NCLAT Sets Aside IBC Order Passed By Judicial Member Alone In A Case Heard By DB

The NCLAT has set aside insolvency proceedings initiated against Ambience Pvt. Ltd by 'Vistra ITCL(India) Ltd.' on the ground that the matter was heard by a Division Bench of the NCLT Delhi, comprising of R. Vardharajan (Member Judicial) and Ms. Deepa Krishan (Member Technical) but the order was passed by a single bench comprising of only the judicial member.

The application for initiating corporate insolvency resolution process (CIRP) against Ambience Pvt. Ltd was filed by Vistra ITCL(India) Ltd., a financial creditor of the Ambience Pvt. Ltd., under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC). A division bench comprising of R Vardharajan and Deepa Krishan had heard the final arguments in the matter, but only the judicial member R Vardharajan was presiding over the bench, when the order was reserved on 22^nd April 2019.

The admission order was challenged on the ground that since the matter had been heard by two NCLT members, one being a judicial member and the other being a technical member, the final order could not have been passed by one judicial member. Senior Advocate Abhishek Manu Singhvi appeared on behalf of the Corporate Debtor (CD) Ambience Pvt. Ltd and referred to Section 419(3) of the Companies Act and Rule 152(4) of NCLT Rules, 2016 to support his arguments against the admission of the insolvency proceedings.

As per section 419(3) of the Companies Act (Act), the Benches of the Tribunals, constituted under section 410 of the Act, shall comprise of two members - one 'Judicial' member and one 'Technical' member, and exercise their powers. Rule 154(4) provides that

Ambience Pvt. Ltd. approached the NCLAT against the order by way of an appeal, which was admitted on 27th August, 2019, and in the meantime the Technical member Ms. Deepa Krishan retired on 19th July, 2019. The appeal was also based on the rule 152(4) of the NCLT Rules, which lays down that an order passed by the Tribunals may be corrected by way of rectification, in case of any accidental slip or omission.

Senior Advocate Mr. Arun Kathpalia, appearing on behalf of Vistra ITCL (India) Ltd.', also accepted the arguments put forth by Ambience Pvt. Ltd.

In view of the aforesaid facts, the Appellate Bench headed by Justice S J Mukhopadhayay, was of the opinion that the matter be remitted back to the NCLT, for fresh hearing on the basis of merit, and accordingly set aside the CIR proceedings against Ambience Pvt. Ltd.

Click to Read Order.