Sh Sanjay Kumar Choudhayry vs Kishan Kumar Verma

Sanjay Kumar Choudhary ...Appellant

Versus

Creative Infraheights Pvt. Ltd. & Anr. ...Respondents

Present: For Appellant : Mr. Shankari Mishra, Ms. Niharika Tanwar, Advocates For Respondents : Mr. Riju Mani Talukdar, Mr. Pawan Kumar Ray, Adv. for R2 ORDER

Per: Justice Rakesh Kumar Jain:

16.11.2022: This appeal is against the order dated 17.08.2020, filed by one

of the director of the suspended board of directors of the Corporate Debtor, being

aggrieved against the admission of the application filed under Section 9 of the

Insolvency and Bankruptcy Code, 2016 (in short 'Code') by the Operational

Creditor (Creative Infraheights Pvt. Ltd.)

2. Counsel for the Appellant, at the outset, has challenged the validity of the

impugned order on the ground that it has been passed by a single member

(Judicial Member) though the entire matter was heard by two members (Judicial

Member and Technical Member). It is submitted that the application filed under

Section 9 of the Code was continuously heard by a bench comprising of Dr.

Deepti Mukesh, Judicial Member and Hemant Kumar Sarangi, Member

Technical till 17.01.2020 when they had passed the following order "Ld. Counsel

for the Respondent states that reply is filed. Learned Counsel for the Applicant seeks and is granted three days' time to file Rejoinder, with copy in advance to

the other side. Adjourned to 14.02.2020." However, on 14.02.2020, the

arguments were heard and order was reserved by the Judicial Member alone.

The order passed on 14.02.2020 read thus "order reserved. Sd/- Dr. Deepti

Mukesh, Member (Judicial)".

3. Counsel for the Appellant has vehemently argued that the constitution of

benches of the Tribunal has been categorically provided in Section 419(3) of the

Companies Act, 2013 and contended that "the powers of the Tribunal shall be

exercisable by Benches consisting of two Members out of whom one shall be a

Judicial Member and the other shall be a Technical Member:" She has further

argued that in case the bench is to function with the strength of one member

only, to exercise the powers of the Tribunal, it has to be specified by a special

order by the President of the Tribunal that they would act in respect of such

class of cases or such matters pertaining to such class of cases.

4. It is argued that in the absence of any such notification, issued by the

President of the Tribunal, the order passed by a Judicial Member alone is against

the law.

5. She has further argued that even otherwise, in exercise of the powers

provided in Section 419 of the Act, the Central Govt. notified the rules for NCLT,

2016 on 01.06.2016 to lay down the procedure for regulation of the Tribunal in

which there is no such rule that the matter is heard continuously by a bench

comprising of Judicial Member and Technical Member, in compliance of Section

419(3) and then suddenly the order is reserved by the Judicial Member alone. It

is submitted that there are only two provisions in the Rules pertaining to the pronouncement of the order by any one member of the bench and also by

authoring any member to pronounce the order but there is no such rule as per

which the arguments can be heard by a single member and thereafter the order

is pronounced by a single member.

6. She has also relied upon a decision of this Tribunal rendered in Raj Singh

Gehlot, Director of Ambience Pvt. Ltd. Vs. Vistra ITCL (India) Ltd. & Anr., CA (AT)

(Ins) No. 971 of 2019 in which a similar issue was raised about the violation of

Section 419(3) of the Act and Rule 152(4) of NCLT Rules, 2016. The contention

was accepted not only by the Counsel for the Appellant but also by the Tribunal.

The impugned order was set aside and the matter was remanded back to be

decided in accordance with law with the constitution of two members bench in

terms of Section 419(3).

7. Counsel for the Respondent has not denied the factual position because

the same is borne out from the record that the application filed under Section 9

of the Code by the Operational Creditor was heard through out by a Bench

comprising of two members (Judicial Member and Technical Member) but the

arguments were ultimately heard on the penultimate date i.e. 14.02.2020 by a

single bench member (Judicial Member) who reserved the order and ultimately

pronounced the same though after a period of six months.

