NCLAT upholds NCLT decision prioritizing section 19(2) application over section 60(5) during ongoing insolvency proceedings

NCLAT Chennai dismissed an appeal challenging NCLT's order in insolvency proceedings. The appellant sought priority consideration of their application under section 60(5) of IB Code over another application under section 19(2). NCLAT held that since CIRP proceedings were already initiated and moratorium under section 14 was enforced, the NCLT correctly prioritized the section 19(2) application to facilitate effective CIRP conduct. The tribunal found no violation of natural justice as the appellant's counsel failed to file proper documents, justifying the ex-parte proceedings. Section 60(5) does not supersede section 19(2) provisions for CIRP effectiveness.

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Issues:
1. Propriety of the impugned order dated 17.11.2023 passed by the Learned Adjudicating Authority
2. Alleged error in law by the Learned Adjudicating Authority
3. Admission of the company into CIRP proceedings and appointment of Interim Resolution Professional
4. Lack of notice to suspended directors of the corporate debtor
5. Filing of application to set aside the ex-parte order dated 12.04.2023
6. Validity of the debt claimed by the operational creditor
7. Consideration of IA No. 204/2023 seeking recall of the order dated 12.04.2023
8. Disposal of IA (IBC)/202/2023 and its impact on IA No. 204/2023
9. Justification for rejection of IA No. 204/2023
10. Ex-parte nature of the order passed on IA No. 204/2023

Analysis:

1. The Appellant challenges the propriety of the impugned order dated 17.11.2023, arguing that it was based on an earlier order that allegedly lacked proper legal foundation. The Appellant contends that the Learned Adjudicating Authority erred in law by relying on a decision rendered on 17.11.2023 as the basis for the order on IA (IBC)/204/23, which is the subject of the appeal.

2. The company, M/s. Villmar Agro Polymer Pvt. Ltd., was admitted into Corporate Insolvency Resolution Process (CIRP) proceedings, and Mr. Sivarama Prasad Gudipati was appointed as the Interim Resolution Professional (IRP) by an order dated 12.04.2023.

3. The Appellant claims that the suspended directors of the corporate debtor were not notified about the CIRP proceedings until 21.04.2023 when they received a letter from Respondent No. 2 requesting documents and information for the CIRP proceedings.

4. Upon learning about the order dated 12.04.2023, the Appellant filed an application, IA No. 204/2023, seeking to set aside the ex-parte order due to lack of a fair hearing opportunity.

5. The Appellant disputes the validity of the debt claimed by the operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, stating that the debt was not proven and that the proceedings should not have been initiated without proper notice.

6. The Appellant argues that IA No. 204/2023, filed for recalling the order dated 12.04.2023, should have been considered before IA(IBC)/202/2023, which was allowed by the Learned Adjudicating Authority on 17.11.2023.

7. The rejection of IA No. 204/2023 by the Learned Adjudicating Authority was justified based on the enforcement of the CIRP proceedings and the need to facilitate the process effectively.

8. The dismissal of IA No. 204/2023 was deemed appropriate as the order passed on IA(IBC)/202/2023 did not prejudice the Appellant's right to challenge the ex-parte nature of the order dated 12.04.2023.

9. The order on IA No. 204/2023 was not considered ex-parte, as the Appellant failed to provide effective assistance, leading to the matter being proceeded ex-parte by the Learned Adjudicating Authority.

10. Ultimately, the appeal was dismissed, finding no merit in the Appellant's contentions, and upholding the decisions of the Learned Adjudicating Authority.

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