Sree Metaliks Limited and another v. Union of India and Anr. (W.P. 7144 (W) of 2017) - Synopsis
Team SoOLEGAL 21 Dec 2020
In this case, Sree Metaliks Limited and another v. Union of India and Anr. (W.P. 7144 (W) of 2017),  the petitioner had challenged Section 7 of the Insolvency Bankruptcy Code, 2016 and the related rules under the 2016 Law of Insolvency and Bankruptcy (Application to the Adjudicating Authority). The petitioner complained that IBC 2016 did not offer any opportunities to hear from a corporate debtor in a petition brought under section 7 of IBC.
The petitioner informed the court that a notice was sent to him from a company secretary of a firm stating that an application was filed against him under section 7 of IBC before the NCLT. The petitioner had stated that the application which was sent to him did not have any date mentioned as to when the matter would come up before NCLT. An ex-parte order was passed by NCLT based on the petition and also appointed an Interim Resolution Professional and the petitioner did not get a chance to present himself before the NCLT. The petitioner had contented that he is entitled to be heard under the principles of natural justice. According to the petitioner, Insolvency Bankruptcy Code, 2016 is silent as to the grant of hearing by the NCLT.
The Court was of the opinion that IBC, 2016 read with Rules, 2016, is silent on the process to be followed at the hearing of the application under section 7 submitted to the NCLT, i.e. whether or not a party respondent has the right to be heard before the adjudicating authority. The Court also ruled that NCLT and NCLAT were not bound by the rules of the Code of Civil Procedure, 1908. The Court also stated that, according to Section 424 of the Companies Act, 2013, NCLT and NCLAT must follow the principle of natural justice. When NCLT receives a petition, both the parties should be given an equal chance to be heard during the hearing procedure. It is required by section 424 of the Companies Act, 2013 to determine the nature of default as stated in the application by the financial creditor. The appeal to the vires to section 7 of IBC of 2016 fails under such cases.

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