Case Note & Summary
The appellant, CA Ramasamy Shanmuggam, the liquidator of RLS Alloys Pvt. Ltd., challenged an order dated 02.06.2022 passed by the Adjudicating Authority (NCLT) in IA No.796/2021. The challenge was limited to para 30(vii) of the order, which directed the Insolvency and Bankruptcy Board of India (IBBI) to conduct a detailed inspection of the liquidator's conduct and records pertaining to the corporate debtor to find irregularities. The appellant contended that this direction was passed without any opportunity of hearing being provided to him, violating principles of natural justice. The NCLAT examined the issue and found that the Adjudicating Authority had made adverse remarks and directed an inspection without giving the liquidator a chance to explain. The Appellate Tribunal held that such a direction, which could lead to serious consequences for the liquidator, could not be sustained without affording an opportunity of hearing. Accordingly, the NCLAT set aside the observation in para 30(vii) of the Impugned Order and allowed the appeal to that extent.
Headnote
A) Insolvency Law - Natural Justice - Opportunity of Hearing - Insolvency and Bankruptcy Code, 2016 - Section 196 - The Adjudicating Authority directed IBBI to conduct a detailed inspection of the liquidator's conduct and records without providing any opportunity of hearing to the liquidator. The Appellate Tribunal held that such a direction, which could lead to adverse consequences, cannot be passed without affording the liquidator a chance to explain or defend himself. The observation in para 30(vii) of the Impugned Order was set aside. (Paras 1-7)
Issue of Consideration
Whether the Adjudicating Authority could direct IBBI to conduct a detailed inspection of the liquidator's conduct and records without affording an opportunity of hearing to the liquidator.
Final Decision
The NCLAT allowed the appeal to the extent of setting aside the observation made in para 30(vii) of the Impugned Order dated 02.06.2022, which directed IBBI to conduct a detailed inspection of the liquidator's conduct and records.
Law Points
- Natural Justice
- Opportunity of Hearing
- Adverse Remarks
- Liquidator's Conduct
- Inspection Direction
Case Details
2024 LawText (NCLAT) (01) 21
Comp. App (AT) (CH) (Ins) No.413/2022
Justice Sharad Kumar Sharma, Member (Judicial)
Mr. A.G. Sathyanarayana, Advocate for Appellant; Mr. K. S. Jeyaganeshan, Senior Panel Advocate for Respondent
CA Ramasamy Shanmuggam, Liquidator of RLS Alloys Pvt. Ltd.
Insolvency and Bankruptcy Board of India
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Nature of Litigation
Appeal against an order of the Adjudicating Authority (NCLT) directing IBBI to conduct a detailed inspection of the liquidator's conduct and records.
Remedy Sought
The appellant liquidator sought to set aside the observation in para 30(vii) of the Impugned Order directing inspection of his conduct and records.
Filing Reason
The appellant contended that the direction was passed without affording him an opportunity of hearing, violating principles of natural justice.
Previous Decisions
The Impugned Order dated 02.06.2022 was passed by the Ld. Adjudicating Authority in IA No.796/2021, in CP /661(IB)/CB/2017.
Issues
Whether the Adjudicating Authority could direct IBBI to conduct a detailed inspection of the liquidator's conduct and records without affording an opportunity of hearing to the liquidator.
Submissions/Arguments
The appellant argued that no opportunity of explaining or defending himself was provided before the adverse remarks and direction for inspection were made.
The respondent IBBI's position is not detailed in the judgment text.
Ratio Decidendi
A direction for inspection of a liquidator's conduct and records, which could lead to adverse consequences, cannot be passed without affording the liquidator an opportunity of hearing, as it violates principles of natural justice.
Judgment Excerpts
The Appellant contends that the said observation made in para. 30(vii) is wrong with eyes of law for the reason being that, prior to passing of the order, no opportunity of explaining or defending himself was provided.
As far as, the observation...
The Appellant who is the Official Liquidator of the Corporate Debtor M/s RLS Alloys Pvt. Ltd, puts a challenge to the Impugned Order dated 02.06.2022...
Procedural History
The Adjudicating Authority (NCLT) passed an order on 02.06.2022 in IA No.796/2021 in CP /661(IB)/CB/2017, which included a direction in para 30(vii) for IBBI to conduct a detailed inspection of the liquidator's conduct and records. The liquidator appealed to NCLAT against that specific observation.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 196
