Ashok tiwari Vs. DBS bank India Limited and Ors.
Company Appeal no.464 of 2022
Facts:
(1) Application was filed by the Respondent under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) on 18.01.2022 alleging default of Rs.49,55,93,696.48.
(2) Adjudicating Authority on the said Application issued notice to the Corporate Debtor (Appellant herein) on 11.02.2022, fixing the date as 29.03.2022. The copy of the notice was served on the Appellant on 07.03.2022. On 29.03.2022, which was the first date of hearing after service of notice on the Appellant – Corporate Debtor, the Counsel appearing on behalf of the Appellant made a request to the Adjudicating Authority for grant of time to file a reply
(3) Appellant is challenging the order of admitting the application
Issue: Whether NCLT was right in admitting the application and right in rejecting the request to time to file the reply?
Arguments:
For appellant:
(1) Counsel for the appellant submitted that that the Adjudicating Authority while refusing to grant any time for filing reply on the first date of hearing has denied natural justice to the Appellant. Not even one opportunity was granted to the Appellant to file a reply
(2) It relied on Rule 37 of National Company Law Tribunal Rules, 2016 (“Rules”) and submits that the rule envisage that in event the Respondent does not appear on the date specified in the notice, Tribunal after according reasonable opportunity to the Respondent, shall forthwith proceed to ex-parte disposal of the Application. Whereas, when the Respondent appears on the first date of hearing, the Rules does not envisage that no reasonable opportunity should be given to the Respondent.
(3) Counsel submitted that Corporate Debtor, who appears on the first date of hearing and seeks a reasonable opportunity to file a reply cannot be worse off than a Respondent who does not appear on first date of hearing. Further, the Rules does not provide for any consequence for non-filing of the reply on the first date of hearing, in the event notice is served. The provisions of Rules 37 are only procedural provisions, which are ‘directory’ and non-filing of reply on the first date does not result in forfeiting the right of the reply of the Appellant.
(4) Court has to adopt a procedure with the consonance of principles of natural justice
For respondents:
(1) Counsel for respondent submits that Corporate Debtor had ample opportunity to file a reply before the next date of hearing. The notices were issued on 11.02.2022, which was served on 07.03.2022. Hence, the Corporate Debtor could have filed the reply before the first date of hearing.
(2) Adjudicating Authority has rightly refused to grant any time to the Corporate Debtor to file a reply, since it had ample time to file a reply and when it chooses not to file a reply, it has to face the consequences. The IBC proceedings are to be completed in a timeline as is prescribed in the Code and the Rules. Hence, the Adjudicating Authority did not commit any error in rejecting the prayer for grant of time to file a reply.
(3) He submitted that Adjudicating Authority has noticed the earlier proceedings before the Debt Recovery Tribunal and has rightly observed that Corporate Debtor was well versed with the facts of the case since long.
Decision: Hon’ble NCLAT set aside the order of admitting the application and held that NCLT did not provide reasonable opportunity to corporate debtor to file its reply.
Rationale:
(1) NCLAT noted that rule contemplates filing of reply by the Corporate Debtor, who has received notice and who appears before the Adjudicating Authority and contest the matter. Sub-rule (3) of Rule 27, however, is silent as to what shall be the course of action to be adopted by the Adjudicating Authority in event the reply is not filed by the Corporate Debtor before the date of hearing.
(2) Sub-rule (3) of Rule 37 does not provide for any consequence in event of non-filing of reply before the next date of hearing. Rule 37 is procedural Rule and procedural Rules are there to assist the adjudication of the dispute by Adjudicating Authority. Rule 37, sub-rule (3) cannot be read to mean that on non-filing of reply by the Corporate Debtor before the date of hearing, he can neither ask for any time, nor can be granted any time by the Adjudicating Authority to file the reply.
(3) It noted that When a Corporate Debtor, who does not appear on the date fixed, is entitled to a reasonable opportunity before proceeding ex-parte, a Corporate Debtor who appeared on the first date of hearing cannot be put to in worse position than a Corporate Debtor who does not appear.
(4) The procedure, which is to be adopted by the Tribunal has to be in consonance with the rules of natural justice and equity as required by the rules itself. Unless, it is held that due to non-filing of the reply before the date of hearing by the Corporate Debtor, the Adjudicating Authority is obliged to decide the application under Section 7, the Adjudicating Authority has ample jurisdiction to consider any request for reasonable time by a Corporate Debtor for filing a reply
(5) Rejecting the request of the Corporate Debtor on the very first day for grant of time to file a reply, cannot be said to be in consonance with the principles of natural justice. There can be no dispute that in appropriate case, if the Adjudicating Authority is satisfied that the Corporate Debtor is deliberately delaying the matter, the request for grant of any further time to file a reply can be refused.
