2022 (11) TMI 1468 - AT - Insolvency and Bankruptcy

NCLAT sets aside insolvency admission order passed by single member instead of required two-member bench under Section 419(3)

Sanjay Kumar Choudhary Versus Creative Infraheights Pvt. Ltd. & Anr.

Sanjay Kumar Choudhary Versus Creative Infraheights Pvt. Ltd. & Anr. - TMI Issues Involved:Violation of Section 419(3) of the Companies Act, 2013 and Rule 152(4) of NCLT Rules, 2016 in passing an order by a single member bench instead of a two-member bench.Detailed Analysis:1. The appeal challenges the validity of an order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed by a director of the suspended board of directors of the Corporate Debtor. The argument is based on the fact that the matter was heard by a bench comprising a Judicial Member and a Technical Member, but the order was reserved and pronounced by the Judicial Member alone, which is contested as against the law. 2. The appellant's counsel contends that the constitution of benches is clearly provided in Section 419(3) of the Companies Act, 2013, requiring a bench to consist of two members, one being a Judicial Member and the other a Technical Member. The absence of a special order by the President of the Tribunal allowing a single-member bench to function is highlighted as a violation of the law.3. It is argued that the rules for NCLT, 2016 do not specify the procedure of a single member hearing arguments and pronouncing the order after a matter was heard by a bench comprising both Judicial and Technical Members. A previous decision cited in a similar context supported the contention that the matter should be decided by a two-member bench as per the statutory requirements.4. The Respondent does not dispute the factual sequence where the application was heard by a two-member bench but the order was reserved and pronounced by a single member. The Tribunal, after hearing both parties, examines the provisions of Section 419 of the Act, emphasizing the requirement for a bench to consist of two members, unless authorized otherwise by the President through a general or special order.5. The Tribunal concludes that the order passed by a single member is nonest in the eyes of the law, as it does not comply with the statutory provisions. Consequently, the impugned order is set aside, and the matter is remanded back to the Adjudicating Authority for a fresh decision in accordance with the law. The appeal is allowed, and the parties are directed to appear before the Adjudicating Authority on a specified date.6. It is clarified that the decision to set aside the order does not touch upon the merits of the case but solely addresses the procedural irregularity in passing the order by a single member bench instead of a two-member bench as required by law.