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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 ..... necessary for deciding this Appeal are: (i) The Application C.P. (IB)/91(PB)/2022 has been filed by the Respondent under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC") on 18.01.2022 alleging default of Rs.49,55,93,696.48. (ii) The Adjudicating Authority on the said Application issued notice to the Corporate Debtor (Appellant herein) on 11.02.2022, 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 appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Respondent No.1 refuting the submissions of learned Senior Counsel for the Appellant submits that Corporate Debtor had ample opportunity to file a reply before the next date of hearing. The notices were issued on 11.02.2022, which was served on 07.03.2022. Hence, the Corporate Debtor could have filed the reply before the first date of hearing. It is submitted that Adjudicating Authority 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 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent does not appear on the date specified in the notice in Form No. NCLT.5, the Tribunal, after according reasonable opportunity to the respondent, shall forthwith proceed ex-parte to dispose of the application. (3) If the respondent contests to the notice received under sub-rule (1), it may, either in person or through an authorised representative, file a reply accompanied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or application or reference shall be filed in form as provided in Form No. NCLT. 1 with attachments thereto accompanied by Form No. NCLT.2 and in case of an interlocutory application, the same shall be filed in Form No. NCLT. 1 accompanied by such attachments thereto along with Form No. NCLT. 3. (4) Every petition or application including interlocutory application 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under subclause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority." The question before NCLT in a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he control of the defendant and grave injustice would be occasioned if the time was not extended. Costs may be imposed and affidavit or documents in support of the grounds pleaded by the defendant for extension of time may be demanded, depending on the facts and circumstances of a given case." 14. The learned Senior Counsel for the Appellant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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