2024 (9) TMI 1423 - AT - IBC

NCLAT quashes NCLT judgment for failing to consider objections and violating Section 424 guidelines

Mr. KN Devdass, Son of KK Narayanan, Suspended Director of Cema Electric Lighting Products India Pvt Ltd. Versus M/s. Overdrive Electronics (P) Ltd., Mr. Sushil Kumar Singhal

NCLAT Chennai quashed NCLT's judgment dated 09.07.2024 in CP/IB/173(CHE)/2023 for being perverse and without application of mind. The tribunal failed to ... Admissibility of pleadings when respondent does not file a counter affidavit - judicial implications of non filing of a Counter - HELD THAT:- NCLT has recorded that it was conscious of the objection raised by the Appellant in the objection, failure to consider the same and to record specific finding on it, that is, on the facts as pleaded by the Appellant in the Memo of Objection, would render Judgment being perverse and without application of mind especially when the pleadings of the Appellant remain undenied by the Respondent’s Counsel having denied to file a Counter Affidavit, qua the pleadings. Accordingly, the Judgment dated 09.07.2024 as rendered in CP/IB/173(CHE)/2023 would be held to be vitiated, owing to the ground which has been taken by the appellant that even after taking note of the Appellant’s contention raised in his objection dated 14.03.2024, and referring to the same in the body of the Judgment, the Learned Adjudicating Authority has not recorded any, no finding on the same in its judgment. Even in the light of the Judgment of Mobilox Innovations Private Limited [2017 (9) TMI 1270 - SUPREME COURT], where the guidelines have been framed therein for the purposes of determining an application under Section 9 based on the criteria prescribed therein prior to the imposition of moratorium under Section 14, since the aforesaid factors have not been considered while passing the final judgment, the judgment Impugned will be held as being not in consonance to the provisions contained under Section 424 of the Companies Act and therefore, the initiation of the Section 9 proceedings would be bad and without application of mind. The Impugned Judgment dated 09.07.2024 as rendered by the National Company Law Tribunal, Chennai Bench in CP/IB/173(CHE)/2023, would hereby stand quashed - the proceedings are remanded back to the Learned National Company Law Tribunal, Chennai Bench, to redecide the matter afresh after considering the rival contentions and particularly in the context of the pleading which has been raised qua the claim which is subject matter of consideration and decide the same on its merit. Issues:1. Admissibility of pleadings when respondent does not file a counter affidavit.2. Allegations of inaction by the Learned Adjudicating Authority.3. Failure to consider appellant's objections and contentions.4. Compliance with principles of natural justice and fair hearing in tribunal proceedings.Detailed Analysis:1. The judgment discusses the settled principle that when a respondent in judicial proceedings states that they do not intend to file a counter affidavit, the appellant's pleadings are treated as admitted. This principle was established in previous judgments by the Hon'ble High Courts of Delhi and Allahabad. Despite repeated requests, the respondent did not file a counter affidavit in the case at hand, leading the tribunal to decide the appeal based on the appellant's pleadings alone.2. The appellant, a Suspended Director of a company, alleged inaction by the Learned Adjudicating Authority in a specific case. The appellant raised objections regarding the handling of defective products and the failure of the Operational Creditor to cooperate as directed by the tribunal. The appellant argued that the impugned order and subsequent actions would lack merit if his objections were not considered and resolved.3. The appellant contended that the Learned Adjudicating Authority did not adequately address his objections and contentions in the judgment. Despite the appellant's detailed submissions and objections, the tribunal's decision failed to consider and address crucial points raised by the appellant, leading to a flawed judgment.4. The judgment emphasized the importance of complying with the principles of natural justice and fair hearing in tribunal proceedings. The tribunal is required to consider all pleadings and objections raised by parties, giving them a genuine opportunity to defend themselves. Failure to consider and address the appellant's objections rendered the judgment flawed and not in line with the provisions of the Companies Act.In conclusion, the National Company Law Tribunal, Chennai Bench's judgment dated 09.07.2024 in the case was quashed, and the proceedings were remanded back to redecide the matter considering all contentions and objections raised by the parties. The judgment highlighted the necessity of fair consideration of all pleadings and objections in tribunal proceedings to ensure a just outcome.