2023 (5) TMI 1200 - AT - Insolvency and Bankruptcy

Section 7 application admitted - the Adjudicating Authority passed an order on 06.01.2023 closing the right of the Appellant to file reply and the orders were reserved - Respondent submits that the order of the High Court was not even before the Adjudicating Authority when order was passed on 28.02.2023, therefore, there is no error in the order admitting application under Section 7 - HELD THAT - From the sequence of events which has been brought on the record it does appear that reply was filed by the Corporate Debtor on 29.11.2022 which continued to be under scrutiny as per DMS, as noted in order dated 06.01.2023. Learned counsel for the Appellant submits that there are certain minor defects in the reply which Appellant was always ready to rectify. It is submitted that the High Court has passed the order on 22.02.2023 when the Appellant directly approached the High Court in a Writ Petition. Their being statutory need, the Appellant should have filed appeal, if any, against the order dated 06.01.2223 of the Adjudicating Authority, before this Tribunal. The ends of justice be served in directing the Adjudicating Authority to consider the reply which was filed by the Appellant on 29.11.2022, especially when the Financial Creditor has already filed it rejoinder. The Adjudicating Authority passed the impugned order without taking into consideration the reply which has already filed on 29.11.2022 but laying in defect. Let the Section 7 application be listed before the Adjudicating Authority on 03.07.2023, on which date the Adjudicating Authority may consider the application as well as reply and rejoinder and take decision in accordance with law, as early as possible.

Summary

Issues involved:
The issues involved in the judgment are the admission of a Section 7 application by the Adjudicating Authority, the filing of a Writ Petition before the High Court, the consideration of a reply by the Adjudicating Authority, and the subsequent setting aside of the order dated 28.02.2023.

Admission of Section 7 Application:
The Appellate Tribunal heard the appeal against the order admitting the Section 7 application filed by the Financial Creditor. The Adjudicating Authority had initially closed the right of the Appellant to file a reply, leading to the Appellant filing a Writ Petition before the High Court.

Writ Petition before High Court:
The High Court, in response to the Writ Petition filed by the Appellant, directed that the Appellant's reply, filed on 29th November 2022, be placed on record before the NCLT for further consideration. The High Court emphasized the importance of allowing the Petitioner to defend its position in a case where the consequences of an order under Section 7 of the IBC could be significant.

Consideration of Reply by Adjudicating Authority:
The Adjudicating Authority had passed an order admitting the Section 7 application without considering the reply filed by the Corporate Debtor on 29.11.2022. The Appellate Tribunal found that the Adjudicating Authority erred in not taking into account the reply, especially when the Financial Creditor had filed a rejoinder. The Tribunal directed the Adjudicating Authority to consider the reply and the rejoinder afresh, setting aside the previous order.

Setting Aside of Order and Directions:
The Appellate Tribunal allowed the appeal, setting aside the order dated 28.02.2023. It directed the Adjudicating Authority to hear the Section 7 application afresh, taking into consideration the reply and rejoinder filed by the parties. The Appellant was given a timeline to cure any defects in the filing, and the matter was scheduled to be heard on 03.07.2023 for a decision in accordance with the law.