NCLAT orders enquiry into 'dubious' order passed by NCLT Chennai

The National Company Law Appellate Tribunal (NCLAT) has ordered an enquiry by the Principal Bench of National Company Law Tribunal (NCLT) into the functioning of the NCLT's Chennai Bench after citing irregularities in an order passed by the NCLT in 2022..The order was passed by a Bench of NCLAT comprising Judicial Member Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain. "The President, NCLT, is requested to look into the issue and conduct an enquiry, particularly in order to attach fairness to the proceedings of the NCLT so as to repose confidence in the public at large on these major issues," the NCLAT order said..The order was passed on an appeal filed by Asset Reconstruction Company (India) Limited (ARCIL) challenging an NCLT order dated March 15, 2022. The appellant’s counsel, Senior Advocate Om Prakash, submitted that the appeal had become infructuous due to the admission of ARCIL’s claim. While dismissing the appeal, the NCLAT raised serious concerns over the NCLT’s handling of the case, terming it "dubious.""The appeal is directed to be dismissed as having rendered infructuous. But this Appellate Tribunal cannot ignore the fact that the manner in which the order of 15.03.2022 has been passed for appears rather dubious," the NCLAT opined..The NCLAT highlighted several irregularities in the NCLT order:Unrecorded hearing dateThe case, initially heard on January 18, 2022, was marked as part-heard and scheduled for February 15, 2022. However, there was no record of the matter being listed or directed for hearing on March 15, 2022, the date on which the order under challenge was passed."It is submitted by the counsel for the appellant that as per the order-sheet drawn up on 15.02.2022, the said matter was not listed nor was directed to be listed on 15.03.2022 by the NCLT. But subsequently the matter is shown to have been taken up for hearing on 15.03.2022, without there being any record of prior fixation of such date for hearing, the date on which the impugned order is shown to have been passed," the NCLAT noted. Discrepancy in cause listWhile the respondent’s counsel argued that the case was listed on March 15, 2022, as per the cause list, the NCLAT found no evidence of prior fixation of the hearing date..Questionable basis for orderThe NCLAT observed that the NCLT’s order of March 15, 2022 appeared to have been passed based on observations and directions made on the same day, which the tribunal found implausible."Another remarkable feature, which could be borne out from the impugned order under challenge is that, when the proceedings itself was taken up on 15.03.2022, the observations / directions as observed by NCLT, Chennai on 15.03.2022, has been taken as to be the basis of passing of the impugned order on 15.03.2022 itself, which is not plausible," the NCLAT said.The NCLT order passed on March 15, 2022 said that it had passed a direction on that day pursuant to which a memo was filed."However, the Resolution Plan in respect of the Corporate Debtor had already been approved by this Adjudicating Authority vide Order dated 01.02.2022 passed in 1A 460/2021 in IBA/1099/2019. Based on the direction given by this Adjudicating Authority on 15.03.2022, a memo has been filed by the Applicant and the same is taken on record," the NCLT order said.However, such a direction and the contents of the memo are not recorded in the order..In view of the above, the NCLAT requested the President of the NCLT to conduct a thorough inquiry into the matter. It emphasised the need to ensure fairness in NCLT proceedings to maintain public confidence in the institution.The NCLAT also directed the President of the NCLT to submit a report to the Chairperson in New Delhi with a copy to NCLAT for further necessary action..[Read Order]