The NCLAT held that unrefuted pleadings should be considered admitted, quashing the impugned judgment for ignoring principles of natural justice and failing to address key objections.
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench led by Justice Sharad Kumar Sharma (Judicial Member) and Mr. Jatindranath Swain (Technical Member) reviewed an appeal on Tuesday and observed that when a respondent explicitly declines to file a counter affidavit, the appellant's unrefuted pleadings must be accepted as admitted, and failure to consider these pleadings constitutes a violation of natural justice, warranting the quashing of the impugned judgment.
The NCLAT judgment clarified the legal principle that when a respondent in judicial proceedings explicitly states that they do not intend to file a counter affidavit, the appellant's pleadings must be treated as admitted. This principle, established by the Delhi High Court in Naresh Kumar Bansal Vs G.S. Kalra & Ors., was reinforced by similar rulings from the Allahabad High Court. In this case, the respondent’s counsel repeatedly declined to submit a counter affidavit despite being requested to do so by the Tribunal. Consequently, the Tribunal found it necessary to resolve the appeal based solely on the appellant's pleadings.
The appellant, a suspended director of a corporate debtor, contended that the adjudicating authority failed to address his objections regarding the handling of defective products, which were essential to the resolution of the case. He argued that the operational creditor did not comply with inspection requests and that the tribunal's failure to acknowledge this lack of cooperation undermined the integrity of the proceedings. The appellant highlighted discrepancies in the adjudicating authority's findings and pointed out that critical evidence supporting his claims was overlooked.
The NCLAT determined that the adjudicating authority had indeed acknowledged the appellant’s objections but failed to consider them adequately when rendering its judgment. This lack of consideration amounted to a violation of the principles of natural justice, as laid out in Section 424 of the Companies Act, which mandates that all parties must be heard and their pleadings considered. Consequently, the NCLAT concluded that the impugned judgment from the NCLT was perverse and not based on a proper application of mind.
As a result, the NCLAT quashed the judgment dated July 9, 2024, from the NCLT and remanded the case back for reconsideration. The Tribunal was instructed to reevaluate the matter by adequately addressing the parties' rival contentions, particularly concerning the claims of defective products, and to issue a fresh decision based on the merits of the case, with no orders on costs.
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