TaxTMI 
TaxTMI 
2017 (4) TMI 1248
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....any Law Tribunal, (NCLT) Kolkata Bench. He submits that, the letter does not inform the petitioners about the date when such application would be taken up for consideration by the (NCLT). He submits that, the NCLT had registered such application as Company Petition No. 16 of 2017. An order dated January 30, 2017 was passed on a hearing conducted on such Company Petition on January 25, 2017. The order was passed ex-parte. The petitioner was not informed of the date of hearing. The petitioner was not afforded an opportunity of hearing by the NCLT prior to the passing of such order of administration of the petitioner and appointment of Interim Resolution Professional. The petitioner had preferred an appeal from such order. Such appeal being Company Appeals (AT) (Insolvency) No. 3 of 2017 was disposed of by an order dated February 21, 2017. He submits that, pursuant to the disposal of the appeal, proceedings have taken place in the Company Petition. At no stage has the petitioner been heard by the NCLT. He submits that, the petitioner is entitled to a right of hearing under the principles of natural justice. He submits that, the Code of 2016 is silent as to the grant of hearing by the ....
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..... He refers to the Rules 2016, particularly Rule 4 thereof which contemplates a service of notice of the application by the financial creditor on the financial debtor. He refers to Rule 10 of the Rules of 2016 and submits that, such Rules contemplate that, the provisions of Rules 20 to 24 and 26 of Part III of the National Company Law Tribunal Rules, 2016 will be applicable. He refers to Rule 24 of the National Company Law Tribunal Rules, 2016 which contemplates service of notice of the application upon the respondent. He submits that, the proceedings before the NCLT are to be conducted keeping in view the provisions of Section 424 of the Companies Act, 2013. Section 424 of the Act of 2013 contemplates the NCLT applying the principles of natural justice in the proceedings. He submits that, the NCLT is not bound by the Code of Civil Procedure, 1908 and that, it can regulate its own procedure subject to the provisions of the Act of 2013 and the Insolvency and the Bankruptcy Code of 2016. He submits that, the Code of 2016 does not debar the applicability of the principles of natural justice in proceedings under consideration by the NCLT when it is considering an application under Sect....
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....he applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish - (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under Sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). (5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional,....
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....tion 7 allows the adjudicating authority to admit an application under Sub-section (2) where a default has occurred and the application is complete and there is no disciplinary proceedings pending against the proposed resolution professional. It also allows the adjudicating authority to reject such an application if no default has occurred or the application under Sub-section (2) is incomplete or where any disciplinary proceedings is pending against the proposed resolution professional. However, if the adjudicating authority is proceeding to dismiss an application, on the ground of defect in the application, then the adjudicating authority will give a notice of such defect to the applicant to rectify such defect within 7 days from the date of receipt of the notice. Sub-section (6) of Section 7 stipulates that, the corporate insolvency resolution process shall commence from the date of admission of the application under Sub-section (5). Sub-section (7) of Section 7 mandates the adjudicating authority to communicate its orders within 7 days of admission or rejection of the application, as the case may be, to the financial creditor and the corporate debtor. Section 61 of the Code o....
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....recognizes that, an appeal against an order of liquidation passed under Section 33 may be filed on the grounds of material irregularity or fraud committed in relation to an order of liquidation. In the scheme of the Code of 2016, therefore, an application under Section 7 of the Code of 2016 is to be first made before the NCLT. An appeal of the order of NCLT will lie before the NCLAT. NCLT and NCLAT are constituted under the provisions of the Companies Act, 2013. The procedure before the NCLT and the NCLAT is guided by Section 424 of the Companies Act, 2013. It is as follows: "424. Procedure before Tribunal and Appellate Tribunal.-(1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908(5 of 1908), but shall be guided by the principles of natural justice, and, subject to the other provisions of the Act 1[or of the Insolvency and Bankruptcy Code, 2016] and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure. (2) The Tribunal and the Appellate Tribun....
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.... the other provisions of the Act of 2013 or the Insolvency and Bankruptcy Code of 2016 and any Rules made thereunder. The Code of 2016 read with the Rules 2016 is silent on the procedure to be adopted at the hearing of an application under section 7 presented before the NCLT, that is to say, it is silent whether a party respondent has a right of hearing before the adjudicating authority or not. Section 424 of the Companies Act, 2013 requires the NCLT and NCLAT to adhere to the principles of the natural justice above anything else. It also allows the NCLT and NCLAT the power to regulate their own procedure. Fretters of the Code of Civil Procedure, 1908 does not bind it. However, it is required to apply its principles. Principles of natural justice require an authority to hear the other party. In an application under Section 7 of the Code of 2016, the financial creditor is the applicant while the corporate debtor is the respondent. A proceeding for declaration of insolvency of a company has drastic consequences for a company. Such proceeding may end up in its liquidation. A person cannot be condemned unheard. Where a statute is silent on the right of hearing and it does not in exp....