Jai Balaji Industries Limited vs State Bank Of India

JAI BALAJI INDUSTRIES LIMITED … APPELLANT

VERSUS

STATE BANK OF INDIA & ORS. … RESPONDENTS

JUDGMENT

N.V. RAMANA J.

1. This appeal is directed against order dated 08.02.2019,

passed by the National Company Law Appellate Tribunal, New

Delhi [“the NCLAT”], in Company Appeal (AT) (Insolvency) No.788

of 2018, whereby the order of the National Company Law

Tribunal, Calcutta [“the NCLT”] dated 10.10.2018 was set aside

and the NCLT was directed to admit the application filed by Signature Not Verified Digitally signed by

respondent no.1 against the appellant under Section 7, IBC. SATISH KUMAR YADAV Date: 2019.03.11 15:43:51 IST Reason:

2. Aggrieved by the said order, the appellant has preferred the

1 instant appeal.

3. Mr. Kapil Sibal, learned senior counsel appearing on behalf

of the appellant, assiduously urged that the appellant’s right to

be heard, audi alteram partem, one of the principles of natural

justice, has been violated in as much as the appellant has

neither been served with notice of appeal before the NCLAT nor

been given a hearing before it. The learned senior counsel

further submitted that the impugned order passed by the NCLAT

is contrary to law as it failed to comply with the procedure laid

down under the NCLAT Rules, 2016 [“NCLAT Rules”], specifically

Rule 48, which clearly provides that pursuant to issuance of

notice by the NCLAT, the copy of the appeal and documents filed

therewith, if any, shall be served along with the notice on the

other side. He further submitted that though notice was

directed to be issued by the NCLAT, the same was never received

by the appellant herein and the NCLAT passed order without

hearing the appellant, erroneously noting that it has heard all

the parties.

4. On the other hand, Mr. Mukul Rohatgi, learned senior

counsel appearing on behalf of respondent No.1, vehemently

2 contested the above­mentioned submissions of appellant. He

submitted that the advance copy of the appeal paperbook filed

by respondent no.1 in NCLAT was duly delivered by post at the

registered office of the appellant, wherein it showed intent to

challenge the order of the NCLT. Despite this, the counsel for the

appellant did not appear before the NCLAT. He referred to the

proceedings before the Calcutta High Court to show that the

appellant has been employing delay tactics to stall the

insolvency proceedings, which assertion was denied by the

learned senior counsel for the appellant.

5. Having heard the learned senior counsel for the parties, we

have also perused the materials placed before us. We find that in

the instant case, the NCLAT, vide order dated 02.01.2019,

issued notice both on the question of limitation as well as on the

merit of the appeal. Subsequently, judgment was reserved vide

order dated 08.01.2019. On 08.02.2019, the judgment was

pronounced noting:

“17. For the reasons aforesaid, we set aside the impugned order dated 10th October, 2018 and remit the matter to the Adjudicating Authority, Kolkata Bench, Kolkata with direction to admit the application under Section 7. Before such 3 admission, intimation to be given to the ‘Corporate Debtor’, but no further hearing is required to be given to any person, this Appellate Tribunal having heard all the parties and having held that it is a fit case for admission.” (emphasis supplied)

6. It is to be noted that in the rejoinder affidavit before us the

appellant has submitted that, pursuant to issuance of notice

vide order dated 02.01.2019, neither did respondent no. 1 file

process fee for issuance of summons in terms of the said order,

nor was the same served upon the appellant. Thus the judgment

which was reserved on 08.01.2019 by the NCLAT, and

consequently pronounced, was done without hearing the

appellant and the observation of the NCLAT that all the parties

were heard is erroneous. In fact, even the impugned order does

not note the appearance of the counsels on behalf of appellant

herein.

7. While the respondent no. 1 has submitted that an

advanced copy of the appeal was served on the appellant, the

same cannot be treated as service of notice as stipulated under

Rule 48 of the NCLAT Rules which, inter alia, provides:

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“48. Issue of notice­ (1) Where notice of an appeal or petition or interlocutory application is issued by the Appellate Tribunal, copies of the same, the affidavit in support thereof and if so ordered by the Appellate Tribunal the copy of other documents filed therewith, if any, shall be served along with the notice on the other side.”

8. Rule 48 of the NCLAT Rules clearly stipulates service of

notice on the other side, pursuant to issuance of notice by the

NCLAT in the appeal, regardless of supply of advance copy of

appeal paperbook prior to the issuance of notice by NCLAT.

9. Further, Rule 52 of the NCLAT Rules categorically states

that the judicial section of the registry of the NCLAT shall record,

in the “Notes of the Registry” column in the order sheet, the

details regarding completion of service of notice on the

respondents. It notes:

“52. Entries regarding service of notice or process.­ The Judicial Section of the Registry shall record in the column in the order sheet ‘Notes of the Registry’, the details regarding completion of service of notice on the respondents, such as date of issue of notice, date of service, date of return of notice, if unserved, steps taken for issuing fresh notice and date of completion of services etc.”

10. However, it is pertinent to note that the material placed

before us do not indicate that the aforementioned stipulation 5 has been complied with. As per the rejoinder affidavit filed on

behalf of the appellant, the counsel for the appellant had

undertaken a search of the register of process fee and summons,

and the concerned file in the office of the NCLAT on 28.02.2019.

However, no record of respondent no. 1 having paid the process

fee for issuance and service of notice to the appellant was found.

11. Thus, in view of the above position, it is abundantly clear

that no notice was served upon the appellant before the NCLAT

as stipulated under the rules, and the right of the appellant to

be heard, audi alteram partem, has been violated [See:

Ghaziabad Development Authority v. Machhla Devi, 2018

SCC OnLine SC 2178].

12. In the facts and circumstances of the case, we are of the

considered opinion that the instant appeal can be disposed of by

setting aside the order of NCLAT and remanding the matter back

to the NCLAT for fresh consideration. Accordingly, we set aside

the impugned order dated 08.02.2019 passed by the NCLAT and

remand the matter back to NCLAT with a direction to dispose of

the matter as expeditiously as possible after affording an

opportunity of hearing to the parties.

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13. The appellant and the respondents are also directed to

approach the NCLAT on March 13, 2019 with a prayer for early

listing of the matter. It is clarified that there is no necessity for

the NCLAT to issue any fresh notice to the appellant herein.

14. Before parting with the matter, we make it clear that we

have not expressed any opinion on the merits of the case.

Needless to say, the NCLAT will adjudicate the matter on its own

merits uninfluenced by any of the observations made

hereinabove.

15. The appeal stands disposed of in the above terms. Pending

applications, if any, shall also stand disposed of. No costs.

..............................................J. (N.V. RAMANA)

..............................................J. (MOHAN M. SHANTANAGOUDAR)

NEW DELHI;

MARCH 08, 2019.

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