Appellate tribunal directs Adjudicating Authority to proceed with hearing, emphasizing expeditious resolution and compliance.

The appellate tribunal vacated the ex-parte interim order dated 09.09.2020 and directed the Adjudicating Authority to proceed with the hearing of I.A No. 368 of 2020 on its merits. The appeal focused on procedural aspects, emphasizing the need for expeditious resolution and compliance with service rules. The tribunal's decision did not delve into the substantive merits of the case but provided specific directions to expedite the adjudication process.

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Issues Involved:
1. Delay in adjudicating applications I.A No. 368 of 2020 and I.A No. 555 of 2020.
2. Legitimacy of the ex-parte interim order dated 09.09.2020.
3. Locus standi of the Suspended Director to challenge the Liquidator's decisions.
4. Impact of pending counterclaims on liquidation proceedings.
5. Compliance with procedural rules regarding service of applications.

Detailed Analysis:

1. Delay in Adjudicating Applications:
The appeal was filed by Kotak Mahindra Bank Limited, a financial creditor, seeking direction for the adjudication of applications I.A No. 368 of 2020 and I.A No. 555 of 2020. The applications remained pending despite multiple hearings and directions from the appellate tribunal and the Supreme Court to expedite the process. The Supreme Court, in its order dated 26.11.2021, emphasized the need for expeditious resolution and allowed the appellate tribunal to withdraw the matter from the Chandigarh Bench if necessary.

2. Legitimacy of the Ex-Parte Interim Order:
The ex-parte interim order dated 09.09.2020 directed the Liquidator to maintain status quo regarding the distribution of funds to financial creditors. Kotak Mahindra Bank filed I.A No. 555 of 2020 to recall this order. The appellate tribunal noted that the application was filed without serving a copy to the affected financial creditors, violating Rule 25(5) of the National Company Law Tribunal Rules, 2016. The tribunal found the ex-parte order unjustified and decided to vacate it.

3. Locus Standi of the Suspended Director:
The Suspended Director of the Corporate Debtor filed I.A No. 368 of 2020 challenging the Liquidator's acceptance of claims from financial creditors. The tribunal observed that under Section 42 of the Insolvency and Bankruptcy Code, 2016, only creditors have the right to challenge the Liquidator's decisions. Thus, the Suspended Director lacked the locus standi to file the application.

4. Impact of Pending Counterclaims on Liquidation Proceedings:
The Suspended Director argued that pending counterclaims before the Debt Recovery Tribunal (DRT) should halt the distribution of funds in the liquidation process. The appellate tribunal rejected this argument, stating that proceedings under the Insolvency and Bankruptcy Code are time-bound and have an overriding effect. The tribunal emphasized that liquidation proceedings cannot be dependent on other pending litigations.

5. Compliance with Procedural Rules:
The appellate tribunal highlighted the failure to serve a copy of I.A No. 368 of 2020 to the financial creditors, as required by Rule 25(5) of the National Company Law Tribunal Rules, 2016. This procedural lapse further invalidated the ex-parte interim order dated 09.09.2020.

Conclusion:
The appellate tribunal allowed I.A No. 555 of 2020, vacating the interim order dated 09.09.2020, and directed the Adjudicating Authority to proceed with the hearing of I.A No. 368 of 2020 on its merits. The tribunal's observations were confined to the procedural aspects and did not express any final opinion on the merits of I.A No. 368 of 2020. The appeal was disposed of with specific directions to expedite the adjudication process.

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