IBC Digest by AVM Resolution Professionals LLP.

IBC Digest by AVM Resolution Professionals LLP.

NCLAT JUDGEMENTS

1.AA has the power to maintain the decorum of the Tribunal under Section 425 of Companies Act, 2013.

The National Company Law Appellate Tribunal-New Delhi, in the matter of Prakash K. Pandya Vs. National Company Law Tribunal, Mumbai Bench, held that the Adjudicating Authority (AA) has ample power under Section 425 of the Companies Act, 2013 to deal with the maintenance ofdecorum.

The present appeal was filed by the appellant against the order dated 09.02.2022 passed by the AA, NCLT-Mumbai Bench, Court II, wherein the matter was directed to be listed on 04.04.2022.

The appellant contended that the Corporate Insolvency Resolution Process (CIRP) was in its fifth year and the Resolution plan has already been approved by the Committee of Creditors. It was further contended that due to the happening of certain events and arguments between the Counsels of both the parties during the hearing of the matter before the AA, the AA was not inclined to hear the matter and adjourned the same.

The NCLAT held although there was no record of any arguments between the Counsels in the order passed by AA, it was held that the AA had the power vested with itself to deal with the maintenance of decorum in the court, both by the parties and Counsel, under Section 425 of the Companies Act,2013. The appeal was thus dismissed by the NCLAT. It was further observed that the AA must endeavour to dispose of the matter on the date fixed by it as the matter has been going on for years.

2.Requirement of Notice on Personal Guarantor under the Code.

In the matter of Dheeraj Wadhawan vs Union Bank of India, the NCLAT decided whether the service of Demand Notice under the Code is required on the personal guarantor or not.

In the instant matter an application was filed under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 for initiation of insolvency resolution process against the personal guarantor. Previously, the personal guarantee was executed by the PG in favour of the credit facilities availed by the Corporate Debtor.

The lender invoked the deed of guarantee on account of default by the corporate debtor. Subsequently, Demand Notice was sent to the PG on his residential address.

When the Application under Section 95 came for consideration before the Adjudicating Authority on 07.12.2021, a submission was raised before the Adjudicating Authority that Demand Notice issued by the Bank having not been served on the Appellant Application need not be entertained.

Appellant’s Contention:

It was submitted that at the time when notice is claimed to be served, the Appellant was in judicial custody. Hence, it was incumbent on the Bank to serve notice at Taloja, Navi Mumbai. It is submitted that statutory rules require personal service and personal service having not been effected on Appellant the Company Petition is not maintainable.

Further, the personal service of the notice is mandatory and without personal service of notice Company Petition cannot be entertained and the Adjudicating Authority committed error in entertaining the Application under Section 95 by directing the Resolution Professional to submit report under Section 99. Notice on the Appellant was required to be served as per provisions of Order 5 Rule 24 of the Civil Procedure Code.

Respondent’s Contention:

The Bank, who is a Respondent , contended that Demand Notice under Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019(hereinafter referred to as ‘2019 Rules’) has been duly served by post at the residential address of the Appellant which was received by adult member of the family of the Appellant i.e. his nephew Mr. Karthik Wadhawan, therefore service is complete and Application filed under Section 95 be entertained.

Decision of the Tribunal:

The NCLAT stated that Order 5 Rule 24 of the CPC shall not be applicable for effecting services under the Personal Guarantor Rules. In this particular case, it is also on the record that after service of the demand notice when Company Petition was filed under Section 95,notices were issued by the Adjudicating Authority which were also duly served on the Appellant through his counsel on 19.01.2021.Company Petition under Section 95(1) was taken up by the Adjudicating Authority on 07.12.2021 before which date the Appellant was served and represented before the Adjudicating Authority.

Hence, the Demand Notice was duly served on the appellant.

About AVM- Insolvency Professionals LLP

AVM- Insolvency Professionals LLP is a registered Insolvency Professional Entity (IPE) by The Insolvency and Bankruptcy Board of India (IBBI).(Registration number: IBBI/IPE/0099) ( The partners of IPE are Registered Insolvency Professionals (IP) under Insolvency and Bankruptcy Code, 2016 (IBC) having expertise and rich experience to advise on / carry out all aspects of Insolvency Resolution, Restructuring, Bankruptcy & Liquidation.

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