2024 Supreme(Online)(NCLAT) 643
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
Pradeep P. Agarwal – Appellant
Versus
INDIABULLS ASSET RECONSTRUCTION COMPANYLIMITED – Respondent
607/ND/2024 COMPANY APPEAL(AT)(INS)
Mr. Abhijeet Sinha, Sr. Advocate with Ms. Aakashi Lodha and Mr. Utkarsh Kumar, Advocates. Mr. Gaurav Mitra, Mr. Karan Luthra, Ms. Lavanya Pathak, Mr. Naman Gowda, Advocate for R-1. Ms. Sarita Agarwal, Advocate/ Ms. Savita Agarwal, IRP for Corporate Debtor.
The Adjudicating Authority must consider subsequent developments before admitting a Section 7 application, ensuring procedural fairness in insolvency proceedings.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - National Company Law Tribunal Rules, 2016 - Rule 150 - Appeal against admission of Section 7 Application - The Appellant, a Suspended Director, challenged the Tribunal's order admitting the application filed by the Asset Reconstruction Company, arguing procedural impropriety due to the transfer of a Bench member and the delay in pronouncement of the order. The Tribunal's failure to await the outcome of a subsequent application was deemed erroneous. (Paras 1, 6, 22, 23)
(B) Procedural Fairness - The court emphasized that the Adjudicating Authority must consider subsequent developments that may impact the proceedings, reinforcing the principle that appeals are a continuation of original proceedings. (Paras 21, 22)
Facts of the case:
The Corporate Debtor secured loans from Indiabulls Housing Finance Limited, which were assigned to Indiabulls Asset Reconstruction Company. The Tribunal admitted a Section 7 application despite a pending interlocutory application regarding the same matter.
Findings of Court:
The order admitting the Section 7 application was set aside, and the matter was directed to be heard afresh by the regular Bench.
Issues: The main issues included whether the Tribunal erred in admitting the Section 7 application without considering the pending interlocutory application and the procedural implications of the transfer of a Bench member.
Ratio Decidendi: The court ruled that the Adjudicating Authority should have awaited the outcome of the pending application before admitting the Section 7 application, highlighting the importance of procedural fairness and the need to consider subsequent developments.
Result: Appeal allowed, order set aside.
JUDGEMENT
ASHOK BHUSHAN, J. This Appeal by a Suspended Director of the Corporate Debtor has been filed against the order dated 22.03.2024 passed by National Company Law Tribunal, Mumbai Bench, Mumbai, Court-III by which Section 7 Application C.P.(IB)-769(MB)/2022 filed by India Bulls Asset Reconstruction Company Limited has been admitted and IA No.2889 of 2022 filed by the Corporate Debtor was disposed of as infructuous. The Suspended Director aggrieved by the order dated 22.03.2024 has come up in this Appeal.
2. This Appeal came up for consideration on 02.04.2024, on which date, noticing the submission of learned Counsel for the parties, following order was passed:
- “2.4.2024 - Learned Counsel for the Appellant submits that one of the issues in this Appeal is that in the Company Petition under Section 7, Orders were reserved by Court No.3 as it existed at that time i.e. 26th June, 2023 and thereafter one of the Members of the Bench was transferred to Guwahati and thereafter, an Application was filed by the Corporate Debtor on 22nd December, 2023 being IA No.5177 of 2023 which was also heard and orders were reserved on 4.3.2024. It is submitted that the main Company Petition was listed for pronouncement of Order on 22nd March, 2024 by the Bench which heard the matter on 26th June, 2023 and the Court was apprised that the IA 5177 of 2023 has been filed in which Order is also reserved but the Order was pronounced admitting Section 7 Application by Order dated 22nd March, 2024 which has now been challenged in the Appeal. It is submitted by Mr. Gaurav Mitra, Counsel for the Respondent that the Order dated 22nd March, 2024 has dealt with Section 7 Application as well as earlier IA 2889/2023 filed by the Corporate Debtor.
- The issues with regard to procedural aspect of the matter and the hearing in the Appeal, especially, after one of the Members has been transferred has arisen in this Appeal. The learned Counsel seeks time to bring on record the Order issued by the President regulating such situation, if any.
- Let both the parties bring relevant material with regard to issues which have been arisen as noted above. List these Appeals on 9th April, 2024.
- In the meantime, interim protection granted by this Tribunal on 28th March, 2024 shall continue.
- The additional Affidavit may be filed by 8.4.2024.”
3. Interim order passed on 28.03.2024 that no publication in pursuance of the impugned order shall be made was continued by order dated 02.04.2024. In pursuance to the order dated 02.04.2024, the Appellant has filed the compilation of orders/ judgment on 08.04.2024. Both the parties were heard on 10.04.2024 with regard to procedural aspect of the matter.
4. Brief facts of the case necessary to be noticed for deciding the Appeal are:
- (i) Indiabulls Housing Finance Limited (“IHFL”), has sanctioned five loans to the Corporate Debtor from the year 2014 to 2018.
- The Corporate Debtor secured the loans by way of deposit of title deeds for an immovable property. The Corporate Debtor made certain payments on various dates.
- (ii) Proceedings under Section 13, sub-section (2) of the SARFEASI Act, 2002 was initiated by IHFL in April – May 2019. Notice dated 27.08.2019 was issued by IHFL for e-auction of the secured assets. On 30.09.2019, by registered Assignment Agreement, IHFL assigned all the loan facilities to the Indiabulls Asset Reconstruction Company Limited, a Group Company of IHFL.
- (iii) A Securitization Application No.116 of 2019 was filed before the Debt Recovery Tribunal by Shri Prateek Agarwal, owner of the Secured Asset. In the Securitization Application, Interim Application was also filed by Shri Prateek Agarwal, challenging notices issued for sale of assets where direction was passed that sale should be subject to outcome of the Application. Writ Petition No. 20 of 2020 was filed before the Bombay High Court by Shri Prateek Agarwal. A SLP (C) was also filed by Shri Prateek Agarwal challenging order dated 14.05.2020
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