NCLAT: Adjudicating Authority Must Consider Sufficient Cause Before Proceeding Ex-Parte

NCLAT: Adjudicating Authority Must Consider Sufficient Cause Before Proceeding Ex-Parte

Introduction

The National Company Law Appellate Tribunal (NCLAT) has held that litigants cannot be forced to argue on merits when they have not filed a reply to the Resolution Professional's report submitted under Section 99 of the Insolvency and Bankruptcy Code (IBC), due to sufficiently explained causes.

Factual Background

The appellant challenged an order passed by the National Company Law Tribunal (NCLT), New Delhi, which rejected an application filed by the appellant. The appellant's counsel appeared in a related matter and informed about the husband's illness, but an ex-parte order was passed in the appellant's case due to non-appearance.

Procedural Background

The NCLAT considered the appellant's appeal and examined the sequence of events. The tribunal noted that the appellant had made out a sufficient case for recall of the orders, which was not considered by the Adjudicating Authority.

Issues

1. Whether the Adjudicating Authority's order was justified in requiring the appellant to argue on merits without filing a reply to the RP's report?

2. Whether the appellant's absence was justified due to sufficiently explained causes?

Contentions of the Parties

Appellant's Contention: The appellant argued that the Adjudicating Authority failed to consider the sufficient cause for non-appearance and that the appellant was not given a fair opportunity to file a reply.

Respondent's Contention: The respondent submitted that ample opportunity was given to file a reply, but the appellant failed to do so and was not present when the case was called.

Reasoning and Analysis

The coram of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) observed that the Adjudicating Authority failed to address the appellant's sufficient cause for non-appearance and that requiring the appellant to argue on merits without filing a reply was premature and unjustified. The tribunal held that the impugned orders were liable to be set aside.

Implications

This judgment clarifies that litigants cannot be forced to argue on merits without filing a reply to the RP's report, when sufficient cause is shown for non-appearance or non-filing.

Outcome

The NCLAT set aside the impugned orders, holding that the Adjudicating Authority's order was not justified in requiring the appellant to argue on merits without filing a reply.

In this case the appellant was represented by Mr. Mayank Bhargava and Mr. Rajdeep Saraf, Advocates. Meanwhile the respondent was represented by Mr. Brijesh Kumar Tamber and Mr. Prateek Kushwaha, Advocates for R-1. Mr. Sandeep Bajaj, Mr. Devansh Jain, Ms. Shrishti Jeswani, Advocates for R-2.