NCLAT Delhi: NCLT Rule 49 Gives Ample Authority To Adjudicating Authority To Proceed “Ex Parte” As “Appearance” Refers To Appearance By CD Or By Authorised Representative

Background Facts:

DBS Bank India Ltd. (Financial Creditor) approached the Debt Recovery Tribunal ('DRT') on default towards the financial facilities by Vyam Technologies Ltd. (Corporate Debtor). DRT via its Order dated 15.07.2019, DRT awarded an amount of Rs.23.29 crores along with interest. A recovery certificate was also issued in favor of the financial creditor.

DBS Bank initiated the Corporate Insolvency Resolution Process ('CIRP') against the Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code ('IBC') claiming a default of amount of Rs.48.31 crores till 22.09.2021 and also placed reliance upon the recovery certificate.

The Corporate Debtor received notices issued by NCLT New Delhi on 07.03.2022 but did not file a response. When the CIRP application was listed on 25.03.2022, no reply had been submitted and no authorized counsel appeared. Consequently, NCLT New Delhi proceeded to hear the application on its merits and admitted the Section 7 application by order dated 25.03.2022.

An application was subsequently filed with a request to recall the order dated 25.03.2022. This application was heard by the Adjudicating Authority, which rejected the request by an order dated 15.01.2024. Aggrieved by this impugned order dated 15.01.2024, the present appeal has been filed.

NCLAT Verdict:

The NCLAT Delhi dismissed the appeal and held that Rule 49 of NCLT Rules, 2016 gives ample jurisdiction to the Adjudicating Authority to proceed for ex parte as the corporate debtor does not appear. “Appearance” as contemplated under Rule 49(1) is an appearance by the corporate debtor or by an authorized representative.

The Appellate Tribunal ruled that, according to Rule 49(2) of the NCLT Rules, 2016, where a petition or an application has been heard ex-parte against the respondent(s), such respondent may apply to set aside such ex-parte order if they can prove that the notice was not properly served or that they were prevented by a sufficient cause from appearing when the petition or application was heard.

NCLAT observed that notices were issued to the corporate debtor in the application under Section 7 of IBC which was listed before the Adjudicating Authority. However, no reply was filed by the Corporate Debtor to the said Section 7 application. Further, it was an undisputed fact that the notice was served on the appellant on 07.03.2022 and the appellant did not argue that the notice was not served.

The Appellate Tribunal pointed out that the second ground for recalling an order is if the respondent was prevented by sufficient cause from appearing. In this case, the Corporate Debtor was not prevented by any sufficient cause from appearing, as the notice was duly served. No reason was shown by them for their failure to appear.

In conclusion, NCLAT dismissed the appeal noting that the Corporate Debtor's Counsel's argument that he was recently engaged and had not filed a vakalatnama cannot be considered to be a sufficient cause. It held that the corporate debtor was at fault for not appointing an advocate in time to make the necessary pleadings before the court. The appearance by the corporate debtor or an authorized representative is required under Rule 49(1) of NCLT Rules, 2016.

Case Title: Ashok Tiwari vs. DBS Bank India (Ltd.) and Anr.

Case No.: Company Appeal (AT) (Insolvency) No. 195 of 2024

Counsel for Appellant: Mr. Gaurav Mitra, Mr. Ishan Roy Choudhury, Mr. S. Anand, Mr. R. Ranjan, Mr. Gunjesh Ranjan, Advocates.

Counsel for Respondent: Mr. Krishnendu Datta, Sr. Advocate with Mr. Dhruv Malik, Ms. Palak Nanwani, Ms. Versha, Advocates for DBIL. Mr. Prafull, Mr. Marshit Khare, Advocates for R-2.

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