there was ‘existence of dispute’ which the Corporate Debtor would have brought to notice of the Adjudicating Authority

 

NCLAT- 1

P.K. ORES PRIVATE LIMITED Applicant and (Corporate Debtor)

VERSUS

TRACTORS INDIA PRIVATE LIMITED. Respondent (Operational

Creditor)

Section 8 and 9 of the Code

- The present appeal was filed by P. K. Ores Private Limited –

(Corporate Debtor) against the judgment passed by NCLT, Kolkata

Bench, Kolkata (“Adjudicating Authority”) whereby the application

filed by Tractors India Private Limited – (Operational Creditor) was

admitted.

-

The Corporate Debtor assailed the impugned order on the ground that the same has been passed in violation of principles of natural justice, without giving any opportunity of hearing and further, that there was ‘existence of dispute’ which the Corporate Debtor would have brought to notice of the Adjudicating Authority, if given an opportunity.

 

- The Operational Creditor, however, contended that the Corporate Debtor was served with notice under Section 8 of the Code as well as copy of application under Section 9 of the Code, the Corporate Debtor failed to reply to the notice under Section 8.

 

- The NCLAT (“Appellate Authority”) perused the record of the Adjudicating Authority and noted that there was no order issuing notice to the Corporate Debtor.

 

- The Appellate Authority took note of section 424 of the Companies Act, 2013 which mandates that the Adjudicating Authority is supposed to follow the rules of natural justice before passing any order.

- It observed that in the case of “Innoventive Industries Limited vs. ICICI Bank”, the Appellate Authority held that a notice is required to be given to a Corporate Debtor before admitting any application for initiation of Corporate Insolvency Resolution Process under Section 7 and 9 of the Code.

 

- Since the Adjudicating Authority in the present case had not

issued any notice to the Corporate Debtor, it was held that the

impugned order was bad in law and thus, liable to be set aside.

 

- The Appellate Authority also took note of the reply given by the Corporate Debtor in November, 2016 to the letter issued by Operational Creditor in which the former had disputed the

satisfactory installation of machinery (Engine) by latter and also stated that various complaints were made regarding rectifying the

defects in the machinery.

 

- The Appellate Authority relying upon the judgment passed by it in “Kirusa Software (P) Ltd. versus Mobilox Innovations Pvt. Ltd.” held that the Corporate Debtor had in fact, raised dispute about the quality of goods and brought the same to notice of Operational Creditor.

 

It also claimed damages for inferior quality of goods and its loss much prior to receipt of notice under Section 8 of the Code.

 

Accordingly, the Appellate Authority held that there was violation of the principles of natural justice as well existence of dispute and thus, the order passed by Adjudicating Authority was set aside.

 

- In effect, the order appointing an Interim Resolution Professional (IRP), order declaring moratorium, freezing of account and other actions taken by IRP pursuant to order of Adjudicating Authority

were declared illegal.