NCLAT Quashes Ex-Parte Order: Lack of Notice to Corporate Debtor Due to Renumbering of Petition Renders Proceedings Invalid

NCLAT Quashes Ex-Parte Order: Lack of Notice to Corporate Debtor Due to Renumbering of Petition Renders Proceedings Invalid

Introduction

The National Company Law Appellate Tribunal (NCLAT) has set aside an ex-parte order passed by the Adjudicating Authority (NCLT), holding that renumbering a company petition without informing the corporate debtor invalidates the proceedings. The ruling underscores the importance of procedural fairness and ensuring the corporate debtor has a fair opportunity to contest the application.

Factual Background

A company petition was initially disposed of due to the commencement of the Corporate Insolvency Resolution Process (CIRP). The CIRP order was challenged before the NCLAT, which granted liberty to re-agitate the application if the CIRP order was set aside. Upon restoration, the petition was renumbered without notice to the corporate debtor.

Procedural Background

The Adjudicating Authority subsequently passed an ex-parte order admitting an application under Section 7 of the Insolvency and Bankruptcy Code (IBC). The corporate debtor appealed, contending that renumbering without notice deprived it of a chance to access the case details and appear in hearings.

Issues Before the Tribunal

1. Fair Opportunity to Contest – Whether failure to notify the corporate debtor about the renumbering violated the principles of natural justice.

2. Effect of Renumbering Without Notice – Whether such procedural lapse is sufficient to invalidate the proceedings.

Contentions of the Parties

• Appellant’s Contentions: The corporate debtor argued that renumbering without notice prevented its counsel from accessing the case file and attending hearings, thereby violating due process and the right to a fair hearing.
• Respondent’s Contentions: The financial creditor informed the Tribunal that it had accepted the amount deposited by the corporate debtor and did not wish to pursue the application under Section 7, rendering the dispute largely academic.

Reasoning & Analysis

The bench of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) held that renumbering without informing the corporate debtor was a significant procedural irregularity. This denied the debtor an effective opportunity to defend itself, making the ex-parte order procedurally invalid.

The Tribunal reiterated that procedural fairness is fundamental in insolvency proceedings, and any lapse affecting a party’s ability to participate can lead to the setting aside of orders.

Outcome

Although the financial creditor’s decision to withdraw the Section 7 application made the dispute academic, the NCLAT still addressed the validity of the ex-parte order. It directed the Registry to release the deposited amount to the financial creditor and close the application.

In this case, the appellant was represented by Mr. Abhijeet Sinha, Sr. Advocate with Mr. Himanshu Satija, Mr. Harsh Saxena, Ms. Heena Kochar, and Mr. Shevaaz Khan. The respondent was represented by Mr. Gaurav Mitra, Sr. Advocate with Mr. Abhishek Devgan for R-1, and Ms. Srishty Kaul and Ms. Roopsee Pandita for the applicant in I.A. No. 4228 of 2025.