NCLAT Emphasizes the Necessity of a Fair Hearing Before Dismissing Applications Under Section 7
- REEDLAW
- Sep 24, 2024
- 2 min read
NCLAT Emphasized the Necessity of a Fair Hearing Before Dismissing Applications Under Section 7 and Upheld the Maintainability of Section 65 Applications.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench led by Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha and Mr. Indevar Pandey (Technical Members) reviewed a bunch of appeals and miscellaneous IAs and emphasized the necessity of a fair hearing before dismissing applications under Section 7, ruling that applications under Section 65 are maintainable even if filed before the admission of Section 7. The Appellate Tribunal focused on procedural fairness and did not address the merits of the case.
The appeal challenged the order dated 29.08.2023, which dismissed an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) for a sum of Rs. 2,31,00,000/- without allowing any arguments. Counsel for the Respondent did not dispute this fact. The Tribunal’s failure to adhere to the fundamental principle of hearing both parties before making a decision warranted a reassessment of the case. Thus, the order was deemed appropriate to set aside and remand, directing the Tribunal to hear both parties and issue a reasoned order in accordance with the law.
Consequently, the appeal was allowed, and the earlier order was annulled. The application was restored, and the Tribunal was instructed to reconvene on 02nd September 2024, to consider the matter expeditiously. It was emphasized that no comments on the merits of the case were made during this process.
In a related matter involving a jointly filed application under Sections 60(5), 65, and 75, the Tribunal dismissed the application, citing its filing prior to the admission of the Section 7 application as the reason. Counsel for the Appellant contended that this dismissal represented a clear legal error, counter to established case law from the Supreme Court and previous judgments. Relying on significant precedents, the argument asserted that the timing of the application under Section 65 did not preclude its consideration simply because it was filed before the Section 7 application was admitted.
The discourse highlighted that the key issue revolved around the maintainability of applications under Section 65 following the filing of Section 7 applications. The appellate court reiterated that the Tribunal’s dismissal based solely on timing was incorrect, citing prior decisions affirming the maintainability of Section 65 applications in such contexts. Therefore, the appeal was granted, and the matter was remanded back for proper evaluation in accordance with legal principles, without delving into the merits of the case itself.
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