2021 (12) TMI 286 - Tri - Insolvency and Bankruptcy

Validity of ex-parte order - rule 11 of NCLT Rules, 2016 - whether inherent power u/r 11 can be used when alternate remedy is available? - HELD THAT - The present Application has been filed by the Corporate Debtor on 10.6.2019 i.e., after two months after the date of admission of CIRP. On careful reading of the present Application, it is more than clear that the applicant seeks to recall/review of the Admission Order dated 10.4.2019 along with the ex-parte order dated 8.2.2019. Both the said orders have been passed by this Authority after careful consideration of facts and circumstances including the credible evidence placed in support of the fact that Corporate Debtor has been properly served with notice under section 8 of the IB Code, the main petition seeking initiation of CIRP as well as further dates of hearings before this Authority. The Operational Creditor has relied upon various case laws which deal with power of review of orders passed by this Authority and powers available under Rule 11 of the NCLT Rules, 2016. The facts and circumstances of the present Application clearly indicate that the Applicant is effectively seeking recall/setting aside of ex-parte order dated 8.2.2019 and CIRP admission order dated 10.4.2019. It is noted that the said orders have been passed after due consideration of facts and circumstances of the case. Therefore, there is no substance in the arguments advanced by Corporate Debtor that the said Orders can be recalled/reviewed by this Tribunal. The Hon'ble Allahabad High Court in the matter of Khan Enterprises Vs. National Company Law Tribunal and Ors. M/S KHAN ENTERPRISES VERSUS THE NATIONAL COMPANY LAW TRIBUNAL AND 4 OTHERS 2018 (9) TMI 1908 - ALLAHABAD HIGH COURT has inter alia, held that it is admitted that there is no provision in I.B.C. for review of the order admitting a petition filed under Section 9 of the I.B.C. It is also not disputed in law that the power to review cannot be exercised unless there is specific provision for the same. Similar views have been propounded in various other case laws by the Hon'ble NCLAT and relied upon by the Operational Creditor. Application dismissed.

Summary

Issues:
Application under rule 11 of NCLT Rules, 2016 for setting aside ex-parte order and admission order.

Analysis:
The Corporate Debtor filed an application seeking to set aside the ex-parte order and admission order passed by the Tribunal. The Corporate Debtor alleged deficiencies in services provided by the Operational Creditor, leading to a shift in business operations and registered office. The Corporate Debtor claimed that proceedings were initiated without proper notice and that the CIR Process was conducted without their knowledge. The Corporate Debtor argued that no payment was due to the Operational Creditor due to deficient goods supply. On the other hand, the Operational Creditor contended that the Tribunal's orders were passed after proper service and that the application was time-barred. The Operational Creditor highlighted that the Corporate Debtor had alternative remedies available and that the Tribunal lacked the power to review its own orders.

The Corporate Debtor cited judgments to support the maintainability of their application, emphasizing the interest of justice and equity. The Operational Creditor, in response, relied on NCLAT judgments stating that inherent power should only be used when no other remedy is available and that the power of review must be granted by statute. The Tribunal considered the arguments from both parties and reviewed the facts of the case. It noted that the orders were passed after due consideration of the facts and circumstances. The Tribunal agreed with the Operational Creditor that the powers under Rule 11 of NCLT Rules could not be used to seek a recall or review of orders when alternative remedies were available under the IBC, 2016. Citing legal precedents, the Tribunal held that the application lacked merit and dismissed it.

In conclusion, the Tribunal dismissed the application filed by the Corporate Debtor seeking to set aside the ex-parte order and admission order, affirming that the orders were passed after due consideration and that the application was devoid of merit. The Tribunal emphasized the availability of alternative remedies under the IBC, 2016 and the limitations on the Tribunal's power to review its own orders.