Bombay HC sets aside NCLT Order admitting Rolta India into insolvency

Bombay HC sets aside NCLT Order admitting Rolta India into insolvency

Omkar Gokhale

The Bombay High Court on Friday set aside the National Company Law Tribunal (NCLT) Mumbai Bench order that initiated insolvency proceedings against software firm Rolta India Limited (Rolta).

In doing so, a Division Bench of Justices S C Dharmadhikari and RI Chagla set aside NCLT order not on merits but on procedural grounds and directed the Tribunal to decide it afresh. The Court held that NCLT Order that had admitted Rolta into insolvency was not pronounced in open court as required under the NCLT Rules and held it as a nullity.

A Mumbai Bench of NCLT judges V P Singh and Rajesh Sharma had passed its order on October 22, admitting an insolvency petition by Value Partner Greater China High Yield Income Fund and Pinpoint Multi-Strategy Fund against Rolta India.

Being aggrieved, Kamal K Singh, the Founder and Chairman of the firm invoked writ jurisdiction of the Bombay High Court claiming that the Tribunal had not passed the order in an open court and hence not a valid judgment.

The petitioner sought quashing of the order on account of procedural lapses.

In this regard, Senior Counsel Janak Dwarkadas and Vikram Nankani appearing for the petitioner had cited Rule 150 of the National Company Law Tribunal Rules, 2016 dealing with the pronouncement of the order. It was submitted that the Rule makes the pronouncement mandatory and there is no legal and valid order unless it is pronounced in the Court.

Moreover, it was contended that the date of pronouncement was not notified and the firm found out about the said decision only when the Resolution Professional (RP) visited the company office with a copy of the order. Dwarkadas went on to argue,

“There was no board prepared of the proceedings and particularly, no pronouncement of the order in open Court. There was no intimation to the parties and that the petitioner’s advocate was in the Court, but no pronouncement was done.” 

It was also claimed that concerned NCLT Bench did not conduct adjudicatory business on October 22 as the Senior Judge V P Singh was not present on account of his transfer to National Company Law Appellate Tribunal (NCLAT), Delhi. According to the petitioner, Judge VP Singh took charge at NCLAT on October 23.

Dwarkadas had further argued that the process pertaining to insolvency resolution can have drastic consequences as the petitioner could not get an opportunity to appeal before the Appellate Tribunal. In view of this, the petitioner Kamal K Singh had also sought from the Court to direct RP for Rolta to refrain from discharging functions and taking actions in pursuance of the October 22 order.

On the other hand, Senior Counsel Ravi Kadam, appearing for respondents, who had sought insolvency of Rolta contested the plea and submitted that the Rules cannot be elevated to such a status making it impossible for the Tribunal to function. The respondents opposed the plea and challenged its maintainability.

In view of these submissions, the High Court today held that it has a jurisdiction to decide the plea.

The High Court said that it can decide the plea once it is satisfied by the grounds challenging the order of Tribunal, which is subordinate to the writ Court.

The Court further observed in its order that,

“There is a difference in the meaning of pronouncement and communication as used in the rules. If the decision itself is in breach of rules of procedure, it will result in failure of justice. If the sanctity of justice is totally lost, we cannot be mute spectators. The present case falls within the exceptions laid down in Supreme Court judgments referred by the parties.”

After perusing the original records submitted by Advocate RV Govilkar for NCLT last week, the Court had made preliminary observations and noted that it did not find any endorsement of the Court Master as required under sub-rule (2) of Rule 151 of the NCLT Rules, 2016.

The said rule mandates the Court Master to make a note in the order sheet that the order of the Bench consisting of President and Members was pronounced in open Court on behalf of the Bench.

With this, the Court allowed the plea by Rolta and asked the Tribunal to decide the application seeking its insolvency afresh.

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