Tribunal sets aside ex-parte order in insolvency case, emphasizes importance of legal representation

The Tribunal set aside the ex-parte order admitting the Corporate Debtor into Corporate Insolvency Resolution Process. Despite noting unethical conduct, the Tribunal granted the application, emphasizing the significance of proper legal representation. The Corporate Debtor was given a chance to contest the claim by filing an affidavit-in-reply and making a specified deposit within a set timeframe. The Tribunal highlighted the severity of admitting a corporate entity into CIRP and stressed the necessity of following procedural requirements in insolvency proceedings.

---

---

Issues:
Application to set aside an ex-parte order of admission of Corporate Insolvency Resolution Process against the Corporate Debtor based on an application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:

1. Service of Notice and Appearance of Advocate:
The Corporate Debtor applied to set aside the ex-parte order, claiming that their advocate failed to appear, resulting in the order being passed ex-parte. The Operational Creditor contended that notice was duly served, and the Corporate Debtor's advocate had appeared on their behalf. The Tribunal found that the notice was served, and the Corporate Debtor's advocate had appeared based on instructions from the directors. Therefore, the first ground for setting aside the ex-parte order was not valid.

2. Failure of Advocate and Opportunity to Contest:
The Corporate Debtor argued that their advocate's failure should not make them suffer the consequences of the CIRP order. The Tribunal acknowledged that the order to admit into CIRP is a harsh decision and observed that the Corporate Debtor had raised disputes but failed to contest them. Despite the delay tactics, the Tribunal considered giving the Corporate Debtor an opportunity to contest the claim by setting aside the ex-parte order.

3. Setting Aside the Ex-Parte Order:
The Tribunal emphasized that admitting a corporate person into CIRP is a severe measure, and proper notice is crucial before passing such orders. In this case, the Corporate Debtor's advocate did not appear, leading to the ex-parte order. The Tribunal believed that the Corporate Debtor should not suffer due to the advocate's fault and decided to set aside the ex-parte order on certain terms, including a deposit of a specified amount and filing an affidavit-in-reply within a given timeframe.

4. Unethical Conduct and Resolution:
The Tribunal noted the unethical conduct of the Corporate Debtor in withdrawing an appeal without disclosure and intervening in the CIRP process. Despite this, the Tribunal allowed the application to set aside the ex-parte order to prevent the Corporate Debtor from undergoing CIRP due to non-appearance of their advocate. The Tribunal directed specific actions to be taken by the Corporate Debtor within a stipulated timeframe to proceed with the resolution process.

In conclusion, the Tribunal set aside the ex-parte order against the Corporate Debtor, emphasizing the importance of proper legal representation and adherence to procedural requirements in insolvency proceedings.

---