8. We have heard Counsel for the parties and perused the record with their

able assistance.

9. From the resume of the aforestated facts and circumstances, the question

is as to whether the application filed either under section 7, 9 or 10 of the Code is heard by a bench comprising of two members of the Tribunal till the date it

was reserved by a single bench who ultimately pronounced the order is in

violation of the provisions of Section 419(3) of the Act?

10. Since, the facts are not disputed, therefore, it is relevant to refer to law

much less Section 419 of the Act, which is reproduced as under:-

"Section 419: Benches of Tribunal.

*419. (1) There shall be constituted such number of Benches of the Tribunal, as may, by notification, be specified by the Central Government.

(2) The Principal Bench of the Tribunal shall be at New Delhi which shall be presided over by the President of the Tribunal.

(3) The powers of the Tribunal shall be exercisable by Benches consisting of two Members out of whom one shall be a Judicial Member and the other shall be a Technical Member:

Provided that it shall be competent for the Members of the Tribunal authorised in this behalf to function as a Bench consisting of a single Judicial Member and exercise the powers of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as the President may, by general or special order, specify:

Provided further that if at any stage of the hearing of any such case or matter, it appears to the Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the President, or, as the case may be, referred to him for transfer, to such Bench as the President may deem fit.

1[(4) The Central Government shall, by notification, establish such number of benches of the Tribunal, as it may consider necessary, to exercise the jurisdiction, powers and authority of the Adjudicating Authority conferred on such Tribunal by or under Part II of the Insolvency and Bankruptcy Code, 2016.]

(5) If the Members of a Bench differ in opinion on any point or points, it shall be decided according to the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President for hearing on such point or points by one or more of the other Members of the Tribunal and such point or points shall be decided according to the opinion of the majority of Members who have heard the case, including those who first heard it.

11. A bare reading of Section 419(3) of the Act provides that the powers of the

Tribunal is to be exercised by benches having strength of two members out of

whom one shall be a Judicial Member and the other a Technical Member.

However, in order to meet the exigency, there is a proviso to this section which

says that, a member of the Tribunal, who is authorized by the President to

function as a bench, consisting of single Judicial Member bench, in order to

exercise the powers of the Tribunal in respect of a particular class of cases or

particular matters pertaining to such class of cases. However, it has to be only

by a general or special order passed by the President and not otherwise. Nothing

has been brought to our notice during the course of hearing that the President

of the Tribunal had issue any general or special order to give power to the single

member (Judicial Member) to function as a bench and nothing has been brought

to our notice that the case filed by the Operational Creditor has been treated as

a class of cases for the purpose of a decision by a single bench to function as a

division bench.

12. In so far as, Rule 151 of NCLT Rules, 2016 is concerned, it provides that

any member of the bench may pronounce the order for and on behalf of the

Bench and when an order is pronounced in terms of Rule 151, the Court Master

shall make a note in the order sheet, that the order of the Bench consisting of

President and Members was pronounced in open court on behalf of the Bench.

There is no such note even in the impugned order at the instance of the Court master in compliance with Rule 151 of the NCLT Rules. Rule 152 deals with the

situation where the member who had heard the matter is not available or ceased

to be member of the Tribunal then with the authority conferred by the President

any other member of the Tribunal may pronounce the order on his behalf after

being satisfied that the order has been duly prepared and signed by all the

members who heard the case.

13. In such facts and circumstances, there is no other alternative but to set

aside the order because the order passed is nonest in the eyes of law and cannot

be followed in any Court. Consequently, the appeal is allowed and the impugned

order is set aside. The application filed under Section 9 of the Code is restored

to its original number. The matter is remanded back to the concerned

Adjudicating Authority to decide it again in accordance with law.

The parties are directed to appear before the concerned Adjudicating

Authority on 06th December, 2022.

It is made clear that while allowing the appeal we have not touched any

aspect of the merit of the case.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

sc/rr