In the case of NUI Pulp and Paper Industries Pvt. Ltd. vs. M/S Roxcel Trading BMCH, NCLT, Chennai had passed an ad-interim order preventing the Directors of NUI Pulp and Paper Industries (Corporate Debtor) from alienating and creating any third-party interest in the assets of the Debtor Company until further notice.

The Corporate Debtor, in an appeal to the NCLAT, argued that the NCLT had no jurisdiction to pass such an order restraining the Debtor Company and its Directors from alienating or creating third-party interest on its assets. The NCLT, Chennai was of the opinion that it had the power vested on it under Rule 11 of the NCLT Rules, 2016, to pass interim orders to ensure that the purpose of Insolvency and Bankruptcy Code (I&B Code), 2016, is not defeated.

The NCLAT bench comprising of Justice S. J. Mukhopadhaya, Chairperson and Kanthi Narahari, Member (Technical), held that under NCLT Rules, 2016, Rule 11, the NCLT had the power to pass an interim relief without hearing the parties. It also observed that:

“it is clear that once an application under Sections 7 or 9 is filed by the Adjudicating Authority, it is not necessary for the Adjudicating Authority to await hearing of the parties for passing order of ‘Moratorium’ under Section 14 of the ‘I&B Code’. To ensure that one or other party may not abuse the process of the Tribunal or for meeting the ends of justice, it is always open to the Tribunal to pass appropriate interim order.”

Thus, the NCLAT passed the order that the NCLT had the power to impose a moratorium even without hearing the parties and the appeal stood dismissed.

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