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TMI Blog2022 (7) TMI 1371X X X X Extracts X X X X X X X X Extracts X X X X ..... ity as required by the rules itself. Unless, it is held that due to non-filing of the reply before the date of hearing by the Corporate Debtor, the Adjudicating Authority is obliged to decide the application under Section 7, the Adjudicating Authority has ample jurisdiction to consider any request for reasonable time by a Corporate Debtor for filing a reply. The Tribunal is fully entitle to grant time for filing a reply asked for by the Corporate Debtor on the first date of hearing. Rejecting the request of the Corporate Debtor on the very first day for grant of time to file a reply, cannot be said to be in consonance with the principles of natural justice. There can be no dispute that in appropriate case, if the Adjudicating Authority is satisfied that the Corporate Debtor is deliberately delaying the matter, the request for grant of any further time to file a reply can be refused - But present is not a case where it can be said that Corporate Debtor was delaying the disposal of the case, since 29.03.2022 was the first date of hearing as indicated in the notice served on the Corporate Debtor on 07.03.2022. Whether fourteen days time prescribed for the Adjudicating Authority t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixing the date as 29.03.2022. The copy of the notice was served on the Appellant on 07.03.2022. On 29.03.2022, which was the first date of hearing after service of notice on the Appellant Corporate Debtor, the Counsel appearing on behalf of the Appellant made a request to the Adjudicating Authority for grant of time to file a reply. The Adjudicating Authority refused to grant any time to file reply and proceeded to admit the Application by order of the same date, that is, 29.03.2022. The Appellant aggrieved by the said order has come up in this Appeal. 3. This Appeal was entertained by this Tribunal on 27.04.2022, on which date, this Tribunal passed an interim order that no further steps shall be taken in pursuance of the impugned order dated 29.03.2022. The Financial Creditor has appeared and filed reply and rejoinder to the reply has also been filed by the Appellant. 4. We have heard Shri Siddharth Bhatnagar, learned Senior Advocate for the Appellant and Shri Dhruv Malik, learned Counsel appearing for the Respondent. 5. Learned Senior Counsel for the Appellant submits that the Adjudicating Authority while refusing to grant any time for filing reply on the first date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity has rightly refused to grant any time to the Corporate Debtor to file a reply, since it had ample time to file a reply and when it chooses not to file a reply, it has to face the consequences. The IBC proceedings are to be completed in a timeline as is prescribed in the Code and the Rules. Hence, the Adjudicating Authority did not commit any error in rejecting the prayer for grant of time to file a reply. Further, the Adjudicating Authority has noticed the earlier proceedings before the Debt Recovery Tribunal and has rightly observed that Corporate Debtor was well versed with the facts of the case since long. The learned Counsel for the Respondent submitted that the Appellant having chosen not to file a reply cannot be heard in alleging violation of principles of natural justice. 7. We have heard learned Counsel for the parties and have perused the records. 8. There is no dispute between the parties regarding facts of the case and sequence of events. The notice was issued by the Adjudicating Authority to the Corporate Debtor in Section 7 Application filed by the Financial Creditor on 11.02.2022, which notice was served on the Appellant Corporate Debtor on 07.03.2022. 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panied with an affidavit and along with copies of such documents on which it relies, with an advance service to the petitioner or applicant, to the Registry before the date of hearing and such reply and copies of documents shall form part of the record. 10. The Rules thus, contemplates filing of reply by the Corporate Debtor, who has received notice and who appears before the Adjudicating Authority and contest the matter. Sub-rule (3) of Rule 27, however, is silent as to what shall be the course of action to be adopted by the Adjudicating Authority in event the reply is not filed by the Corporate Debtor before the date of hearing. The submission of learned Counsel for the Respondent is that when notice grants time to file a reply and no reply is filed by the Corporate Debtor on the first date of hearing, he shall have no right to claim any time for filing a reply. In event we accept the submission of the Respondent, sub-rule (3) of Rule 37 has to be read to mean that in the event on the date of hearing, no reply is filed by the Corporate Debtor and it has been served with the notice of filing reply, its right to file reply shall be forfeited. As noted above, sub-rule (3) of Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be verified by an affidavit in Form No. NCLT.6. Notice to be issued by the Tribunal to the opposite party shall be in Form NCLT-5. 51. Power to regulate the procedure.- The Tribunal may regulate its own procedure in accordance with the rules of natural justice and equity, for the purpose of discharging its functions under the Act. 12. The procedure, which is to be adopted by the Tribunal has to be in consonance with the rules of natural justice and equity as required by the rules itself. Unless, it is held that due to non-filing of the reply before the date of hearing by the Corporate Debtor, the Adjudicating Authority is obliged to decide the application under Section 7, the Adjudicating Authority has ample jurisdiction to consider any request for reasonable time by a Corporate Debtor for filing a reply. The Tribunal is fully entitle to grant time for filing a reply asked for by the Corporate Debtor on the first date of hearing. Rejecting the request of the Corporate Debtor on the very first day for grant of time to file a reply, cannot be said to be in consonance with the principles of natural justice. There can be no dispute that in appropriate case, if the Adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding under Section 9 is as to whether fourteen days time prescribed for the Adjudicating Authority to pass the order is directory or mandatory . The Appellate Tribunal has held the said provision as directory . However, Appellate Tribunal held proviso to sub-section (5) of Section 7 or proviso to sub-section (5) of Section 9 and Section 10 (4) to remove the defect within seven days as mandatory, and on failure, application is fit to be rejected. The Hon ble Supreme Court considered the proviso of Section 7 and 9 and did not approve the view of the Appellate Tribunal that time provided to remove the defects within seven days under proviso to sub-section (5) of Section 7 and under proviso to sub-section (5) of Section 9 are mandatory. Hon ble Supreme Court held that the said provisions are directory in nature. It further held that procedural provisions are generally directory . The Hon ble Supreme Court has quoted with approval an earlier judgment of the Supreme Court Kailash v. Nanhku (2005) 4 SCC 480, which was a case where Hon ble Supreme Court has considered the provision of Order 8 Rule 1 of CPC, which provided for time to file a written statement. Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also placed reliance on a judgment of this Tribunal in Zee Entertainment enterprises Limited v. Invesco Developing Markets Fund and Ors. Company Appeal (AT) No.121 of 2021 - (2021) 229 Company Cases, 13, where this Tribunal held that Rule 37 provides for grant of reasonable and sufficient time to file a reply. In the above case, the Adjudicating Authority has granted only two days time to file a reply, which was held to be in violation of principles of natural justice. It is relevant to note paragraphs 22 and 23 of the judgment, which is to the following effect: 22. It is also important to mention that Rule 37 of NCLT Rules provides a grant for reasonable and sufficient time to file a reply/counter. Rule 37 of NCLT Rules, 2016 is quoted below for ready reference: 37. Notice to Opposite Party.-( 1) The Tribunal shall issue Notice to the respondent to show cause against the application or petition on a date of hearing to be specified in the Notice. Such Notice in Form No. NCLT. 5 shall be accompanied by a copy of the application with supporting documents. (2) If the respondent does not appear on the date specified in the Notice in Form No. NCLT. 5, the Tribunal, af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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