2024 (5) TMI 1152 - AT - Insolvency and Bankruptcy

Corporate debtor fails to overturn section 7 CIRP admission after missing hearing without sufficient cause under Rule 49

The NCLAT dismissed an appeal challenging the validity of admission of a section 7 application under CIRP. The corporate debtor alleged violation of ... CIRP - Validity of admission of section 7 application - Violation of principle of natural justice - Denial of opportunity of the corporate debtor to file reply - error in misinterpreting the scope of Rule 49(2) Denial of opportunity of the corporate debtor to file reply - HELD THAT:- Present is not a case where it can be said that the corporate debtor was prevented by any sufficient cause from appearing. Notice has been issued which was duly served. No cause is being showed by the appellant that they were prevented from appearing. Counsel appearing before the Adjudicating Authority and saying that he has recently engaged and has not filed the vakalatnama cannot be said that the corporate debtor was prevented by any sufficient cause from appearing. Corporate debtor has to blame himself for not appointing an Advocate to appear and make appropriate pleading before the Court. It is not a case advocate who appeared submitted that he shall file vakalatnama during the course of the day. Interpretation and Application of Rule 49(2) of the NCLT Rules, 2016 - HELD THAT:- Rule 49 gives ample jurisdiction to the Adjudicating Authority to proceed for ex parte as corporate debtor does not appear. “Appearance” as contemplated under Rule 49(1) is appearance by the corporate debtor or by an authorised representative. The financial creditor has also submitted that present is a case where debt and default is not even questioned since there is a consent decree passed by the DRT against the corporate debtor, hence, the appellant in this appeal is not making any submission on merits of the appeal although time was taken by the appellant on 31.01.2024 to file an additional affidavit so as to address the appeal on merits. It is noticed that during the oral submissions challenging the order rejecting the application under Rule 49(2), no submission has been advanced by the appellant on debt and default. In the facts of the present case and submission of the counsel for the parties, the present is not a case where this Tribunal may interfere with the impugned order in exercise of our appellate jurisdiction. There is no merit in the appeal. The appeal is dismissed. Issues Involved:1. Recall of the order dated 25.03.2022 admitting Section 7 application.2. Interpretation of Rule 49(2) of the NCLT Rules, 2016.3. Alleged violation of principles of natural justice.Summary:1. Recall of the Order Dated 25.03.2022 Admitting Section 7 Application:The appeal was filed by a Suspended Director of the Corporate Debtor challenging the order dated 15.01.2024, which rejected IA No.3470 of 2022. This IA sought the recall of the order dated 25.03.2022, admitting the Section 7 application filed by DBS Bank India Limited. The Corporate Debtor had defaulted on a debt of Rs.25,00,00,000/- granted by DBS Bank, leading to the filing of an OA No.466 of 2015 before the DRT. The DRT awarded Rs.23,29,19,212.46/- along with interest, and a recovery certificate was issued. The financial creditor filed a Section 7 application before the NCLT, claiming a default of Rs.48,31,28,726.42/- till 22.09.2021. Notices were issued to the Corporate Debtor, but no reply was filed, leading to the admission of the application on 25.03.2022. The appellant's subsequent appeal was withdrawn with liberty to file an application under Rule 49(2) of the NCLT Rules, 2016. The application was filed but rejected by the Adjudicating Authority, leading to the current appeal.2. Interpretation of Rule 49(2) of the NCLT Rules, 2016:The appellant argued that the Adjudicating Authority misinterpreted Rule 49(2), which allows for setting aside an ex-parte order if the respondent was not duly served or was prevented by sufficient cause from appearing. The Adjudicating Authority found that the notice was duly served on 07.03.2022, and the Corporate Debtor was not prevented by any sufficient cause from appearing. The mere fact that counsel appeared without a vakalatnama did not constitute sufficient cause. The Tribunal observed that the Corporate Debtor failed to appoint an advocate in time and could not blame the Adjudicating Authority for proceeding ex-parte.3. Alleged Violation of Principles of Natural Justice:The appellant contended that the refusal to grant time to file a reply on the first date of hearing was a violation of natural justice. The Tribunal referred to a similar case (Company Appeal (AT) (Insolvency) No.464 of 2022) where denial of time to file a reply was deemed a violation of natural justice. However, in the present case, the Tribunal noted that the Corporate Debtor had ample opportunity to respond but failed to do so. The Tribunal concluded that the Adjudicating Authority acted within its jurisdiction and there was no violation of natural justice.Conclusion:The Tribunal found no merit in the appeal and dismissed it, upholding the Adjudicating Authority's order rejecting the application under Rule 49(2). The Tribunal emphasized that the Corporate Debtor had not questioned the debt and default and had failed to show sufficient cause for non-appearance. The appeal was dismissed.