2024 (1) TMI 45 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - resolution plan approved by the CoC of the Corporate Debtor with 77.54% - impugned order having been passed by a single member, is contrary to the provision of Section 419(3) of the Companies Act, 2013 or not - non-speaking order - violation of principles of natural justice. Whether as per Section 419(3) of the Act, the order has to be passed by two members or a single member until and unless there is a notification specifically issued in this regard? - HELD THAT - It is clear from the bare reading of Section 419(3) of the Act that the powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a Technical Member but still a single Judicial Member can exercise the powers of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the President may, by general or special order, specify - In the present case which is pending since 2020, nothing has been brought on record by the Respondents that there has been a notification in this regard much less in terms of first proviso to Section 419 (3) of the Act authorising the solitary judicial member (Acting President at that time) to entertain unnumbered applications filed by RP and Resolution Applicant to decide the same in such a summary manner, therefore, the answer to this question is that until and unless a notification is issued under the first proviso to Section 419(3) of the Code the single judicial member cannot take upon itself the jurisdiction to entertain an application such like the one in hand and decide the same, therefore, the impugned order has been passed by an authority having no jurisdiction. Administrative order issued on 22.03.2020 by none else than the NCLT - HELD THAT - This administrative order was issued in the wake of Covid-19. It was specifically mentioned in the said instructions that because the whole country is fighting against Covid-19, therefore, during this period the serious matter like extension of time, approval of resolution plan and liquidation shall not be entertained as urgent matters - It is needless to mention that on the one hand the Adjudicating Authority itself is issuing instructions that the issue regarding the extension of time, approval of the resolution plan and liquidation should not be treated as urgent matter and on the other hand the Acting President heard the unnumbered applications treating them most urgent and then approved the resolution plan only on the basis that the CoC has already approved the same without recording his satisfaction about Section 30(2) of the Code. The impugned order is patently illegal as it is without any reason which is the heart and soul of a judicial order because the Adjudicating Authority has passed the order though referring to Section 31 of the Code but it has not recorded its satisfaction about the provisions of Section 30(2) of the Code - the impugned order is not only illegal, but also unreasonable and non-speaking. The matter has to be remanded back to the Adjudicating Authority to decide the issues again after recording its findings in accordance with law - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Whether the order has to be passed by two members or a single member as per Section 419(3) of the Companies Act, 2013.
2. Compliance with the administrative orders issued in the wake of COVID-19.
3. Whether the impugned order is non-speaking and violates principles of natural justice.

Summary:

Issue 1: Single Member vs. Two Members as per Section 419(3) of the Companies Act, 2013
The first issue discussed was whether the order should have been passed by a single member or two members as per Section 419(3) of the Companies Act, 2013. The Tribunal noted that the powers of the Tribunal are exercisable by Benches consisting of two Members, one Judicial and one Technical. However, a single Judicial Member can exercise the powers if specified by the President through a general or special order. In this case, no such notification was provided, making the order passed by a single member without jurisdiction.

Issue 2: Compliance with Administrative Orders During COVID-19
The second issue was the compliance with the administrative orders dated 22.03.2020 and 28.03.2020 issued by the NCLT in the wake of COVID-19. These orders specified that matters related to the extension of time, approval of resolution plans, and liquidation should not be treated as urgent. Despite these instructions, the Acting President treated the applications as urgent and approved the resolution plan, which was contradictory to the issued instructions.

Issue 3: Non-Speaking Order and Principles of Natural Justice
The third issue was whether the impugned order was non-speaking and violated principles of natural justice. The Tribunal found that the order was passed without recording satisfaction about the provisions of Section 30(2) of the Insolvency and Bankruptcy Code, 2016, which is essential. The order merely referred to Section 31 of the Code without providing reasons, making it unreasonable and non-speaking.

Conclusion:
The Tribunal concluded that the impugned order was illegal, unreasonable, and non-speaking. It was passed without jurisdiction and did not follow principles of natural justice. Consequently, the appeal was allowed, and the impugned order dated 01.04.2020 was set aside. The matter was remanded back to the Adjudicating Authority to decide the issues afresh by recording findings in accordance with the law. The parties were directed to appear before the Adjudicating Authority on 10th November 2023, and the registry was instructed to assign numbers to the unnumbered applications and send a copy of the order to the concerned Adjudicating Authority.