2025 (3) TMI 912 - HC - IBC

Ex-parte property takeover order violated natural justice principles by denying notice and hearing to stakeholders

M/s. Lavender Infraprojects Pvt. Ltd., Bright Buildtech Pvt. Ltd., Greenopolis Welfare Association, Delhi Brass And Metal Works Private Limited And Ors. Versus Nishit Badola & Ors.

Delhi HC found violation of natural justice principles in ex-parte order allowing property takeover and liquidation without providing notice or hearing ... Violation of principles of natural justice - challenge to ex-parte order - notice or opportunity of being heard not provided to any of the stakeholders - takeover and liquidation of properties allowed - HELD THAT:- It would be appropriate to direct the appellants to approach the learned Single Judge seeking their impleadment in the underlying writ petition and simultaneously file an appropriate application seeking recall/clarification/modification or review of the impugned order dated 22.10.2024 so as to enable the learned Single Judge to re-consider the grievances raised by the appellants after giving due opportunity to them. 10 days time granted for the appellants to file their impleadment applications and any other appropriate application, if so advised, in the underlying writ petition pending before the learned Single Judge. The learned Single Judge is requested to take up the applications, if so filed, and dispose of the same with due expedition, preferably within a period of 30 days thereafter. Appeal disposed off. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:1. Whether the ex-parte order passed by the learned Single Judge, allowing the takeover and liquidation of properties claimed by the appellants without notice or hearing, was legally justified.2. Whether the properties in question were rightfully deemed as assets of M/s. Three C Shelters Pvt. Ltd. and subject to the Corporate Insolvency Resolution Process (CIRP) despite the CIRP being quashed by the National Company Law Appellate Tribunal (NCLAT).3. Whether the actions of the Interim Resolution Professional (IRP), who was functus officio, were valid under the Insolvency and Bankruptcy Code, 2016.4. The implications of the Supreme Court's decision in Embassy Property Developments Private Limited vs. State of Karnataka & Ors. on the current proceedings.5. The procedural propriety of the appellants not being impleaded or heard in the underlying writ petition.ISSUE-WISE DETAILED ANALYSIS1. Legality of Ex-parte Order:The Court considered whether the learned Single Judge's ex-parte order, which allowed the takeover and liquidation of properties claimed by the appellants, was legally justified. The appellants argued that they were not parties to the underlying writ petition and were not given notice or an opportunity to be heard before the order affecting their substantial rights was passed. The Court found that the appellants were indeed not arrayed in the memo of parties nor called upon to answer the issues raised, which led to an ex-parte order affecting their rights. The Court concluded that such directions should have been passed only after considering or hearing the appellants.2. Status of Properties as Assets of M/s. Three C Shelters Pvt. Ltd.:The appellants contended that the properties in question were wrongly deemed as assets of M/s. Three C Shelters Pvt. Ltd. The Court noted that the CIRP for M/s. Three C Shelters Pvt. Ltd. had been quashed by the NCLAT, rendering the office of the IRP functus officio. The Court also referenced the Supreme Court's decision in Embassy Property Developments Private Limited vs. State of Karnataka & Ors., which clarified that assets owned by third parties but in possession of a Corporate Debtor under contractual arrangements are excluded from the definition of 'asset' under Section 18 of the Insolvency and Bankruptcy Code, 2016.3. Actions of the IRP:The Court examined whether the actions of the IRP, who was functus officio, were valid under the Insolvency and Bankruptcy Code, 2016. The appellants argued that the IRP could not take possession of properties not belonging to the Corporate Debtor without following the prescribed procedure. The Court found that the IRP's actions were contrary to law as the properties were not in possession of M/s. Three C Shelters Pvt. Ltd. under any contractual arrangement.4. Procedural Propriety:The Court addressed the procedural propriety of the appellants not being impleaded or heard in the underlying writ petition. The Court concluded that the appellants should have been given an opportunity to be heard before any order affecting their rights was passed.SIGNIFICANT HOLDINGSThe Court held that the matter required reconsideration by the learned Single Judge, particularly in light of the issues raised by the appellants. The Court directed the appellants to file applications for impleadment and for recall or review of the impugned order within 10 days. The learned Single Judge was requested to dispose of these applications within 30 days thereafter.The Court preserved the status quo regarding the properties in question, restraining both parties from taking any further steps in terms of the impugned order. It emphasized that no observations made should be construed as an expression on the merits of the case, and the learned Single Judge should consider the matter uninfluenced by the current judgment.The appeals were disposed of with directions to maintain status quo until the learned Single Judge addresses the applications filed by the appellants.