Court HON’BLE SUPREME COURT

Case Title M/S. INNOVENTIVE INDUSTRIES LTD. (Appellant)

v.
ICICI BANK & ANR. (Respondents)
CIVIL APPEAL NOS. 8337-8338 of 2017
Citation (2018) 1 SCC 407
Hon’ble Judge HON'BLE MR. JUSTICE R.F. NARIMAN
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
Issue First Petitioner has challenged Sec 7 of the Code on the grounds that it violates the
principle of natural justice.
Facts  The Appellant owing to labour issues were unable to services the debts taken
from Bank and consequently proposed for CDR. 19 Banks formed a consortium,
led by Central Bank of India and Joint Lenders Forum finally approved the
restructuring plan. Details of plan is not relevant for us.
 Master Restructuring Agreement (MRA) was entered.
 In December, 2016 – ICICI Bank filed an application under Sec 7 of IBC at NCLT,
said that that appellant is a defaulter.
 Appellant filed a first reply - stating that no debt is legally due because
Maharashtra Govt vide its two notification under Maharashtra Relied Undertaking
(Special Provisions Act), 1958 imposed temporary moratorium on all recovery of
dues against the Appellant.
 Then Appellant filed second application stating that Responent has not released
the funds as per the terms of MRA, hence when ICICI Bank has not fulfilled its
obligation and did not release funds, no debt is due.
 NCLT held that Sec 238 of IBC gives overriding powers to the Code over any other
law. NCLT also dismissed the second application.
 Appeal was filed NCLAT, it held that although IBC and Maharashtra Act operate in
different fields and therefor are not REPUGNANT to each other.

Submissions By First Respondent:

No date of hearing was informed, only received notice of application, and NCLT
proceeded, passed ex-parte order, and admitted the application. Section 7 does not
prescribe the procedure to hear both parties.

By Respondent 2:
1. Notice of application filed with NCLT was sent to First Petitioner but it failed
to appear.
2. Rule 4 of IB (app. To AA) Rules (Rules 2016) were followed. NCLT rules were
followed.
3. First Petitioner did not challenge Sec 7 at NCLAT hence, they now cannot pray
for violation of principles of Natural Justice.

By Additional Solicitor General:

1. Rule 10 contemplates the application of Rule 24 of NCLT rules which provides
 for services of notice of an application to the respondent (first petitioner in
the present case).
2. Sec 424 of CA 2013 takes about the procedure for tribunal subject to
principles of Natural Justice.
3. Hence, Sec 7 does not debar the applicability of the principles of Natural
Justice.

Reasoning of 1. Sec 7 of the Code read with Rules 2016 is silent on procedure to be followed
Judgment wrt right of hearing to respondent.
2. Sec 424 of CA 2013 allows NCLT and NCLAT to follow own procedure subject
to principles of Natural Justice.
3. Code does not, in express terms, oust the principles of natural justice, the
same can be read into in.
4. Sec 7(4) provides for ascertaining the existence of default and this statutory
requirement can be extended to provide a reasonable opportunity of being
heard to Corporate Debtor and there is no default.
5. Proceedings at NCLT are adversarial in nature.
6. Both parties are entitled to the opportunity of hearing.
7. Principles of Natural Justice can be found in Sec 7(4) and Rule 4 of Rules 2016.
8. Adherence to principles of Natural Justice does not mean to provide hearing
to the respondent in all situations.
9. Ex-parte ad interim order can be passed with sufficient reasons for deviating
from principles of natural justice.
Judgment Section 7 of the Code does not violate principles of NATURAL JUSTICE.

END