2024 (11) TMI 673 - AT - IBC

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

M/s. Villmar Agro Polymers Pvt. Ltd Versus SPC FAB Private Limited Saraswathi Nilayam, Mr. Sivarama Prasad Gudipati (IRP of M/s. Villmar Agro Polymers Private Limited)

NCLAT Chennai dismissed an appeal challenging NCLT's order in insolvency proceedings. The appellant sought priority consideration of their application ... Violation of principles of natural justice - Propriety of the impugned order - ex-parte order - order rendered without providing an adequate opportunity of hearing - HELD THAT:- The contentions of the Appellant that, his application preferred under section 60(5) of the I & B Code to be read with the rule 49(2) of the NCLT rules, should have been taken up for consideration and for decision prior to IA(IBC)/202/2023 is un-called for, for the reason being that the CIRP proceedings as initiated by the order of 12.04.2023 has already been given effect to, and moratorium contemplated under section 14 of the I & B code, 2016 has already been enforced. Further, the fact that the Corporate Debtor had already vacated the premises about four years back and that the inferences drawn upon the inspection of the records as available with the RoC, and as per the share allotment letter of 08.01.2018 pointed to the need for considering the application under section 19(2) of the Code, on a priority basis so as to facilitate CIRP proceedings already ordered to be carried out in a move effective manner. The dismissal of the application preferred by the appellant, being IA(IBC)204/2023, on the ground that no adjudication on merits is required to be made on the said application, because of the order passed on IA No. 202/2023, is absolutely justified, because section 60(5) will not have a superseding effect to the provisions contained under section 19(2) to be read with section 14 of I & B code, 2016 for the purpose of effective conduct of CIRP proceedings. The order passed on IA No.204/2023 cannot be said to be an ex-parte order, contrary to the claim of the Appellant for the reason being that according to the Appellant's own case, a counsel was engaged by him, who did not file vakalathnama or counter affidavit and in the absence of there being any effective assistance being provided by the Appellant herein to the Learned Adjudicating Authority, the Learned Adjudicating Authority, by order of 29.08.2023, directed the matter to be proceeded ex-parte. There are no merits in the appeal and the same would accordingly stand ‘dismissed’. Issues:1. Propriety of the impugned order dated 17.11.2023 passed by the Learned Adjudicating Authority2. Alleged error in law by the Learned Adjudicating Authority3. Admission of the company into CIRP proceedings and appointment of Interim Resolution Professional4. Lack of notice to suspended directors of the corporate debtor5. Filing of application to set aside the ex-parte order dated 12.04.20236. Validity of the debt claimed by the operational creditor7. Consideration of IA No. 204/2023 seeking recall of the order dated 12.04.20238. Disposal of IA (IBC)/202/2023 and its impact on IA No. 204/20239. Justification for rejection of IA No. 204/202310. Ex-parte nature of the order passed on IA No. 204/2023Analysis: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.