The High Court of Kerala held that a writ petition challenging an NCLT order in insolvency proceedings is not maintainable, as an alternative remedy under Section 61 of the IBC exists and the order was passed on the petitioner's own applications.
The writ petition was dismissed as not maintainable.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR WEDNESDAY, THE 6TH DAY OF OCTOBER 2021 / 14TH ASWINA,
1943
WP(C) NO. 20685 OF 2021
PETITIONER:
V.K. ABDUL RAHIM, AGED 73 YEARS S/O.V.M.KUNJALI NAINA, SHARE HOLDER AND SUSPENDED MANAGING DIRECTOR OF M/S. SARGAM BUILDERS PVT LTD. 28/3858-D, SARGAM HOUSE, KOCHI -20 AND RESIDING AT SARGAM, WATERLAND ROAD, ELAMKULAM, KOCHI 682 020
BY ADVS. BABU KARUKAPADATH M.A.VAHEEDA BABU P.U.VINOD KUMAR ARYA RAGHUNATH VAISAKHI V. T.M.MUHAMMED MUSTHAQ MOHAMED HISHAM P KARUKAPADATH WAZIM BABU
RESPONDENTS:
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06.10.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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P.B.SURESH KUMAR, J.
W.P.(C) No.20685 of 2021
Dated this the 6th day of October, 2021
JUDGMENT
Petitioner is the Managing Director and a share holder of M/s.Sargam Builders Private Limited, a Company incorporated under the Companies Act. The Company had availed credit facilities from the first respondent bank in connection with its business. Since the amounts due to the bank in connection with the credit facilities availed by the Company have not been repaid by the petitioner, the bank initiated proceedings initially under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and later under the Recovery of Debts Due to Banks and Financial Institutions Act. During the pendency of the said proceedings, the bank filed an application before the National Company Law Tribunal (the NCLT) as TIBA
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No.7/KOB/2019 under Section 7 of the Insolvency and Bankruptcy Code (the IBC) seeking orders for initiating corporate insolvency resolution process against the Company. In terms of Ext.P1 order, the NCLT admitted the said application, ordered the commencement of the corporate insolvency resolution process and appointed an Interim Resolution Professional for the said purpose. Ext.P1 order was affirmed by the National Company Law Appellate Tribunal (the NCLAT) as also by the Apex Court. Later, I.A.No.129/KOB/2020 was filed by the Resolution Professional in TIBA No.7/KOB/2019 under Section 33(2) of the IBC for an order to liquidate the Company. The said application was allowed by the NCLT on 16.09.2020 in terms of the Ext.P2 order directing to put the Company under liquidation with immediate effect. In terms of Ext.P2 order, the Resolution Professional appointed in terms of Ext.P1 order was permitted to continue as the Liquidator of the Company. The petitioner challenged Ext.P2 order initially before the NCLAT in appeal. Later, he preferred M.A.No.207/KOB/2020 in TIBA No.07/KOB/2019 seeking orders recalling Ext.P2 order. Ext.P3 is the said interlocutory application. After filing Ext.P3 application, the petitioner has
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withdrawn the appeal preferred against Ext.P2 order before the NCLAT. Later, the petitioner preferred an application to amend Ext.P3 application. Ext.P4 is the said application. Exts.P3 and P4 applications now stand dismissed by the NCLT in terms of Ext.P12 order. Exts.P2 and P12 orders are under challenge in this proceedings under Article 226 of the Constitution.
dispute the fact that Ext.P12 is an order that can be challenged in appeal in terms of Section 61 of the IBC before the NCLAT. When the learned counsel was required to explain as to whether the writ petition is maintainable in the light of the alternative remedy available to the petitioner for redressal of the grievance voiced in the writ petition under Section 61 of the IBC, it was pointed out by the learned counsel that Ext.P2 order is one issued without notice to the petitioner. It was also pointed out by the learned counsel that though very many contentions have been raised by the petitioner in Exts.P3 and P4 applications to sustain the reliefs sought therein, none of them have been considered by the NCLT in Ext.P12 order.
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According to the learned counsel, Exts.P2 and P12 orders are therefore vitiated for non-compliance of the principles of natural justice and hence, a writ petition under Article 226 of the Constitution is certainly maintainable against such orders.
“The Insolvency Code is a legislation which deals with economic matters and, in the larger sense, deals with the economy of the country as a whole. Earlier experiments, as we have seen, in terms of legislations having failed, “trial” having led to repeated “errors”, ultimately led to the enactment of the Code. The experiment contained in the Code, judged by the generality of its provisions and not by so-called crudities and inequities that have been pointed out by the petitioners, passes constitutional muster”.
