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2023 (3) TMI 174 - AT - Insolvency and BankruptcyCIRP - Ex-Parte Order - appeal barred by time limitation or not - NCLT admitted the application - Pre-Existing Dispute or not - HELD THAT - It is seen from the record that though the Impugned Order of Admission is passed on 21.03.2022 the Operation of the Order was stayed vide Order dated 25.03.2022 till 05.05.2022 that is the date on which the Order in I.A.33/2022 was passed. It is apparent from the record that the Appellant has diligently pursued their remedy of seeking recall of the Ex-Parte Order passed against the Corporate Debtor and therefore the period spent before the Adjudicating Authority pending adjudication would not be included in computing the Limitation. This Tribunal is of the considered view that when the Operation of the Impugned Order dated 21.03.2022 was suspended till 05.05.2022 no Appeal could have been preferred by the Appellant herein pending the adjudication before the Adjudicating Authority. The Appellant had challenged both Orders dated 21.03.2022 and 05.05.2022 by filing both these Appeals before this Tribunal on 09.05.2022 which is well within the period of Limitation and thereforethe Company Appeal (AT) (CH) (Ins.) No.158/2022 is not barred by Limitation. This Tribunal is conscious of the fact that any Admission under Section 9 of the Code it is also mandated that the existence of a Pre-Existing Dispute is to be ascertained by the Adjudicating Authority. Keeping in view the peculiar facts of the attendant case that the Corporate Debtor had replied on 06.01.2022 to the Section 8 Demand Notice dated 21.12.2021 highlighting the Pre-Existing Dispute; the Section 9 Application was filed on 07.01.2022 and the copy of the Reply Notice was delivered to the first Respondent on 08.01.2022; that the matter was listed before the Adjudicating Authority on 10.02.2022 and on 17.03.2022 but the Respondent had failed to place this Reply before the Adjudicating Authority either on 10.02.2022 or on 17.03.2022; this Tribunal is of the earnest view that in the interest of justice an opportunity be given to the Appellant herein to be heard on merits. This Tribunal finds it a fit case to remand to the Adjudicating Authority to decide the matter on merits specifically keeping in view that in paras 13 20 of the Impugned Order the Adjudicating Authority has observed that even if the Reply Notice dated 06.01.2022 was placed on record the same conclusion as was drawn in respect of the Reply Notice dated 04.10.2021 could have been drawn in respect of the said Notice since no document in support of the proof of the contention of the said Notice dated 06.01.2022 also came forth. Having regard to the fact that the Adjudicating Authority has touched upon the merits of the case by adverting to the submissions made in the Reply Notice this Tribunal is of the earnest view that an opportunity be given to the Appellants to raise all contentions and put forth the communication between the parties and argue their case on merits. The Impugned Orders are set aside and the Adjudicating Authority (Tribunal) shall hear both parties on merits and decide the matter afresh uninfluenced by any of the observations made by this Tribunal in this Order - Appeal allowed.
Issues Involved:
1. Admission of the Section 9 Application. 2. Existence of a Pre-Existing Dispute. 3. Service of Notice and Ex-Parte Order. 4. Limitation period for filing the appeal. 5. Rule 49 of the NCLT Rules, 2016. 6. Costs and Conditions for setting aside Ex-Parte Order. Issue-wise Detailed Analysis: 1. Admission of the Section 9 Application: The Adjudicating Authority admitted the application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Authority observed that the Corporate Debtor had defaulted on payments due to the Operational Creditor as per the Revenue Sharing Agreement. Despite issuing a legal notice, the Corporate Debtor failed to pay the amount due, leading to the admission of the insolvency petition. 2. Existence of a Pre-Existing Dispute: The Appellant argued that there was a pre-existing dispute regarding the claimed amount, citing various communications and legal notices exchanged between the parties. The Adjudicating Authority, however, found no evidence of a pre-existing dispute, as the Corporate Debtor did not appear to contest the case and prove the contentions made in the reply notices. The Tribunal noted that the reply notices did not spell out any pre-existing dispute except for raising certain contentions regarding contractual obligations. 3. Service of Notice and Ex-Parte Order: The Appellant contended that the notice was refused due to limited functioning of the Corporate Debtor's office during the Covid-19 pandemic. The Adjudicating Authority dismissed this argument, stating that the notice was deemed to be properly served once refused. The Tribunal emphasized that the Appellant did not satisfy the conditions under Rule 49 of the NCLT Rules, 2016, to set aside the ex-parte order, as they did not prove that the notice was not duly served or that they were prevented by sufficient cause from appearing. 4. Limitation Period for Filing the Appeal: The Tribunal assessed whether the appeal was barred by limitation. It concluded that the appeal was filed within the limitation period, as the operation of the impugned order was stayed until 05.05.2022, and the appeal was filed on 09.05.2022. The Tribunal held that the period spent before the Adjudicating Authority, pending adjudication, would not be included in computing the limitation. 5. Rule 49 of the NCLT Rules, 2016: The Tribunal examined Rule 49, which allows a respondent to apply for setting aside an ex-parte order if the notice was not duly served or if they were prevented by sufficient cause from appearing. The Tribunal found that the Appellant's argument of limited functioning due to Covid-19 did not constitute sufficient cause. However, considering the peculiar facts of the case, the Tribunal decided to provide the Appellant an opportunity to be heard on merits. 6. Costs and Conditions for Setting Aside Ex-Parte Order: The Tribunal set aside the ex-parte order, placing the Appellant on terms of paying costs of Rs. 15,000 to the Prime Minister's Relief Fund. The Appellant was required to produce the receipt before the Registry of the Adjudicating Authority three days prior to the first appearance. Conclusion: The appeals were allowed, and the impugned orders were set aside. The Adjudicating Authority was directed to hear both parties on merits and decide the matter afresh, uninfluenced by any observations made by the Tribunal. Both parties were directed to appear before the National Company Law Tribunal, Amravati Bench, Hyderabad, on 15.03.2023.
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