2022 (9) TMI 173 - AT - Insolvency and Bankruptcy

Appeal against Insolvency Order Allowed due to Violation of Natural Justice

BHAWANISHANKAR HARISHCHANDRA SHARMA Versus FEEDBACK HIGHWAYS OMT PVT. LTD.

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 ... Scope of pronouncing of judgement - Whether a member of the bench who has not heard the arguments can pronounce the order of a reserved Judgment? - HELD THAT:- Audi alterm partem is a salutary principle of natural justice which means that nobody should be condemned unheard. It is equally important that the decision should not be taken by a Judge who has not heard the case on facts and the law. The law does not permit that the case is heard by one entity and the order is pronounced by another who has not heard the case at all. In such circumstances, the question posed is hereby answered in favour of the Appellant and it is held that the order dated 10.01.2018, having been passed by a bench in which one of the member was not a member of the bench who had heard the matter at the time when it was reserved, is patently illegal and void ab-initio. Time Limitation - HELD THAT:- The appeal filed by the Appellant is well within the period of limitation even against the order dated 10.01.2018 because the said order was never pronounced to the knowledge of the Appellant and by the bench competent to do so and as such it could not have been challenged by the Appellant earlier within the time prescribed by Section 61 of the Code. Appeal allowed. 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.