2026 (4) TMI 162 - AT - IBC

Recall application, not review, applies where hearing defects and procedural lapses undermine an insolvency proceeding order.

An application challenging an order for lack of proper hearing is to be treated as a recall application, not a review on merits, where the record does not ... Scope of application seeking recall of the order, wrongly treated as a review - absence of a proper hearing and failure to follow the prescribed procedural course - Principles of Natural Justice - Procedural irregularity in pronouncement of orders - definition of word ‘‘Tribunal” as given under sub-section 90 of Section (2) of the Companies Act, 2013. Notice of hearing - Ex parte procedure - Natural justice - HELD THAT: - The Appellate Tribunal held that, once Section 424 of the Companies Act applies to proceedings under the Insolvency and Bankruptcy Code, the adjudicatory process must conform to the principles of natural justice and the procedural framework reflected in Rule 44 of the NCLT Rules and the corresponding civil court procedure. On the record, the order dated 14.12.2023 neither concluded arguments nor reserved orders, and no date was fixed for pronouncement. Despite that, the matter was shown for pronouncement on 19.02.2024 even though a later order had fixed 01.03.2024 in connection with the pending applications. There was also no order directing that the matter would proceed ex parte against the appellants, and the appellants' application for taking additional documents on record remained undecided. These procedural defects rendered the earlier order ex parte and vitiated by non-compliance with natural justice. [Paras 26, 27, 32, 33, 34] The earlier proceedings culminating in the order dated 19.02.2024 were held to be procedurally defective and legally unsustainable. Recall and review - Inherent powers - Ex parte order - HELD THAT: - The Appellate Tribunal found that IA (IBC) / 743 / CHE / 2024 did not seek a re-examination of the merits of the order dated 19.02.2024, but pointed out the procedural anomalies in passing that order without hearing, without fixing a proper hearing date, and without dealing with the pending application for additional documents. In that situation, the application was in substance one for recall of an ex parte order and not for review. The Adjudicating Authority therefore erred in law in dismissing it on the ground that it lacked review jurisdiction. In consequence, the impugned order was quashed and the matter remitted for fresh consideration of the recall application, after first taking a decision on the pending application for additional documents, subject to payment of costs by the appellants. [Paras 30, 31, 34, 35, 36] The impugned order treating the application as one for review was set aside, and the matter was remitted for fresh decision on the recall application after consideration of the pending document application, subject to costs. Final Conclusion: The Appellate Tribunal held that the Adjudicating Authority had wrongly treated the appellants' application as a review, though it was in substance a recall of an ex parte order passed in breach of procedural fairness. The impugned order was quashed and the matter remitted for fresh consideration, after first deciding the pending application for additional documents, subject to deposit of costs. Issues: Whether the application seeking recall of the order dated 19.02.2024 was wrongly treated as a review, and whether the absence of a proper hearing and failure to follow the prescribed procedural course vitiated the impugned order.Analysis: The Tribunal's procedure in insolvency and company matters is governed by the principles of natural justice and the procedural framework under Section 424 of the Companies Act, 2013, read with the applicable NCLT Rules and the corresponding civil procedure principles. Where a party has not been afforded a proper hearing, and the record does not show that the matter was validly taken ex parte or that arguments were concluded before pronouncement, an application complaining of such procedural infirmity is a recall application and not a review on merits. The failure to separately deal with the application for taking additional documents on record further indicated a procedural defect and non-application of mind.Conclusion: The impugned order was held unsustainable, the application was directed to be considered as a recall application, and the matter was remitted to the Tribunal for fresh consideration of the pending applications, subject to costs.