The National Company Law Appellate Tribunal (NCLAT) has set aside an order of the Principal Bench of NCLT that the Ministry of Corporate Affairs (MCA) will have to be made a party to every case under the Insolvency and Bankruptcy Code (IBC).
The appellate tribunal said that the NCLT's order dated November 22, 2019, is "beyond the power" of the tribunal and it tantamount to imposition of a new rule in a compelling fashion.
The impugned order making it applicable throughout the country to all the benches of NCLT is untenable and it suffers from material irregularity and patent illegality in the eye of law, said the judgment.
The MCA had moved the appellate tribunal after the Principal Bench of NCLT in Delhi, in the Oriental Bank of Commerce versus Sikka Papers case, ordered that the ministry should be impleaded as a party/respondent through the Secretary so that authentic record is made available by the ministry officers for proper appreciation of the matters.
"As a matter of fact, there is no necessity to array the appellant/Ministry of Corporate Affairs as a party in respect of the applications filed under Sections 7, 9 or 10 of IBC for the purpose of reliable record or for appreciation of the matter," said the NCLAT judgment.
The three-member bench of NCLAT noted that such "wholesale, blanket and omnibus directions" cannot be issued in a single stroke.
Whether the Ministry of Corporate Affairs through the Secretary should be impleaded as a necessary party or as pro forma respondent before the tribunal is to be determined only on a case-to-case basis when the need of a given case arises for rumination of issues, which comes up before the respective tribunals, NCLAT said.
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