2025 (1) TMI 552 - AT - IBC

Recall of order - lifting of Provisional Attachment order - seeking declaration that the attached properties could never have formed part of the resolution plan - requirement to hear all necessary parties - principles of natural justice - HELD THAT - In a proceeding before a Court or Tribunal, all necessary parties are to be impleaded, even if, a party is not a necessary party, which may be treated as a proper party, whose presence may be necessary for deciding the issues, which have come up before the Court or who may have some stake in the issues, which has arisen for adjudication. The Hon ble Supreme Court in Udit Narain Singh Malpharia vs. Additional Member Board of Revenue, Bihar and Anr. 1962 (10) TMI 55 - SUPREME COURT has laid down that a necessary party is one without whom no order can be made effectively; and a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceeding. Even if, the ED was not necessary party in the Appeal filed by the SRA, it would have been appropriate that ED was also heard while deciding the issue, which was raised in the Appeal. ED also needs to be heard before deciding the Appeal finally, which has the effect, not only on the issues raised in the Appeal, but has larger ramification. Conclusion - The principles of natural justice require that all proper parties be heard before a decision affecting their rights is made. The judgment dated 13.08.2024 was recalled to allow the ED to be heard. The recall does not affect the approval of the Resolution Plan but is limited to the issue of property attachment by the ED. Application allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

Whether the judgment dated 13.08.2024, which allowed the appeal and set aside the findings of the Adjudicating Authority regarding the attachment of properties by the Directorate of Enforcement (ED), should be recalled.
Whether the ED was a necessary or proper party in the appeal proceedings, and whether its absence violated the principles of natural justice.
The applicability and interpretation of Section 32-A of the Insolvency and Bankruptcy Code, 2016 (IBC) concerning the release of attached properties.
Whether the Tribunal's reliance on the judgment of the Delhi High Court in Shiv Charan's case was appropriate, given the pending appeal before the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Recall of Judgment Dated 13.08.2024

Relevant Legal Framework and Precedents: The grounds for recalling a judgment are well-established, as discussed in past judgments, including Union of India vs. Dinkar T. Venkatasubramanian & Ors.
Court's Interpretation and Reasoning: The Tribunal considered whether the principles of natural justice were violated by not hearing the ED before passing the judgment on 13.08.2024.
Key Evidence and Findings: The ED's argument was that they were not given an opportunity to present their case, which affected their rights and interests.
Application of Law to Facts: The Tribunal recognized the ED as a proper party, whose presence was necessary for a complete decision on the matter.
Treatment of Competing Arguments: The Appellant argued that the ED was neither a necessary nor a proper party, while the Tribunal found that ED's involvement was crucial for a fair decision.
Conclusions: The Tribunal decided to recall the judgment to allow the ED to present its case, ensuring adherence to the principles of natural justice.

Issue 2: Necessary or Proper Party

Relevant Legal Framework and Precedents: The distinction between necessary and proper parties was discussed, citing Udit Narain Singh Malpharia vs. Additional Member Board of Revenue, Bihar and Anr.
Court's Interpretation and Reasoning: The Tribunal determined that the ED, while not a necessary party, was a proper party due to its interest in the attached properties.
Key Evidence and Findings: The ED's attachment of properties and its legal implications were central to the appeal.
Application of Law to Facts: The Tribunal concluded that the ED's presence was essential for a comprehensive adjudication of the issues.
Treatment of Competing Arguments: The Tribunal weighed the necessity of the ED's involvement against the procedural requirements of the appeal.
Conclusions: The Tribunal held that the ED should have been heard, warranting the recall of the judgment.

Issue 3: Applicability of Section 32-A of IBC

Relevant Legal Framework and Precedents: Section 32-A of IBC provides protection to the successful resolution applicant from the liabilities of the corporate debtor.
Court's Interpretation and Reasoning: The Tribunal initially allowed the appeal based on Section 32-A, but the recall was necessary due to the ED's absence.
Key Evidence and Findings: The Tribunal's reliance on Section 32-A was challenged due to the pending Supreme Court decision in Shiv Charan's case.
Application of Law to Facts: The Tribunal needed to reassess the applicability of Section 32-A in light of the ED's arguments and the pending Supreme Court case.
Treatment of Competing Arguments: The Tribunal had to balance the statutory protections under IBC with the procedural fairness owed to the ED.
Conclusions: The Tribunal decided to reconsider the application of Section 32-A after hearing the ED's arguments.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "A necessary party is one without whom no order can be made effectively; a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceeding."
Core Principles Established: The principles of natural justice require that all proper parties be heard before a decision affecting their rights is made.
Final Determinations on Each Issue: The judgment dated 13.08.2024 was recalled to allow the ED to be heard. The recall does not affect the approval of the Resolution Plan but is limited to the issue of property attachment by the ED.

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