NCLAT Sets Aside IBC Order Passed by a Member Singly after Retirement of fellow DB Member

The National Company Law Appellate Tribunal (NCLAT) has set aside an order of admission under the Insolvency and Bankruptcy Code, 2016 on the ground that the order was passed by a member singly after the retirement of the fellow member of the Division Bench. The order was passed by a three-member bench of NCLAT comprising Chairperson, Justice SJ Mukhopadhyay, Member (Judicial) Justice Venugopal M and Member (Judicial) Justice Jarat Kumar Jain.

The Vistra ITCL (India) Ltd. had filed an application under Section 7 of the Code for initiation of Corporate Insolvency Resolution Process against Ambience Pvt. Ltd., the Corporate Debtor. The same was heard by the Divisional Bench of one Hon’ble Member (Judicial) and another Hon’ble Member (Technical) of ‘National Company Law Tribunal’ Bench No. III, New Delhi.

In April 2019 a Bench of Member (Judicial) R Vardharajan and Member (Techincal) Deepa Krishan heard final arguments in the case and directed the parties to file written submission. Subsequently, the case was reserved for orders. Meanwhile, Member Deepa Krishan retired from the post in July. In August 2019, an order admitting insolvency was pronounced singly by R Vardharajan. Aggrieved by the admission, Director of the Corporate Debtor, Raj Singh Gehlot (appellant) moved the NCLAT in appeal.

The order was challenged on the ground that although the matter was heard by two Members, the final order was passed by one Member which was not permissible. To support its claim, the appellant referred to Section 419(3) of the Companies Act and Rule 152(4) of NCLT Rules. Rule 152(4) reads, "152. Authorising any member to pronounce order:- (4) If the order cannot be signed by reason of death, retirement or resignation or for any other reason by any one of the Members of the Bench who heard the case, it shall be deemed to have been released from part-heard and listed afresh for hearing.

The claim of the appellant was undisputed by the Vistra (Financial Creditor) as well. In view of the above, the NCLAT opined that the matter ought to be remitted to NCLT for a fresh hearing. "In the facts and circumstances, as suggested by learned Counsel for the parties and we are also of the opinion that the matter may be remitted back for a fresh hearing on merit relating to admission of the application Under Section 7 of the ‘I&B’ Code after giving liberty to the parties.

" Therefore, without getting into the merits of the case, the NCLAT set aside the order of admission passed by NCLT against the corporate debtor. The NCLAT also clarified that the matter would be heard by a Divisional Bench of Member(Judicial) and (Technical) as per the provisions of the Act. Stating that it is expected that the plea would be decided within three weeks from the date of appearance of the parties, the NCLAT has added after notice and hearing, the NCLT will pass an appropriate order in accordance with the law, uninfluenced by the earlier order of admission. As per the NCLAT's order, both the parties would appear before the President of NCLT on November 6, 2019, to bring this order to his notice.

Source: barandbench