NCLAT upholds President's Rule 16(d) order, dismisses appeal filed under Section 421 Companies Act

The NCLAT dismissed an appeal challenging an order passed by the President under Rule 16(d) of NCLT Rules, 2016. The tribunal held that while appeals against orders under Part II of IBC are governed by Section 61, orders under Rule 16(d) fall under Section 421 of Companies Act, 2013. The appeal was maintainable under Section 421 and filed within prescribed time limits. The appellant's contention regarding lack of hearing was rejected, as the order could not be faulted on this ground. Additionally, the appeal was not filed by any applicant from the original Section 7 proceedings. Finding no merit in the grounds raised, the NCLAT upheld the impugned order and dismissed the appeal.

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ISSUES:

Whether an appeal against the order passed by the President of the NCLT under Rule 16(d) of the NCLT Rules, 2016 is maintainable under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC).Whether the appellant, as a stakeholder who had filed a claim in the Corporate Insolvency Resolution Process (CIRP), was a necessary party to the Transfer Application filed under Rule 16(d) and entitled to be heard before the order of transfer was passed by the President.Whether the suspended director of the corporate debtor had the locus standi to file the Transfer Application seeking transfer of the company petition to a different NCLT bench.Whether the order of transfer passed by the President of the NCLT under Rule 16(d) violated principles of natural justice by not providing the appellant an opportunity of hearing.Whether the reconstitution of the NCLT bench and subsequent transfer of the matter to the earlier bench hearing the case was justified and within the powers of the President under Rule 16(d).

RULINGS / HOLDINGS:

The appeal against the order passed by the President of the NCLT under Rule 16(d) is not maintainable under Section 61 of the IBC as it is not an order passed under Part II of the IBC; however, such appeal is maintainable under Section 421 of the Companies Act, 2013 since the President exercises the powers of the Tribunal.The appellant was not a necessary party to the Transfer Application as it was not a party to the original proceedings before the adjudicating authority and had only filed a claim which was pending adjudication; thus, the appellant was not entitled to be heard before the transfer order was passed.The suspended director of the corporate debtor had the right to file the Transfer Application under Rule 16(d) of the NCLT Rules, 2016, seeking transfer of the matter to the bench which had earlier heard the case.The order of transfer passed by the President under Rule 16(d) does not violate the principle of natural justice since the appellant was not impleaded as a party and the IRP, who was the sole party to the Transfer Application, was heard.The reconstitution of the NCLT bench and the transfer of the matter to the bench which had earlier heard the matter was a valid exercise of the administrative power vested in the President under Rule 16(d), and no interference is warranted in such exercise of power.

RATIONALE:

The Court applied the statutory framework under the Insolvency and Bankruptcy Code, 2016, the Companies Act, 2013, and the NCLT Rules, 2016, particularly Section 61 of the IBC, Section 421 of the Companies Act, and Rule 16(d) of the NCLT Rules.Section 61 of the IBC limits appeals to orders passed under Part II of the Code; since the transfer order under Rule 16(d) is administrative and not under Part II, the appeal lies under Section 421 of the Companies Act, which governs appeals from orders of the Tribunal.Rule 16(d) empowers the President of the NCLT to transfer cases between benches when circumstances warrant, reflecting administrative control over case allocation and bench constitution.Precedent judgments of the Tribunal affirm that the President's power under Rule 16(d) is broad and discretionary, and such transfer orders do not require prior notice or hearing of all stakeholders, especially non-parties to the transfer application.The principle of natural justice does not mandate hearing of non-parties in administrative transfer applications where their claims are pending but not yet admitted or adjudicated.The Court distinguished the present transfer application from applications under Section 12A of the IBC and the Supreme Court's judgment in 'Glass Trust Company LLC', clarifying that the transfer order does not engage the procedural requirements applicable to withdrawal or settlement applications under Section 12A.The Court emphasized that no opinion was expressed on the merits of the pending claim or Section 12A application, limiting the scope of the appeal to the validity of the transfer order only.

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