Appeal against Insolvency Order Allowed due to Violation of Natural Justice

The appeal challenging the order dated 10.01.2018, passed by the NCLT, Mumbai Bench, admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, was allowed. The Tribunal found the order to be illegal and void ab-initio as it was pronounced by a bench different from the one that heard the arguments, violating principles of natural justice. The Tribunal set aside the orders dated 10.01.2018 and 25.02.2022, directed a refund with interest, and remanded the matter for fresh consideration by the Adjudicating Authority.

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Issues Involved:
1. Legality of the order dated 10.01.2018 passed by the Adjudicating Authority.
2. Compliance with the principles of natural justice.
3. Validity of the pronouncement of the order by a bench that did not hear the arguments.
4. Limitation period for filing the appeal against the orders dated 10.01.2018 and 25.02.2022.

Issue-wise Detailed Analysis:

1. Legality of the order dated 10.01.2018:
The appeal challenges the order dated 10.01.2018, passed by the NCLT, Mumbai Bench, admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Appellant contends that the order was pronounced by a bench that did not hear the arguments, violating Section 419(3) of the Companies Act, 2013, which mandates that a tribunal's bench must include a technical member. The Tribunal found that the order was indeed pronounced by a bench different from the one that heard the case, rendering it "patently illegal and void ab-initio."

2. Compliance with the principles of natural justice:
The principle of "audi alteram partem," meaning no one should be condemned unheard, was central to the Appellant's argument. The Tribunal referenced the Supreme Court's decision in Gullapalli Nageswara Rao & Ors. Vs. Andhra Pradesh State Road Transport Corporation & Anr., which held that a decision must be taken by the judge who heard the case. The Tribunal concluded that the order dated 10.01.2018 violated this principle, as it was pronounced by a member who did not hear the case.

3. Validity of the pronouncement of the order by a bench that did not hear the arguments:
The Tribunal emphasized that the pronouncement of an order by a judge who did not hear the case is not permissible. It cited the case of Ergomax India Pvt. Ltd. Vs. The Registrar, NCLT, where it was held that such an order is a nullity. Rule 150 of the NCLT Rules, 2016, requires that every order must be signed and dated by the members who heard the case. The Tribunal found that the order dated 10.01.2018 was not pronounced by the bench that heard the arguments, making it invalid.

4. Limitation period for filing the appeal:
The Respondent argued that the appeal was filed beyond the limitation period prescribed under Section 61 of the Code. The Appellant contended that they were unaware of the order dated 10.01.2018 due to its improper pronouncement and lack of communication. The Tribunal noted that the order was never pronounced to the Appellant's knowledge and was not communicated as required by Rule 150(3) of the NCLT Rules, 2016. The Tribunal referenced the Supreme Court's decision in V Nagarajan Vs. SKS Ispat and Power Limited, which emphasized the importance of pronouncement for the limitation period to commence. The Tribunal concluded that the appeal was filed within the limitation period, as the Appellant was not aware of the order dated 10.01.2018 until much later.

Conclusion:
The Tribunal allowed the appeal, setting aside the orders dated 10.01.2018 and 25.02.2022. It directed the Registrar to refund the amount deposited by the Appellant with interest and remanded the matter to the Adjudicating Authority for fresh consideration. The parties were directed to appear before the Adjudicating Authority on 19th September, 2022.

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