Section 9 Petition Not Served Upon Corporate Debtor, NCLAT Delhi Sets Aside NCLT Order Initiating CIRP

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Shri Barun Mitra (Technical Member) and Shri Arun Baroka (Technical Member), has set aside an NCLT order whereby a petition under Section 9 of IBC was admitted and CIRP was initiated without serving a copy of petition to the Corporate Debtor. The Bench has directed that the petition under Section 9 of IBC be revived before the NCLT for fresh consideration and the Corporate Debtor has been granted time to file a Reply. Background Facts Ritzy Chemicals Pvt. Ltd. (“Operational Creditor”) filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against H R Polycoats Pvt. Ltd. (“Corporate Debtor”). On 10.01.2024, the NCLT observed that there was no appearance on behalf of the Corporate Debtor despite service of notice by e-mail. Accordingly, the NCLT directed issuance of fresh notice to the Corporate Debtor through all modes, returnable on 17.01.2024. The Operational Creditor was directed to file Affidavit of service within one week and the Corporate Debtor was given liberty to file its Reply within one week of receipt of notice. On 17.01.2024, the NCLT admitted the Section 9 petition and initiated CIRP against the Corporate Debtor, without the notice being served upon the Corporate Debtor. The Corporate Debtor (“Appellant”) filed an appeal before the NCLAT against the order dated 17.01.2024, contending that no notice was served upon it after 10.01.2024. Therefore, the Corporate Debtor could neither appear before the NCLT nor file any Reply to Section 9 petition. The Operational Creditor submitted that affidavit of service was filed on 04.01.2024 along with email dated 11.12.2023, whereby notice was served on the Corporate Debtor. NCLAT Verdict The Bench opined that after Order dated 10.01.2024, it was necessary for the Operational Creditor to file an affidavit proving service of notice in pursuance of the Order dated 10.01.2024. It was observed that there is nothing on record to show that service was effected after order dated 10.01.2024. “The Court thus having issued fresh direction of notice on 10th January, 2024, there ought to have been satisfaction before proceeding to dispose of the matter finally.” The Bench has set aside the order dated 17.01.2024 and revived the Section 9 petition before NCLT for fresh consideration. The Corporate Debtor has been granted two weeks' time to file a Reply. “We thus are of the view that ends of justice will be served in setting aside the Order dated 17th January, 2024 and revive the application before the Adjudicating Authority for fresh consideration and to obviate the delay in proceeding, we grant two weeks time to file Reply to the Section 7 Application. Adjudicating Authority shall thereafter fix a date and proceed to decide the matter in accordance with law.” The appeal has been disposed off. Case title: Satish Kumar Sethi v Varsha & Anr. Case No.: Company Appeal (AT) (Insolvency) No. 217 of 2024 Counsel for Appellants: Mr. Mohit Chaudhary, Mr. Prakhar Mithal, Advocates. Counsel for Respondent: Mr. Harsh Sharma, Advocate. Click Here to Read/Download Order

Section 9 Petition Not Served Upon Corporate Debtor, NCLAT Delhi Sets Aside NCLT Order Initiating CIRP

Pallavi Mishra

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