The National Company Law Appellate Tribunal (NCLAT) recently overturned an order issued by a former acting President of the National Company Law Tribunal (NCLT) on the grounds that it was not within his jurisdiction and violated his own administrative orders during the COVID-19 lockdown.
Judicial Member Rakesh Kumar Jain and Technical Member Naresh Salecha faulted the then acting President for sitting as a single bench while passing the order. They noted that Section 419 of the Companies Act, 2013 required cases to be heard by at least two members, one judicial and one technical member. Although this provision allowed for matters to be heard by a single member, it required the NCLT President to issue a special or general administrative order to enable it. However, in this case, no such notification was issued, so the NCLAT concluded that the then acting President of the NCLT had passed the order without jurisdiction.
The second issue was related to the NCLT acting President’s administrative order dated March 22, 2020, which notified that the NCLT would suspend its normal functioning due to the COVID-19 pandemic and subsequent lockdown. This order was later extended until April 14, 2020. Despite this, the acting President passed an order approving a resolution plan approved by the Committee of Creditors with a 77.5% majority on two applications filed by the Resolution Professional and the successful Resolution Applicant.
The case in question concerned the corporate insolvency resolution process of Anush Finlease and Construction Pvt. Ltd. In an effort to stop the virus from spreading, the resolution applicant suggested turning a hotel and commercial building that was now under construction into a makeshift refuge that could house 2,500–3,000 people and meet government requirements. The Resolution Applicant told the acting President that this project would be executed as soon as the resolution plan was approved by the NCLT. The acting President eventually granted the applications and approved the proposal, citing this as the rationale for the urgent hearing.
The April 2020 order was challenged before the NCLAT by Suchi Paper Mills Ltd., which asserted that the order was passed without recording reasons as required under Section 31 of the Insolvency and Bankruptcy Code (IBC/ Code). The NCLAT agreed that this was the case, observing that the April 2020 order seemed to contradict the acting President’s own March 2020 administrative order, which stated that pleas to approve resolution plans would not be given priority during the NCLT’s restricted operation due to the COVID epidemic.
Consequently, the NCLAT set aside the NCLT order and sent the matter back for a fresh consideration of the issue. The NCLAT deemed the order illegal as it lacked reason, which is the foundation of a judicial order. It also did not record its satisfaction with the provisions of Section 30(2) of the Code. The NCLAT stated that the impugned order was not only illegal but also unreasonable and non-speaking.
The appellant was represented by Senior Advocate Saurabh Kripal, Advocates Amit George, Preeti Goel, Anubhav Goel, Priyanka Dhyani, Prateek Tomar, R Bharat, Sidharatha Jain, and Arkaneil Bhaumik. The RP and a resolution applicant were among the respondents represented by advocates Abhijeet Sinha, Ashish Verma, Gaurav Mitra, Iswar Mohapatra, and Shikhar Kumar.
Written by N.Yogendra Mani of KL University Vijayawada Andhra Pradesh ( 5th semester) an intern under Legal Vidhiya
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