural justice) - HELD THAT - There is a total fallacy on the part of the Adjudicating Authority in passing the impugned order as it hits the salutary principle of audi alteram partem. The presence of the Appellant was shown in the order dated 01.09.2022 when the order was reserved and at the same time, the order of correction has been passed by the Adjudicating Authority when IA No. 4453 of 2022 was allowed on 22.09.2022 which means that the Appellant was not present when the matter was heard and order was reserved, therefore, there was no representation on behalf of the Appellant before the Adjudicating Authority so that the Appellant could have put forward its case against the admission of the application filed by the Respondent herein. The impugned order is set aside. The matter is remanded back to the Adjudicating Authority to decide the application again after giving an opportunity of hearing to the Appellant - appeal allowed.

Summary

Issues:
1. Revival of Corporate Insolvency Resolution Process (CIRP) proceedings against the Corporate Debtor.
2. Alleged error by the Adjudicating Authority in passing the impugned order without proper representation.

Revival of CIRP Proceedings:
The appeal was against an order reviving the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Financial Creditor had initially filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, which was admitted but later withdrawn due to a settlement. Subsequently, the Financial Creditor sought revival of the application as the settlement had failed. The Adjudicating Authority dismissed the revival application, but the National Company Law Appellate Tribunal (NCLAT) allowed the appeal against this dismissal. The Corporate Debtor then challenged this decision in the Supreme Court. Meanwhile, a new application was filed by the Financial Creditor for revival, leading to the impugned order dated 07.09.2022, which the Appellant contested, claiming lack of proper notice and representation.

Alleged Error by Adjudicating Authority:
The Appellant argued that the Adjudicating Authority made a fundamental error by reserving the order on 01.09.2022, showing the Appellant's presence, and subsequently passing the impugned order on 07.09.2022 without the Appellant's representation. The Adjudicating Authority acknowledged this error in a later order, correcting the record to confirm the absence of the Corporate Debtor's representation on the date in question. The Appellant contended that this lack of representation violated the principle of audi alteram partem (hear the other side), necessitating the setting aside of the impugned order and a remand for a fresh decision with proper representation.

Judgment Analysis:
The National Company Law Appellate Tribunal found merit in the Appellant's argument regarding the lack of proper representation before the Adjudicating Authority. The Tribunal held that the Adjudicating Authority's error in showing the Appellant's presence during the order reservation, when in fact the Appellant was absent, violated the principle of natural justice. Consequently, the impugned order was set aside, and the matter was remanded back to the Adjudicating Authority for a fresh decision. The parties were directed to appear before the Adjudicating Authority on a specified date, emphasizing the importance of proper representation and adherence to procedural fairness. The Tribunal clarified that its decision did not delve into the case's merits and did not award any costs in the matter.