2017 (11) TMI 891 - AT - Insolvency and Bankruptcy

Corporate insolvency resolution processes - main plea taken by the appellant is that no notice was issued or served by the Adjudicating Authority on the appellant - proof of existence of dispute - Held that - Though it was reported that no notice has been served at the given address, but the Adjudicating Authority wrongly treated the notice deemed to have been served. It is a settled law that on refusal of the notice by a party, the same can be deemed to have been served, but for insufficient or on wrong address, return of notice cannot be treated to be served. From the aforesaid fact, we find that the impugned order dated 25th July, 2017 was passed by the Adjudicating Authority completely in violation of rules of natural justice. The letter issued on behalf of the appellant Corporate Debtor dated 1st June, 2016 shows that there is also an existence of dispute as is clear from the relevant portions and the preliminary objections. Though it was reported that no notice has been served at the given address, but the Adjudicating Authority wrongly treated the notice deemed to have been served. It is a settled law that on refusal of the notice by a party, the same can be deemed to have been served, but for insufficient or on wrong address, return of notice cannot be treated to be served. From the aforesaid fact, we find that the impugned order dated 25th July, 2017 was passed by the Adjudicating Authority completely in violation of rules of natural justice. For the reasons aforesaid, the impugned order cannot be sustained. The said order is accordingly set aside.

Summary

Issues:
Application under Section 9 of the Insolvency and Bankruptcy Code, 2016; Existence of dispute; Service of notice; Violation of rules of natural justice; Appointment of Interim Resolution Professional; Setting aside of impugned order.

Analysis:
The case involved an appeal against the admission of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 by an Operational Creditor against a Corporate Debtor. The appellant contended that no notice was served by the Adjudicating Authority and emphasized the existence of a dispute. The appellant presented a letter dated 1st June 2016 as evidence of the dispute, highlighting false claims made by the Operational Creditor. On the other hand, the respondent argued that the notice was served, referring to an order and affidavit as proof. However, the order revealed that no notice was actually served on the appellant, raising concerns about the violation of natural justice.

The Tribunal noted that the Adjudicating Authority wrongly treated the notice as served despite evidence to the contrary. It emphasized that the refusal of notice by a party does not equate to service, especially if the notice was sent to an incorrect address. The appellant's letter further reinforced the existence of a dispute, refuting the claims made by the Operational Creditor. Consequently, the impugned order was deemed to be passed in violation of the rules of natural justice and was set aside.

In its final decision, the Tribunal declared all orders related to the appointment of an Interim Resolution Professional and freezing of accounts as illegal and set them aside. The application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was dismissed, allowing the appellant company to resume independent functioning through its Board of Directors. The Adjudicating Authority was directed to determine the fee of the Interim Resolution Professional, if appointed, to be paid by the Respondents. The appeal was allowed with no order as to costs.