Single-member bench cannot hear insolvency plea, rules NCLAT : 31-08-2020

A single-member bench of the National Company Law Tribunal (NCLT) can’t hear and decide on a company when the law requires a division bench, including both judicial and technical members, to constitute the adjudicating authority.

Indore-based Indison Agro Foods Ltd, which is facing insolvency resolution by Allahabad Bank in the Ahmedabad NCLT, had approached the National Company Law Appellate Tribunal (NCLAT), seeking appellate tribunal’s intervention for referring the matter to a division bench.

The debtor argued that when the matter came for hearing at the NCLT Ahmedabad, initially the judicial member of the division bench recused from the hearing and hence the matter was referred to the registrar for reconstitution of the bench.

However, according to the Indore-based firm, the registrar had referred the matter to the single member. The law requires the bench to consist of two members, with both judicial and technical competence, to hear cases related to the Insolvency & Bankruptcy Code (IBC).

So, Indison Agro Foods had challenged the constitution of the bench at the appellate tribunal.

On August 24, acting chairperson of NCLAT, Justice Bansi Lal Bhat, Justice Jarat Kumar Jain and a technical member Ashok Kumar Mishra, while disposing of the case directed the president of NCLT to constitute a bench comprising a judicial member and a technical member.

“This ruling will leave no room for further challenges on the validity of the benches’ constitution since technical members are included for their expertise,” said Nipun Singhvi, advocate for Indison Agro Foods.

The appellate tribunal recently set aside Mumbai NCLT’s ruling where the point of law involved the authority of a technical member, originally not a part of the hearings, to sign an order.

On August 5, the NCLAT had set aside the bankruptcy court’s approval to a consortium led by investor Kalraj Dharamshi and Rekha Jhunjhunwala to acquire Ricoh India.

Kotak Investment Advisors, the private equity arm of Kotak Mahindra Bank that was one of the bidders for Ricoh India, had challenged the NCLT decision. It had argued that the Dharamshi-Jhunjhunwala consortium was allowed to submit its bid after the expiry of the deadline and when the bids by other bidders had already been opened. The PE also argued that the NCLT bench had passed the order even though the technical member didn’t get an opportunity to hear the arguments on that application.

Source : PTI