Litigation News

NCLAT sets aside order on mandatory impleadment of MCA as a party in all IBC and Company Petitions before NCLT


The National Company Law Appellate Tribunal (NCLAT) has set aside the order mandating the impleadment of Ministry of Corporate Affairs, Government of India as a party to all Insolvency & Bankruptcy Code cases as well as the Company petitions before all Benches of the National Company Law Tribunal (NCLT). (UOI vs OBC)

The order passed by a three-member Bench of Member (Technical) Justice Venugopal M reads,

..the directions issued (by NCLT).. to implead the ‘Secretary of Ministry of Corporate Affairs’ as party Respondent in all cases of I&B Code is nothing but beyond the power of the Tribunal and it tantamounts to imposition of a new rule in a compelling fashion. In short, the impugned order making it applicable throughout the country to all the Benches of the National Company Law Tribunal is untenable one and the said order suffers from material irregularity and patent illegality in the eye of Law.

In November last year, the Principal Bench of NCLT had directed that the Secretary, Ministry of Corporate Affairs, Government of India shall be made a party to all IBC and Compnay cases before all the Tribunals.

The NCLT had justified the direction on the ground that it would facilitate the availability of authentic record for the proper appreciation of the matters being contested before it.

The operation of the direction was stayed after the Central Government preferred an appeal before the NCLAT.

The Central Government argued that the order "bristled with numerous infirmities" as the NCLT did not possess the powers to pass an order, which was in the ‘nature of rule’.

It was submitted that the ‘rule making power’ was the exclusive domain of the Central Government and the NCLT should have issued notice to the Union of India before passing the impugned order.

With respect to the issue of availability of authentic records in a case, the Central Government informed that a separate application is to be filed before the ‘Tribunal’ or ‘Court’ for production of documents from the ‘Registrar of Companies’ by virtue of Section 399(2) of the Companies Act, 2013.

It was added that the record could anyway be viewed or accessed by any public person for analyzing and scrutinizing from the Ministry of Corporate Affairs portal.

After considering the submissions, the NCLAT, at the outset, observed,

"..if a certain thing is to be performed in a particular manner, then the same is to be done in that way. In fact, a procedural wrangle cannot be allowed to be shaked or shackled with."

NCLAT opined that although addition/deletion of parties was a matter of discretion, the power could not exercised in a cavalier and whimsical fashion.

Stating that the tenets of natural justice are of paramount importance, the NCLAT added,

In the instant case on hand, this Tribunal on going through the impugned order dated 22.11.2019 passed by the National Company Law Tribunal, New Delhi, Principal Bench in (IB)-939(PB)/2018, is of the considered opinion that the Appellant (Centre) was not provided with an adequate opportunity of being heard in the subject matter..

The NCLAT remarked that a wholesale, blanket and omnibus direction to implead MCA in all the cases could not be issued in single stroke as the question of adding a party to a litigation has to be determined only on a case to case basis.

..when an order like the impugned one is passed by the ‘Tribunal’ or ‘Competent Authority’ without hearing the party concerned, by not following the ‘principles of Natural Justice’ by not initially ordering notice and not taking into consideration of the objections of that party, certainly, it will result in serious miscarriage of justice, besides causing undue hardship.
NCLAT added.

Therefore, in furtherance of substantial cause of justice, the NCLAT allowed the appeal moved by Central Government and the NCLT order was set aside.

Sanjay Sorie, Director Legal MCA along with Advocates Gopal Singh, AK Sahoo appeared for Centre.

Advocate Vishal Yadav represented the Respondent in the appeal, Oriental Bank of Commerce.

Read the order:

UOI vs OBC.pdf
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