2024 (4) TMI 827 - AT - Insolvency and Bankruptcy

Bench Reconstitution and Order Pronouncement - W hether an order reserved by a bench could be pronounced by a reconstituted bench without considering a subsequent application that called for a re-hearing based on new developments. - Admission of section 7 application - challenge to proceedings in SARFAESI Act initiated by Financial Creditor - HELD THAT - In exercise of appellate jurisdiction, the Appellate Court can take all decision, which could have been passed by Adjudicating Authority while deciding Section 7 Application. In the present case, sequence of events and facts as noticed above shows that subsequent Application filed in November 2023, i.e., IA No.5177 of 2023, the Applicant prayed for rehearing of the matter on account of subsequent events, that is an order passed by Debt Recovery Tribunal dated 05.10.2023 and on which Application notices were issued by the existing Court-III and orders were reserved. For the purpose of this case, the issue as to whether the plea raised in IA No.5177 of 2023, ought to be allowed or not, need not be perused. But when these facts were brought before the Special Bench on 22.03.2024, on which date the case was listed for pronouncement, the Adjudicating Authority ought to have awaited the orders in IA No.5177 of 2023. It is well settled that although lis between the parties have to be decided on the date when proceedings were initiated, but subsequent events can very well be taken into consideration by Adjudicating Authority. There was no fetter on the jurisdiction of the Adjudicating Authority in deferring the pronouncement and awaiting the orders passed in IA No.5177 of 2023. Thus, on this ground alone the order dated 22.03.2024 deserved to be set aside - The Bench, which has delivered the order on 22.03.2024, i.e., Special Bench, which is no more available at Mumbai Bench, ends of justice will be served in directing for hearing of Company Petition afresh before the regular Court-III of the Mumbai Bench. appeal allowed.

Summary

Issues Involved:
1. Procedural irregularities in the pronouncement of the order.
2. Consideration of subsequent events affecting the Section 7 Application.

Summary:

Issue 1: Procedural Irregularities in the Pronouncement of the Order

The Appeal was filed by a Suspended Director of the Corporate Debtor against the order dated 22.03.2024 by NCLT, Mumbai Bench, admitting Section 7 Application filed by India Bulls Asset Reconstruction Company Limited. The main contention was that the order was reserved by Court No.3 on 26th June 2023, and after one of the Members was transferred, an IA No.5177 of 2023 was filed on 22nd December 2023, which was also heard and reserved on 4.3.2024. Despite this, the order was pronounced on 22nd March 2024 without awaiting the decision on IA No.5177 of 2023.

The procedural aspect of the matter was questioned, especially after the transfer of one of the Members. The learned Counsel for the Appellant argued that the Adjudicating Authority should have awaited the orders on IA No.5177 of 2023 before pronouncing the judgment. The Appellate Tribunal noted that the President of NCLT had issued an order on 28.11.2023, clarifying that matters reserved for orders should not be listed for de novo hearing by a new Bench without approval from the President.

Issue 2: Consideration of Subsequent Events Affecting the Section 7 Application

The Corporate Debtor had filed IA No.5177 of 2023, requesting the de-reservation of the Company Petition and rehearing in light of the order dated 05.10.2023 passed by the Debt Recovery Tribunal, which had a bearing on the Section 7 Application. The Appellate Tribunal emphasized that the Adjudicating Authority should have considered the subsequent events before pronouncing the order on 22.03.2024.

The Appellate Tribunal held that the pronouncement of the order after eight months was not in accordance with Rule 150(1) of NCLT Rules, 2016, and the law laid down by the Hon'ble Supreme Court in Anil Rai v. State of Bihar. The Tribunal also cited the judgment in Ramnath Exports Pvt. Ltd. vs. Vinita Mehta, emphasizing that an appeal is a continuation of the original proceedings and the appellate court can take into account subsequent events.

Conclusion:

The Appellate Tribunal set aside the order dated 22.03.2024, directing the regular Court-III of the Mumbai Bench to hear the Company Petition (IB)-769(MB)/2022 and IA No.5177 of 2023 afresh. The Tribunal requested the Adjudicating Authority to decide the Company Petition and the IAs at an early date, considering the Section-7 Application had been filed more than a year ago. No order as to costs was made.