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

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 consider appellant's objections and record specific findings on undenied pleadings, as respondent did not file counter affidavit. NCLAT held the judgment violated Section 424 of Companies Act and Mobilox Innovations guidelines for Section 9 applications. Matter remanded to NCLT Chennai for fresh consideration of rival contentions and merits.

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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.

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