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HON’BLE HIGH COURT OF CALCUTTA
Case Title Sree Metaliks Limited and Another (Petitioner)
v.
Union of India and Anr. (Respondent)
W.P. 7144 (W) of 2017
Hon’ble Judge Debangsu Basak., J.
Issue First Petitioner has challenged Sec 7 of the Code on the grounds that it violates the
principle of natural justice.
Facts NCLT Kolkata Bench passed an ex‐parte order admitting an application u/s 7 of the
Code against the first petitioner without giving an opportunity of being heard to the
first petitioner.
The first Petitioner received notice of application filed by the firm of CS but was not
informed about the date of hearing at NCLT.
First Petitioner approached NCLAT challenging the order of NCLT, not on the account
of violation of principles of Natural Justice but objected to the appointed of Interim
IP, accordingly NCLAT, by its order replaced and appointed new Interim RP.
In the present case, First Petitioner approached Hon’ble HC to challenge the validity
of Sec 7 of the Code on the ground that this section does not envisage the principles
of Natural Justice.
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