Case Note & Summary
The appeal arose from an order dated 07.05.2024 passed by the National Company Law Tribunal, Hyderabad Bench, rejecting an application filed by Kesari Nandan Traders, an operational creditor, under Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The appellant sought a direction to the Resolution Professional of M/s. Nadhi Bio Products Pvt. Ltd. to admit its claim of Rs.7,29,96,779. The corporate debtor was undergoing corporate insolvency resolution process. The appellant contended that it had submitted sufficient credible materials in support of its claim, but the NCLT dismissed the application without recording any reasons or considering the grounds raised. The Tribunal's order merely stated that the Resolution Professional's communication regarding claim admission did not warrant interference. Aggrieved, the appellant preferred the present appeal before the National Company Law Appellate Tribunal, Chennai. The legal issue was whether the NCLT's order was vitiated for being a non-speaking order without application of mind. The appellant argued that the order failed to assign reasons, did not consider the grounds raised, and was thus liable to be set aside. The respondent, through its counsel, conceded that the Tribunal had not recorded any reasons and that the grounds taken by the appellant were not considered. The NCLAT analyzed that any order deciding civil rights of parties must be a reasoned order. It held that the impugned order was without application of mind and did not disclose any reason for rejecting the contentions. Consequently, the appeal was allowed. The order dated 07.05.2024 was quashed, and the matter was remitted back to the NCLT, Hyderabad Bench, to reconsider the application afresh on merits, after hearing the parties, and to pass a reasoned order.
Headnote
A) Insolvency and Bankruptcy - NCLT's Duty to Pass Reasoned Order - Requirement of Speaking Order - Insolvency and Bankruptcy Code, 2016, Section 60(5) - The Appellant, an operational creditor, appealed against the NCLT's rejection of its application under Section 60(5) for admission of its claim, which order was non-speaking and lacked reasons. The NCLAT held that when an order decides civil rights, the adjudicating authority must record reasons for accepting or rejecting the contentions. The impugned order was found to be without application of mind and thus quashed. The matter was remitted back to NCLT with directions to consider the application afresh on merits and pass a reasoned order after hearing the parties. (Paras 1-5)
Issue of Consideration
Whether the NCLT's order rejecting the appellant's application for direction to admit a claim, which is a non-speaking order and does not consider the grounds raised, is liable to be set aside
Final Decision
The appeal was allowed. The impugned order dated 07.05.2024 was quashed. The matter was remitted back to the NCLT, Hyderabad Bench, to reconsider the application IA(IBC) 543/2024 on merits by considering the contentions raised by the appellant and passing a reasoned order after hearing the parties.
Law Points
- Legal points not extracted
- Courts and tribunals are duty-bound to record reasons for accepting or rejecting contentions
- particularly when order decides civil rights
- Non-speaking orders are liable to be set aside
- Order without application of mind is invalid
Case Details
2026 LawText (NCLAT) (05) 1
Company Appeal (AT) (CH) (Ins) No. 257/2024 (IA No. 690/2024)
Justice Sharad Kumar Sharma, Member (Judicial), Jatindranath Swain, Member (Technical)
For Appellant: Kumarpal R Chopra, Chiron Singhi; For Respondent: Shaik Gouse, PCS for Mahadev Tirunagari, PCS
M/s. Nadhi Bio Products Pvt. Ltd., Represented by its Resolution Professional, Mr. Sreenivasa Rao Ravinuthala
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Nature of Litigation
Appeal against rejection of operational creditor's application for direction to admit its claim in corporate insolvency resolution process.
Remedy Sought
Appellant sought setting aside of NCLT order and admission of claim of Rs.7,29,96,779.
Filing Reason
NCLT vide impugned order dated 07.05.2024 rejected the appellant's IA(IBC) 543/2024 without recording reasons, not considering the appellant's grounds.
Previous Decisions
NCLT, Hyderabad Bench, passed order dated 07.05.2024 dismissing the application with a non-speaking order.
Issues
Whether the NCLT's order rejecting the appellant's application for direction to admit a claim is vitiated for being a non-speaking order without application of mind.
Submissions/Arguments
Appellant contended that the impugned order was without application of mind and a non-speaking order, failing to record any reasons for accepting or rejecting the contentions raised.
Appellant argued that the order did not consider whether the corporate debtor committed a default and had civil consequences, thus requiring a reasoned decision.
Respondent's counsel conceded that the NCLT had not recorded any reasons and that the grounds taken by the appellant were not considered.
Ratio Decidendi
An order of an adjudicating authority deciding civil rights of parties must be a reasoned order. An order that fails to record reasons and is passed without application of mind is vitiated and liable to be set aside.
Judgment Excerpts
IA(IBC) 543/2024 Order pronounced. The communication of the Resolution Professional as regards to the admission of the claim of the applicant/operational creditor, to the extent that is found in the balance sheet of the Corporate Debtor does not warrant our interference under the facts and circumstances of this case
Since the Impugned Order is a non-reasoned order, without considering the grounds taken by the Appellant qua his claim raised in his Application preferred being IA(IBC) 543/2024, the Impugned Order dated 07.05.2024 would hereby stand quashed.
Procedural History
The Appellant filed IA No. 543/2024 before NCLT, Hyderabad Bench, under Section 60(5) of the I&B Code, seeking direction to the Resolution Professional to admit its claim. By order dated 07.05.2024, NCLT dismissed the application with a non-speaking order. The Appellant preferred the present Company Appeal (AT) (CH) (Ins) No. 257/2024 before NCLAT Chennai on 16.06.2024. Notice was issued to the Respondent. On 25.02.2025, the appeal was directed to be listed on 17.04.2025. Subsequently, upon the Appellant's application IA No. 481/2025 for advance hearing due to scheduled approval of resolution plan on 28.03.2025, the matter was heard on 27.03.2025, and with consent of parties, the appeal was heard finally on merits and judgment reserved, delivered on 25.04.2025.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: 60(5)
- National Company Law Tribunal Rules, 2016: 11, 13, 32
