2019 (3) TMI 591 - SC - Companies Law

NCLAT violated appellant's right to be heard by not serving notice before directing NCLT.

The court found that the National Company Law Appellate Tribunal (NCLAT) violated the appellant's right to be heard by not serving notice before directing ... Principles of natural justice - case of appellant is that appellant’s right to be heard, audi alteram partem, one of the principles of natural justice, has been violated in as much as the appellant has neither been served with notice of appeal before the NCLAT nor been given a hearing before it - Held that:- In the instant case, the NCLAT, vide order dated 02.01.2019, issued notice both on the question of limitation as well as on the merit of the appeal. Subsequently, judgment was reserved vide order dated 08.01.2019 - It is to be noted that in the rejoinder affidavit before us the appellant has submitted that, pursuant to issuance of notice vide order dated 02.01.2019, neither did respondent no. 1 file process fee for issuance of summons in terms of the said order, nor was the same served upon the appellant. Thus the judgment which was reserved on 08.01.2019 by the NCLAT, and consequently pronounced, was done without hearing the appellant and the observation of the NCLAT that all the parties were heard is erroneous. In fact, even the impugned order does not note the appearance of the counsels on behalf of appellant herein. Rule 48 of the NCLAT Rules clearly stipulates service of notice on the other side, pursuant to issuance of notice by the NCLAT in the appeal, regardless of supply of advance copy of appeal paperbook prior to the issuance of notice by NCLAT. 9. Further, Rule 52 of the NCLAT Rules categorically states that the judicial section of the registry of the NCLAT shall record, in the “Notes of the Registry” column in the order sheet, the details regarding completion of service of notice on the respondents. The material placed before us do not indicate that the aforementioned stipulation has been complied with - the instant appeal can be disposed of by setting aside the order of NCLAT and remanding the matter back to the NCLAT for fresh consideration - appeal allowed by way of remand. Issues: Violation of principles of natural justice, Compliance with NCLAT Rules, Service of notice on the appellantViolation of Principles of Natural Justice:The appeal challenged an order by the National Company Law Appellate Tribunal (NCLAT) directing the National Company Law Tribunal (NCLT) to admit an application under Section 7, IBC against the appellant. The appellant contended that their right to be heard, audi alteram partem, was violated as they were not served with notice of appeal before the NCLAT nor given a hearing. The appellant argued that the NCLAT order failed to comply with the procedure laid down under the NCLAT Rules, specifically Rule 48. The NCLAT, however, noted that it had issued notice on the question of limitation and the merit of the appeal, reserved judgment, and ultimately set aside the NCLT order without further hearing, deeming it a fit case for admission. The appellant claimed that no notice was served upon them as required by the rules, and the NCLAT's observation that all parties were heard was erroneous.Compliance with NCLAT Rules:The appellant argued that despite the respondent serving an advanced copy of the appeal on them, it did not fulfill the requirement of service of notice as stipulated under Rule 48 of the NCLAT Rules. Rule 48 mandates that copies of the appeal, supporting documents, and notice be served on the other side by the NCLAT. The appellant contended that the NCLAT failed to comply with Rule 52, which requires recording details of notice service on the respondents. The appellant's search of the NCLAT's records revealed no evidence of the respondent paying the process fee for issuing and serving notice. The court found that the rules regarding service of notice were not adhered to, leading to a violation of the appellant's right to be heard.Service of Notice on the Appellant:The court concluded that no notice was served on the appellant before the NCLAT as required by the rules, thereby violating the appellant's right to be heard. Citing the case of Ghaziabad Development Authority v. Machhla Devi, the court emphasized the importance of adhering to principles of natural justice. Consequently, the court set aside the NCLAT's order and remanded the matter back for fresh consideration, directing both parties to approach the NCLAT for early listing without the need for a fresh notice to the appellant. The court clarified that it had not expressed any opinion on the case's merits, leaving it to the NCLAT to adjudicate independently.