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2019 (1) TMI 1744

..... principles of natural justice - HELD THAT:- In the present case admittedly no notice was issued by the Adjudicating Authority to the ‘Corporate Debtor’ before admitting the application under Section 9 of the I&B Code. For the said reason an order cannot be upheld having passed in violation of principles of natural justice as already held in M/S. STARLOG ENTERPRISES LIMITED VERSUS ICICI BANK LIMITED [2017 (7) TMI 74 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL]. The Adjudicating Authority having failed to issue any notice to the ‘Corporate Debtor’ before admission of the application under Section 9, it prejudiced the ‘Corporate Debtor’, who could have shown pre-existence of dispute and thereby with a request to dismiss the application - The ‘Resolution Professional’ has filed its affidavit, similar plea has been taken as 1st Respondent has taken but as ‘Resolution Professional’ has no role for admission of Section 9, it is not open to him to support or oppose one of the party on the question of fact except to dispute or admit one or other fact. The application preferred by the 1st Respondent under Section 9 of the I&B .....

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..... submitted that Section 8(1) notice was served on the Corporate Debtor in its registered office on 28th May, 2018. It was only thereafter the application under Section 9 was filed. It was submitted by the learned counsel for the Operational Creditor that the 1st Respondent sent e-mail on 30th July, 2018 and subsequently heard by Adjudicating Authority on 27th August, 2018, the said e-mail clearly shows that the Corporate Debtor was informed about the date of hearing. 4. However, it is not disputed that the Adjudicating Authority had not issued any notice to the Corporate Debtor . In M/s. Innoventive Industries Limited v. ICICI Bank - Company Appeal (AT)(Insolvency) No. 1 & 2 of 2017 this Appellate Tribunal observed that notice is required to be given by the Adjudicating Authority before passing order under Section 7 or 9 of the I&B Code. 5. The aforesaid issue was also noticed by this Appellate Tribunal in M/s. Starlog Enterprises Limited vs. ICICI Bank Limited - 2017 SCC Online NCLAT 13 , wherein this Appellate Tribunal held as follows : 5. The aforesaid issue now stands decided by decision of the Appellate Tribunal in "M/s. Innoventive Industries Limited vs ICICI Bank .....

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..... proceeding may end up in its liquidation. A person cannot be condemned unheard. Where a statute is silent on the right of hearing and it does not in express terms, oust the principles of natural justice, the same can and should be read into in. When the NCLT receives an application under Section 7 of the Code of 2016, therefore, it must afford a reasonable opportunity of hearing to the corporate debtor as Section 424 of the Companies Act, 2013 mandates it to ascertain the existence of default as claimed by the financial creditor in the application. The NCLT is, therefore, obliged to afford a reasonable opportunity to the financial debtor to contest such claim of default by filing a written objection or any other written document as the NCLT may direct and provide a reasonable opportunity of hearing to the corporate debtor prior to admitting the petition filed under Section 7 of the Code of 2016. Section 7(4) of the Code of 2016 requires the NCLT to ascertain the default of the corporate debtor. Such ascertainment of default must necessarily involve the consideration of the documentary claim of the financial creditor. This statutory requirement of ascertainment of default brings wit .....

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..... order of NCLT or NCLAT as the case may be in accordance with law. It is also open to the parties to point out that the NCLT and the NCLAT are bound to follow the principles of natural justice while disposing of proceedings before them. In such circumstances, the challenge to the vires to Section 7 of the Code of 201 6 fails." 6. Therefore, it is clear that before admitting an application under Section 9 of the MB Code it is mandatory duty of the 'adjudicating authority' to issue notice. 6. In the present case admittedly no notice was issued by the Adjudicating Authority to the Corporate Debtor before admitting the application under Section 9 of the I&B Code. For the said reason an order cannot be upheld having passed in violation of principles of natural justice as already held in M/s. Starlog Enterprises Limited (Supra) . 7. Learned counsel appearing on behalf of the 1st Respondent (Operational Creditor) relied on a decision of this Appellate Tribunal in J.B. Tiwari vs. Biostadt India Limited & Anr. - Company Appeal (AT)(Ins.) No. 268 of 2018 disposed of on 30th November, 2018. It was submitted that this Appellate Tribunal though noticed that no notice was iss .....

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..... g Authority having failed to issue any notice to the Corporate Debtor before admission of the application under Section 9, it prejudiced the Corporate Debtor , who could have shown pre-existence of dispute and thereby with a request to dismiss the application. 12. The Resolution Professional has filed its affidavit, similar plea has been taken as 1st Respondent has taken but as Resolution Professional has no role for admission of Section 9, it is not open to him to support or oppose one of the party on the question of fact except to dispute or admit one or other fact. 13. For the reasons aforesaid, we set aside the impugned order dated 14th November, 2018. 14. In effect, order (s) passed by Ld. Adjudicating Authority appointing Interim Resolution Professional , declaring moratorium, freezing of account and all other order(s) passed by Adjudicating Authority pursuant to impugned order and action taken by the Resolution Professional , including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the 1st Respondent under Section 9 of the I&B Code is dismissed. The Adj .....

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