Court dismisses challenge to NCLT order on Insolvency Resolution Process, emphasizes procedural rules

The court dismissed the writ petition challenging the common order passed by the NCLT, Chennai, regarding the initiation of the Corporate Insolvency Resolution Process and approval of a third-party Resolution Plan. The court found that while there were procedural irregularities in pronouncing the orders, the rules were directory and not mandatory. As the petitioner was not significantly prejudiced and received the certified copy of the order promptly, the court advised seeking remedy through appeal before the NCLAT. The court also emphasized the importance of adherence to procedural rules in future proceedings.

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Issues Involved:
1. Challenge to the common order passed by the National Company Law Tribunal (NCLT), Chennai.
2. Compliance with the procedural rules of the National Company Law Tribunal Rules, 2016 (NCLT Rules).
3. Validity and impact of the pronouncement of orders without proper notification.
4. Directory vs. mandatory nature of statutory rules.

Issue-wise Detailed Analysis:

1. Challenge to the Common Order by NCLT:
The petitioner, a suspended Managing Director of M/s. Empee Distilleries Limited, challenged the common order passed by the NCLT, Chennai on 20.01.2020 in MA/780/2019 and MA/1250/2019 of CP/280/IB/2018. The challenge was based on the initiation of the Corporate Insolvency Resolution Process (CIRP) and the approval of a third-party Resolution Plan despite the petitioner’s claims of settling the debts with the creditors.

2. Compliance with Procedural Rules of NCLT Rules, 2016:
The petitioner argued that Rule 150 of the NCLT Rules, which pertains to the pronouncement of orders, was not followed. The petitioner highlighted that the Cause List for 20.01.2020 did not include the pronouncement of orders in MA/1250/2019, causing grave prejudice and irreparable loss due to non-compliance with Rule 89 regarding the preparation and publication of the daily cause list.

3. Validity and Impact of Pronouncement of Orders Without Proper Notification:
The petitioner contended that the orders were pronounced beyond office hours without prior notification on the website, violating the procedural rules. The petitioner cited the Division Bench decision of the Bombay High Court in Kamal K. Singh v. Union of India, emphasizing the importance of transparency and adherence to procedural rules in judicial proceedings.

4. Directory vs. Mandatory Nature of Statutory Rules:
The respondents argued that the procedural rules are directory and not mandatory. They contended that substantial compliance with the rules was sufficient and that no serious prejudice was caused to the petitioner. The court considered various judgments, including Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur, and Sharif-ud-Din v. Abdul Gani Lone, to determine whether the non-compliance with procedural rules vitiates the impugned order.

Court's Observations and Conclusion:
The court noted that the NCLT, Chennai had pronounced the common order on 20.01.2020 with proper legal sanctity, and the timeline for pronouncement was not adhered to. However, the court found that the procedural rules were directory and not mandatory, as the consequences of non-compliance were not specified in the rules. The court emphasized that the petitioner was not seriously prejudiced as the certified copy of the order was furnished within seven days.

Final Judgment:
The writ petition was dismissed, and the court did not delve into the merits of the impugned order, advising the petitioner to seek remedy through appeal before the NCLAT. The court also observed that the second respondent should ensure adherence to procedural rules in the future to avoid similar complaints. The interim orders granted in WMP.No.2253 of 2020 were vacated, and no costs were imposed.

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