Introduction
The National Company Law Appellate Tribunal (NCLAT) judgment, dated 22nd September 2020 has directed the NCLT to place the matter before a third member so that it is decided by a majority. JM Financial Asset Reconstruction Company filed an application under Section 7 of the Insolvency and Bankruptcy Code.
Brief Facts
Conflicting orders have been passed by the two Members comprising the Bench of Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Court I. The two-member Ahmedabad bench of the National Company Law Tribunal (NCLT) had delivered the split verdict on February 26, 2020. The technical member-directed admitting the application filed under Section 7 of the Insolvency and Bankruptcy Code to initiate the proceedings, while the judicial member gave a dissenting view, rejecting the plea.
Arguments Before the Court
JM Financial Asset Reconstruction Company (appellant), which is acting as a trustee of JMFARC-SBI, approached the National Company Law Appellate Tribunal (NCLAT), asking for the appeal against the orders of NCLT.
The Appellant submits that the mandate of Section 419(5) of the Companies Act was not followed as the two Members of the Bench had conflicting views on the vital issues resulting in disposal of application in two different ways viz. one allowing admission of the application under Section 7 and other rejecting it.
Analysis
The two-member Ahmedabad bench of the National Company Law Tribunal (NCLT) had delivered the split verdict on February 26, 2020, in the case of
J.M. Financial Asset Reconstruction Company Ltd. V. Samay Electronics Pvt. Ltd.
The case dealt with Section 7 of Insolvency and Bankruptcy Code which provides for a statutory right in favour of a financial creditor to initiate the corporate insolvency resolution process of a corporate debtor on the occurrence of a default.
Court’s Observation and Decision
Appellate tribunal NCLAT has directed that a plea by JM Financial Asset Reconstruction Company to initiate insolvency proceedings against Samay Electronics be placed before a third member of the NCLT Ahmedabad bench after two other members of the same bench gave a split verdict in the matter.
The Court observed and said:
“After hearing learned counsel for the appellant, we deem it appropriate to dispose of this appeal with direction to the same Bench of the Adjudicating Authority, which passed two conflicting orders, to make a reference to the President, NCLT, if not already made…”
“… for hearing on the issues and points on which the two Members of the Bench had a divergent view in the split verdict so that the matter is placed before a third Member for hearing and the Company Petition is decided in accordance with the opinion of the majority of the Members who heard the case including the member before whom it is placed.”
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