Admission of Personal Insolvency Proceedings Without Considering Reply Violates Principles of Natural Justice: NCLAT
- 9 hours ago
- 2 min read
REEDLAW Legal News Network reports: In a significant ruling, the National Company Law Appellate Tribunal set aside the admission of personal insolvency proceedings after finding that the Adjudicating Authority proceeded on an erroneous premise that no reply had been filed and failed to consider submissions advanced by the personal guarantor, thereby violating settled principles of natural justice under the Insolvency and Bankruptcy Code, 2016.
The Appellate Tribunal, comprising a Judicial Member and two Technical Members, held that merely granting an opportunity of hearing is insufficient if the defence placed on record is not judicially considered. The Tribunal emphasised that insolvency adjudication under Section 100 of the Code requires application of mind and reasoned determination, and that orders passed on incorrect factual assumptions are legally unsustainable.
The appeal arose from an order admitting a petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016, initiating insolvency resolution proceedings against a personal guarantor. The Adjudicating Authority proceeded on the premise that no reply had been filed by the respondent guarantor and adjudicated the matter solely on the material produced by the creditor.
The Appellate Tribunal noted that the reply affidavit had been e-filed, served upon the creditor and the resolution professional, and that detailed arguments were advanced on the basis of such reply at the final hearing. The Tribunal observed that at no stage was the reply rejected, returned, or expressly excluded from consideration by the Adjudicating Authority. Proceeding on an incorrect factual assumption that no reply existed amounted to a fundamental procedural error.
Relying on settled Supreme Court jurisprudence, the Tribunal reiterated that judicial orders must disclose the application of mind and deal with the submissions advanced by parties. Mere opportunity of hearing without consideration of the defence raised does not satisfy the requirement of natural justice. The Tribunal held that insolvency proceedings, though summary, cannot be conducted in disregard of procedural fairness.
The Appellate Tribunal consequently held that the impugned order stood vitiated for violation of principles of natural justice and lack of reasoning, warranting interference in appellate jurisdiction.
Ms. Salomi Kalwade, Advocate, represented the Appellant.
Mr. Asav Rajan, Mr. Kashish Chadha and Mr. Aditya Shah, Advocates, appeared for the Respondent No. 1.
Ms. Yahya Batatawala, Advocate, appeared for the Resolution Professional.
This is premium content available to our subscribers.
To access the full content related to this article — including the complete judgment, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications — we invite you to subscribe to REEDLAW’s premium research platform.
Click here to Subscribe and unlock exclusive access to structured legal analysis, judicial summaries, and a comprehensive legal research database.
REEDLAW Legal Intelligence & Research is India’s most trusted legal publishing and research platform, empowering professionals with structured judicial insights and authoritative legal intelligence since 1985.
The platform offers comprehensive resources spanning Corporate Insolvency, Bankruptcy, Company Law, SARFAESI, Debt Recovery, Contract, MSMEs, Arbitration, Banking, and Commercial Laws. Through curated journals like IBC Reporter and Bank CLR, and an advanced Online Legal Research Database, REEDLAW simplifies complex legal research for professionals, institutions, and academia across India.
Comments