The Karnataka High Court on Wednesday vacated an interim order in which it had directed the Bengaluru bench of the National Company Law Tribunal (NCLT) not to pass any adverse order against a private mall-developing company on insolvency proceedings initiated by Axis Bank.

Justice AS Bopanna passed the order on an application filed by the bank for vacating the interim order passed on August 28 on a petition filed by Lotus Shopping Centres challenging the insolvency proceedings, as well as the constitutional validity of sections 4 to 77, 214, 215, 231 and 238 of the Insolvency and Bankruptcy Code (IBC), 2016.

‘Hear both parties’

However, the court, in its order, observed that as per the judicial pronouncements made by other High Courts and the Supreme Court, the NCLT will have to provide reasonable opportunity of hearing to both the parties before taking a decision on the insolvency application filed by the bank as the proceeding is “adversarial in nature”.

The petitioner-company will have ample opportunity to defend itself before the NCLT, the court observed.

The court made these observations as the petitioner-company had pointed out that the NCLT, as per the IBC, was not required to hear the company’s point of view before admitting the proceedings.

On the contention of Lotus Shopping Centres, which has been classified as “corporate debtor” by the bank, that it will have no right of appeal if the NCLT decides to appoint insolvency professionals in place of company’s board of management, the court said that “any person” aggrieved from an NCLT order can appeal to the appellate tribunal. The court also pointed out that the petitioner-company’s investors too have the right to appeal.

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