Fair Hearing Imperative: NCLAT Chennai Sets Precedent on Reserved Orders and Natural Justice

Fair Hearing Imperative: NCLAT Chennai Sets Precedent on Reserved Orders and Natural Justice

Introduction

The National Company Law Appellate Tribunal (NCLAT) Chennai Bench has delivered a significant judgment, emphasizing the importance of adhering to the principles of natural justice. The tribunal held that reopening a case reserved for orders without hearing the affected party violates the principle of Audi Alteram Partem.

Factual Background

The appellant, Satya Behera (Proprietor of Satya Logistics), filed four applications before the National Company Law Tribunal (NCLT) against four individuals who were personal guarantors of M/s Ankit Ispat Pvt. Ltd. The petitions were heard, and the arguments were concluded on February 19, 2025. The matter was reserved for orders.

On March 21, 2025, the NCLT dismissed all four petitions based on a mention made by the counsel of financial institutions, namely the State Bank of India, the Central Bank of India, and the Federal Bank. The counsel highlighted that parallel insolvency proceedings involving the same guarantors were pending before NCLT Bench-I. Notably, these banks were not parties to the four petitions before NCLT Bench-II.

Procedural Background

The NCLT's decision to dismiss the petitions was based on a unilateral mention made by a non-party, without hearing the affected party. The appellant argued that this decision was in violation of the principles of natural justice.

Issues

The primary issue before the NCLAT was whether the NCLT's decision to reopen the case and dismiss the petitions without hearing the affected party was valid. The NCLAT had to determine whether the NCLT's actions violated the principle of Audi Alteram Partem.

Contentions of the Parties

The appellant argued that the banks had no locus to influence the outcome of the reserved order. The appellant contended that the matter was reserved, and any submission by a third party should have only been considered after duly serving notice to the appellant. The appellant highlighted that the dismissal of the petition based on the unilateral mention, without hearing the appellant, amounts to a violation of principles of natural justice.

Reasoning & Analysis

The bench of Justice Sharad Kumar Sharma (Member – Judicial) and Jatindranath Swain (Member – Technical) observed that the NCLT had erred in acting upon the submission of the third party without hearing the appellant. The bench held that once an order is reserved after the conclusion of arguments, no new facts should influence the order unless the matter is formally reopened and all parties are given notice. The tribunal emphasized that the principles of natural justice require that parties be given a fair opportunity to be heard.

The NCLAT noted that the NCLT ought to have either noticed the appellant and heard him on the issue raised by the mention or should not have passed an order on the basis of the mention on the date when the company petition itself was listed for pronouncement of order.

Implications

The NCLAT's decision has significant implications for the legal community and stakeholders. It emphasizes the importance of adhering to the principles of natural justice and ensuring that all parties are given a fair opportunity to be heard. This decision will likely have a bearing on future cases where similar issues arise.

Outcome

The NCLAT allowed the appeal and quashed the impugned order dated March 21, 2025. The tribunal remitted the matter back to the NCLT for reconsideration. The NCLAT's decision ensures that the principles of natural justice are upheld, and parties are given a fair opportunity to be heard.

In this case the appellant was represented by Mr. T.K. Bhaskar and Mr. P. Gowtham, Advocates. There was no appearance for the respondents.