Tribunal Upholds Validity of Notice, Dismisses Appeal (3)

The tribunal dismissed the appeal, finding no violation of natural justice principles, upholding the validity of the notice under Rule 4(3), confirming the sufficiency of evidence of default, and recognizing the Corporate Debtor's locus standi to file the appeal through its Board of Directors. Each party was directed to bear their own costs.

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Issues Involved:
1. Violation of natural justice principles.
2. Validity of notice under Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
3. Requirement of record of default or evidence of default.
4. Locus standi of the Corporate Debtor to file an appeal through its Board of Directors.

Detailed Analysis:

1. Violation of Natural Justice Principles:
The appellant argued that the impugned order was passed without giving any notice, violating the principles of natural justice. The tribunal referred to its previous judgment in "M/s Innoventive Industries Ltd. Vs ICICI Bank & Ann" where exceptions to the principles of natural justice were discussed, including situations where prompt action is needed or where procedural defects would not affect the outcome. It was observed that the appellant was present and heard during the proceedings before the Adjudicating Authority, making the lack of notice inconsequential. Thus, the tribunal held that the principles of natural justice were not violated in this case.

2. Validity of Notice under Rule 4(3):
The appellant contended that the notice served was a pre-filing notice with an incorrect date of hearing. The tribunal noted that the respondent issued a post-filing notice under Rule 4(3) along with the application under Section 7 of the I & B Code. Although the date of hearing mentioned was incorrect, the matter was adjourned and the appellant was present and represented by counsel during the actual hearing. Therefore, the tribunal concluded that there was no violation of Rule 4(3) and the principles of natural justice were upheld.

3. Requirement of Record of Default or Evidence of Default:
The appellant argued that the necessary records of default, as required under Form I read with Rule 4 of the Adjudicating Authority Rules and Section 7(3) of the I & B Code, were not filed. The tribunal referred to its judgment in "Neelkanth Township and Construction Pvt. Limited. Vs. Urban Infrastructure Trustees Limited," which clarified that procedural rules should not obstruct the substantive obligations under the law. It was held that the documents, records, and evidence of default prescribed in Part V of Form-1 of the Adjudicating Authority Rules, 2016, are sufficient to decide the default of debt. Thus, the tribunal rejected the appellant's contention regarding the requirement of records of default.

4. Locus Standi of the Corporate Debtor to File an Appeal:
The respondent argued that the appellant had no locus to file the appeal after the appointment of the Interim Resolution Professional, as the powers of the Board of Directors were suspended under Section 17(1)(a) & (b) of the I & B Code. The tribunal clarified that while the management of the Corporate Debtor vests with the Interim Resolution Professional, this does not extend to the power to sue on behalf of the Corporate Debtor. The tribunal emphasized that the Corporate Debtor, represented by its Board of Directors or authorized persons, has the right to appeal under Section 61 of the I & B Code. It was noted that the Interim Resolution Professional's role starts after the initiation of the Corporate Insolvency Resolution Process, and allowing them to represent the Corporate Debtor in an appeal would be futile as they would not challenge their own appointment. Therefore, the tribunal held that the Corporate Debtor has the locus to file an appeal through its Board of Directors.

Conclusion:
The tribunal found no merit in the appeal and dismissed it, holding that the principles of natural justice were not violated, the notice under Rule 4(3) was valid, the requirement of records of default was met, and the Corporate Debtor had the locus to file the appeal through its Board of Directors. The parties were directed to bear their respective costs.

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