NCLAT orders NCLT to hear afresh insolvency plea by APL Apollo Tubes

The National Company Law Appellate Tribunal (NCLAT) has directed the NCLT to hear afresh the insolvency plea filed by APL Apollo Tubes against one of its purchasers of goods.

A two-member bench came down heavily on the Bengaluru bench of the National Company Law Tribunal (NCLT) for rejecting claims of APL Apollo Tubes on the "hypothetical interpretation".

The NCLAT said the tribunal "should refrain from stepping into the shoes of a litigating party by substituting their own finding in the absence of there being any pleading evidence".

The appellate tribunal has directed the NCLT to make all efforts to decide proceedings as expeditiously as possible.

The NCLAT order came over a petition filed by APL Apollo Tubes against an order of the NCLT, which, on September 9, 2019, dismissed its insolvency plea filed as an operational creditor against Tanisha Scaffolding.

Tanisha Scaffolding was engaged in marketing the products manufactured by APL Apollo Tubes. Some amount against supplies was not remitted and fell due to be paid and therefore, APL Apollo Tubes filed the insolvency plea.

This was rejected by the NCLT, saying the debt was not due on the ground that there was no documentary evidence, which was furnished by the appellant to establish that the debt was due and payable.

However, the appellate tribunal said this inference has been drawn by the NCLT merely based on a hypothetical interpretation given to the contents of the invoices without there being any evidence or pleadings to the contrary.

"There was no occasion for the NCLT to draw an inference in the absence of there being any pleading to the contrary made by the Respondent as to what implications the Purchase Order would have over the Demand Notice and the prior invoices, which were issued by the Appellant, with regard to the amount due to be paid by the Appellant," it said.

Moreover, even in the proceedings of the NCLAT, Tanisha Scaffolding, despite several opportunities having been granted, has not filed any objections or even a written statement to controvert it.

Setting aside the order, the NCLAT said tribunals created under a statute while adjudicating between the parties have to confine their finding limited to the extent of respective pleadings and evidence laid by the parties.

"The Tribunals or the Courts are not expected to substitute their own stand or finding in supporting case of either of the parties before it in the absence of there being any pleading raised before it to controvert the pleading raised by the other side in support of their case.

"We are of the view that it would meet the ends of justice if the Impugned Order dated September 5, 2019, is quashed and the matter is remitted back to the NCLT, Bangalore Bench, to decide afresh after providing an opportunity to the Respondent to file their objection to the Application under section 9 and to decide the same afresh," the NCLAT said.