NCLAT sets aside order 'patently illegal, unreasonable' order passed by former NCLT Acting President

The National Company Law Appellate Tribunal (NCLAT) recently set aside an order passed by a former acting President of the National Company Law Tribunal (NCLT) on finding that it was issued without jurisdiction and in violation of his own administrative orders during the COVID-19 lockdown..A coram of Judicial Member Rakesh Kumar Jain and Technical Member Naresh Salecha firstly faulted the then acting President for sitting as a single bench while passing the order. The NCLAT noted that Section 419 of the Companies Act, 2013 required cases to be ordinarily heard by at least two members (one judicial and one technical member). The same provision also allowed for matters to be heard by a single member, but only after the NCLT President issues an administrative order (special or general order) enabling the same.However, in the present case, no such administrative notification was issued. Hence, the NCLAT concluded that the NCLT’s then acting President had passed the order in question without jurisdiction.“Until and unless a notification is issued under the first proviso to Section 419(3) of the Code the single judicial member cannot take upon itself the jurisdiction to entertain an application such like the one in hand and decide the same, therefore, the impugned order has been passed by an authority having no jurisdiction,” the NCLAT held..The second limb of the controversy was tied to the NCLT acting President’s administrative order dated March 22, 2020, by which it was notified that the NCLT would be suspending its normal functioning in view of the COVID-19 pandemic and subsequent lockdown.This March 2020 order was extended later till April 14, 2020.While so, the then acting President passed an order approving a resolution plan approved by a Committee of Creditors with a 77.5% majority on two applications filed by the Resolution Professional and the successful Resolution Applicant. The matter concerned the corporate insolvency resolution process of Anush Finlease and Construction Pvt. Ltd.Notably, the Resolution Applicant proposed to convert a hotel and commercial complex under construction into a temporary shelter to accommodate 2,500-3,000 persons and cater to the needs of the government as a measure to control the spread of the pandemic. The Resolution Applicant told the acting President that this project would be executed as soon as the resolution plan is approved by the NCLT. This was cited as the reason for the urgent hearing of the matter by the acting President who ultimately allowed the applications and approved the plan..The said April 2020 order was challenged before the NCLAT by one Suchi Paper Mills Ltd., which also asserted that the said order was passed without recording reasons as required under Section 31 of the Insolvency and Bankruptcy Code (IBC/ Code). The NCLAT found force in this contention.Pertinently, it pointed out that the April 2020 order seemed to also go against the acting President’s own March 2020 administrative order which had stated that pleas to approve resolution plans would not be treated as urgent matters to be heard during the NCLT’s limited functioning amid the COVID pandemic. “On the one hand the Adjudicating Authority itself is issuing instructions that the issue regarding the extension of time, approval of the resolution plan and liquidation should not be treated as urgent matter and on the other hand the Acting President heard the unnumbered applications treating them most urgent and then approved the resolution plan only on the basis that the CoC has already approved the same without recording his satisfaction about Section 30(2) of the Code,” the NCLAT observed..The NCLAT, therefore, set aside the NCLT order under challenge and sent the matter back for a fresh consideration of the issue.“The order is patently illegal as it is without any reason which is the heart and soul of a judicial order … it has not recorded its satisfaction about the provisions of Section 30(2) of the Code ... the impugned order is not only illegal … but also unreasonable and non-speaking,” the NCLAT said..Senior Advocate Saurabh Kripal along with advocates Amit George, Preeti Goel, Anubhav Goel,Priyanka Dhyani, Prateek Tomar, R Bharat, Sidharatha Jain, and Arkaneil Bhaumik appeared for the appellant.Advocates Abhijeet Sinha, Ashish Verma, Gaurav Mitra, Iswar Mohapatra, and Shikhar Kumar appeared for various respondents, including the RP and a resolution applicant. .[Read Order]