Appellate Tribunal reverses ex-parte order, grants parties time to respond.

The Appellate Tribunal set aside the order admitting the Section 7 Application due to the virtually ex-parte nature of the proceedings. The Corporate Debtor was granted one week to file a reply, with the Financial Creditor allowed to file a rejoinder thereafter. The Tribunal directed the Adjudicating Authority to address the amount deposited by the Financial Creditor and allowed the parties to apply for a new date for proceedings. The Appellant's counsel was ordered to pay a cost of Rs. 10,000 to the Financial Creditor within one week. The appeal was disposed of by the Tribunal.

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Issues:
Admission of Section 7 Application without proper response from the corporate debtor.

Analysis:
The appeal was filed against the order passed by the Adjudicating Authority admitting the Section 7 Application filed by the Financial Creditor. The Adjudicating Authority had issued a notice to the Corporate Debtor, but despite the notice being served, the Corporate Debtor did not appear or file a reply objecting to the petition. The appeal was brought by the Suspended Director of the Corporate Debtor, arguing that the request for time to file necessary documents was not considered, and the order was reserved and subsequently uploaded without proper consideration.

The Respondent's counsel contended that the Corporate Debtor had 56 days to file a reply but failed to do so. The counsel also mentioned that due to not having the necessary documents, the court did not record his appearance. An affidavit was filed by the counsel who appeared before the Adjudicating Authority, stating that a request for time to file documents was denied, and the order was reserved without hearing the parties on merits.

The Appellate Tribunal found that the Corporate Debtor should have been given an opportunity to file a reply before the order was passed. The Tribunal noted that the order was virtually ex-parte and deserved to be set aside. The Corporate Debtor was granted one week to file its reply, and the Financial Creditor was allowed to file a rejoinder within two weeks thereafter. The Tribunal clarified that no opinion on the merits of the case was expressed.

Regarding the amount deposited by the Financial Creditor, the Adjudicating Authority was directed to pass an appropriate order in the pending proceedings. The parties were given liberty to apply for fixing a date after three weeks before the Adjudicating Authority. Additionally, the Appellant's counsel was directed to pay a cost of Rs. 10,000 to the Financial Creditor within one week. The appeal was ultimately disposed of by the Tribunal.

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