Case Note & Summary
The appeal arose from an order of the National Company Law Appellate Tribunal (NCLAT) dated 08.02.2019, which set aside the order of the National Company Law Tribunal (NCLT), Calcutta, dated 10.10.2018, and directed the NCLT to admit an application filed by the State Bank of India (respondent no.1) against Jai Balaji Industries Limited (appellant) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant contended that its right to be heard (audi alteram partem) was violated as it was not served with notice of the appeal before the NCLAT, contrary to Rule 48 of the NCLAT Rules, 2016. The NCLAT had issued notice on 02.01.2019, reserved judgment on 08.01.2019, and pronounced judgment on 08.02.2019, noting that all parties were heard. However, the appellant submitted that no process fee was paid for issuance of summons, and no service was effected. The Supreme Court examined the record and found no compliance with Rule 48 (service of notice) and Rule 52 (entries regarding service). The Court held that the observation of the NCLAT that all parties were heard was erroneous, and the appellant's right to be heard was violated, relying on Ghaziabad Development Authority v. Machhla Devi (2018). Consequently, the Supreme Court set aside the NCLAT order and remanded the matter back to the NCLAT for fresh consideration after affording an opportunity of hearing to the parties. The Court directed the parties to appear before the NCLAT on 13.03.2019 for early listing, and clarified that no fresh notice was required. The Court expressly stated that it had not expressed any opinion on the merits of the case.
Headnote
A) Natural Justice - Audi Alteram Partem - Service of Notice - NCLAT Rules, 2016, Rules 48 and 52 - The appellant was not served with notice of appeal as required under Rule 48, and the NCLAT erroneously recorded that all parties were heard. The Supreme Court held that the right to be heard was violated, and set aside the NCLAT order, remanding the matter for fresh hearing. (Paras 3-11) B) Insolvency and Bankruptcy Code - Section 7 - Admission of Application - NCLAT Rules, 2016, Rule 48 - The NCLAT directed admission of a Section 7 application without hearing the corporate debtor, as notice was not served. The Supreme Court clarified that no opinion on merits was expressed and the NCLAT shall adjudicate afresh. (Paras 12-14)
Issue of Consideration
Whether the NCLAT's order was vitiated due to violation of principles of natural justice by not serving notice on the appellant as per Rule 48 of the NCLAT Rules, 2016.
Final Decision
The Supreme Court set aside the impugned order dated 08.02.2019 passed by the NCLAT and remanded the matter back to the NCLAT with a direction to dispose of the matter as expeditiously as possible after affording an opportunity of hearing to the parties. The appellant and respondents were directed to approach the NCLAT on March 13, 2019 with a prayer for early listing. No fresh notice required. No opinion on merits expressed.
Law Points
- Natural justice
- audi alteram partem
- service of notice
- NCLAT Rules 2016
- Rule 48
- Rule 52
- Insolvency and Bankruptcy Code 2016
- Section 7
