Wednesday, February 28, 2024

NCLAT Quashes Direction To Implead MCA As Party In All Cases Before Company Tribunals

The National Company Law Appellate Tribunal (NCLAT) on Friday set aside the order of NCLT, Delhi which directed to implead ‘Secretary of Corporate Affairs’ as party Respondent in all cases of I&B Code and Companies Act.

The National Company Law Tribunal, New Delhi, Principal Bench on 22nd November, 2019 in its order said that “We further direct that in all cases of Insolvency & Bankruptcy Code and Company Petition, the Union of India, Ministry of Corporate Affairs through the Secretary be impleaded as a party respondent so that authentic record is made available by the officers of the Ministry of Corporate Affairs for proper appreciation of the matters.  This shall be applicable throughout the country to all the benches of National Company Law Tribunal.  The Registrar shall send a copy of this order to all NCLT benches so that respective Deputy Registrar may ensure that proper parties are impleaded.

The Union of India appellant herein, said that the impugned order bristles with numerous infirmities and that the Adjudicating Authority does not possess the powers to pass an order, which was in the ‘nature of rule’ under the guise of an ‘order’. According to the Appellant, the ‘rule making power’ is the exclusive domain of the Central Government (being a subordinate legislation) and the same is required to be placed after notification before the August House of the Parliament.    

The counsel for respondent bank said that in the impugned order no direction was issued to the Bank and that the impugned order was passed in an Application filed by the Resolution Professional relating to the difficulties faced by him in carrying out the compliance of the provisions of the Companies Act, 2013 and other relevant provisions of Law. That apart, the general direction issued in the impugned order has no bearing on the Respondent and that the present Appeal is filed against the wrong Respondent.  Hence, the Appeal is liable to be dismissed, in the interest of justice.

Acting on the plea, the bench comprising of Justice M. Venugopal, V.P. Singh (Technical Member) & Alok Srivastava (Technical Member), made following observations:-

  • If a certain thing is to be performed in a particular manner, then the same is to be done in that way.  In fact, a procedural wrangle cannot be allowed to be shaked or shackled with.
  • It is axiomatic principle in law that if a third party is concerned with a dispute, that party is to be arrayed as a necessary or proper party to the adjudication of main issue centering around the dispute.
  • The ‘principles of natural justice’ are not the edicts of a statute.  The ‘principles of natural justice’ are not to be imprisoned in a straight-jacket cast-iron formula.
  • A proper party is a party who although not a necessary party is a person whose presence will enable the Authority to effectively, efficaciously, comprehensively and adequately adjudicate upon all the controversies centering around a given case.
  • In fact, ‘impleadment of parties’ is only a matter of fact and not a matter of Law.  Addition of parties/ striking out parties of course, is a matter of discretion to be exercised by a Tribunal/ Court based on sound judicial principles.

The NCLAT also observed that the directions issued in respect of Application filed by the Resolution Professional to implead the ‘Secretary of Ministry of Corporate Affairs’ as party Respondent in all cases of I&B Code is nothing but beyond the power of the Tribunal and it tantamounts to imposition of a new rule in a compelling fashion. 

In short, the impugned order making it applicable throughout the country to all the Benches of the National Company Law Tribunal is untenable one and the said order suffers from material irregularity and patent illegality in the eye of Law. Thus, the NCLAT set aside the impugned order dated 22.11.2019 in (IB)-939(PB)/2018 in furtherance of substantial cause of justice.

-India Legal Bureau


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