NCLAT Rejects Application: No Power To Restrain Non-Party Without Hearing

NCLAT Rejects Application: No Power To Restrain Non-Party Without Hearing

Introduction

The National Company Law Appellate Tribunal (NCLAT) Chennai Bench has dismissed an interlocutory application filed by IDBI Bank Ltd., seeking to restrain Maharashtra State Power Generation Company Ltd. (MSPGCL), a non-party to the proceedings, from taking certain actions.

Factual Background

The Company Appeal was filed by IDBI Bank Ltd. against an order passed by the NCLT, Hyderabad Bench. During the pendency of the appeal, the Appellant filed an interlocutory application seeking to introduce MSPGCL as a party and restrain it from taking certain actions.

Procedural Background

The Appellate Tribunal considered the application at the admission stage and directed the Respondents to file their counter.

Issues Involved

1. Power to Restrain Non-Party: Whether the Appellate Tribunal has the power to restrain a non-party to the proceedings from taking certain actions.

2. Applicability of IBC Provisions: Whether Sections 19, 25, 35, and 36 of the Insolvency and Bankruptcy Code (IBC) empower the Appellate Tribunal to pass an order of injunction against a non-party.

Contentions of the Parties

Appellant's Contentions: The Appellant argued that the Appellate Tribunal has the power to restrain MSPGCL under Sections 19, 25, 35, and 36 of the IBC.

Respondent's Contentions: The Respondents argued that the Appellate Tribunal does not have the power to restrain a non-party without hearing them.

Reasoning and Analysis

The Appellate Tribunal analyzed the provisions of the IBC and held that:

• No Power to Restrain Non-Party: The Appellate Tribunal does not have the power to restrain a non-party to the proceedings without hearing them.
• Limited Scope of IBC Provisions: Sections 19, 25, 35, and 36 of the IBC do not empower the Appellate Tribunal to pass an order of injunction against a non-party.

Final Decision

A bench of Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain rejected the interlocutory application, holding that the Appellate Tribunal cannot pass an order of injunction against a non-party without hearing them.

Implications

This decision indicates the importance of understanding the scope and limitations of the powers of the Appellate Tribunal under the IBC.

In this case the appellant was represented by Mr. Allwin Godwin, Mr. Sagar Dhawan, Mr. Anoop Rawat, Mr. Vimal Asthana, Ms. Aishani Das and Ms. Niranjana Pandian, Advocates.