In Innoventive Industries Ltd. v. ICICI Bank, AIR 2017 SC
4084, it was observed by the Apex Court that IBC is a single unified umbrella code, covering the entire gamut of the law relating to insolvency resolution of corporate persons and others in a time bound manner. It was also observed that the code provides a three tier mechanism namely, (i) the NCLT
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which is the adjudicating authority, (ii) the NCLAT which is the appellate authority and (iii) the Supreme Court which is the final authority, for dealing with all issues that may arise in relation to the reorganisation and insolvency resolution of corporate persons. The aforesaid being the scheme of the IBC, according to me, interference with the orders of the NCLT and NCLAT issued in exercise of the powers under the IBC is permissible only in cases where the NCLT or NCLAT exercises jurisdiction not vested in it. As far as Ext.P12 order is concerned, the petitioner does not have a case that the NCLT has exercised jurisdiction not vested in it in the matter of passing the said order. The petitioner cannot also be heard to raise such a contention as the said order is one issued by the NCLT on applications preferred before it by the petitioner himself. In other words, according to me, the writ petition instituted challenging Ext.P12 order is not maintainable.
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cannot be heard to contend that Ext.P2 is vitiated for noncompliance of the principles of natural justice so as to invoke the jurisdiction of this Court under Article 226 of the Constitution.
In the light of the discussion aforesaid, I am of the view that the writ petition is not maintainable, and the same is
accordingly dismissed.
Sd/-
P.B.SURESH KUMAR
JUDGE
ds 02.10.2021
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APPENDIX OF WP(C) 20685/2021
PETITIONER EXHIBITS
Exhibit P1 A TRUE COPY OF THE ORDER DATED 20/9/2019 IN TIBA/07/KOB/2019 OF THE HON'BLE NCLT Exhibit P2 A TRUE COPY OF THE ORDER DATED 16/9/2019 IN TIBA/07/KOB/2019 OF THE HON'BLE NCLT Exhibit P3 A TRUE COPY OF THE RELEVANT PARTS OF M.A.NO.207/KOB/2020 IN TIBA/07/KOB/2019 FILED BY THE PETITIONER, EXCLUDING THE ANNEXURES THEREIN, ANNEXURES PRODUCED BEFORE NCLT IS VOLUMINOUS RUNNING TO HUNDREDS OF PAGES PETITIONER IS READY TO PRODUCE THEM IF COURT DEMANDS OR AS AND WHEN NECESSARY Exhibit P4 A TRUE COPY OF THE RELEVANT PORTION OF THE AMENDMENT APPLICATION NO.101/KOB/2021 IN PARTS OF M.A.NO.207/KOB/2020 IN TIBA/07/KOB/2019 FILED BY THE PETITIONER, EXCLUDING THE ANNEXURES THEREIN, ANNEXURES PRODUCED BEFORE NCLT IS VOLUMINOUS RUNNING TO HUNDREDS OF PAGES PETITIONER IS READY TO PRODUCE THEM IF COURT DEMANDS OR AS AND WHEN NECESSARY Exhibit P5 A TRUE COPY OF THE RELEVANT PART OF THE INFORMATION MEMORANDUM AS ON THE DATE OF INSOLVENCY COMMENCEMENT ON 20/9/2019 AND THE LIST OF CREDITORS WITH PERCENTAGE OF SHARES PREPARED BY THE 2ND RESPONDENT Exhibit P6 A TRUE COPY OF THE CHART SHOWING THE VOTING SHARE OF VARIOUS FINANCIAL CREDITORS ON THE BASIS OF THE
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FINANCIAL MEMORANDUM PREPARED BY THE 2ND RESPONDENT UNDER SECTION 18 OF THE IBC
| Exhibit P7 | A TRUE COPY OF THE CHART SHOWING THE VOTING SHARE OF EACH FINANCIAL CREDITORS, EVEN AFTER ADMITTING THE UNFOUNDED UNCONSCIONABLE CLAIM OF THE 1ST RESPONDENT BANK |
|---|---|
| Exhibit P8 | A TUE COPY OF THE RELEVANT PAR OF THE MINUTES OF 1ST COC |
| Exhibit P9 | A TRUE COPY OF THE SO CALLED AUTHORIZATION DATED NIL PRODUCED BY THE 2ND RESPONDENT BEFORE THE HON'BLE NCLT |
| Exhibit P10 | A TRUE COPY OF THE RELEVANT PARTS OF THE SENIORITY LIST OF ASSOCIATE VICE PRESIDENT OF THE 1ST RESPONDENT BANK |
| Exhibit P11 | A TRUE COPY OF THE SHORT WRITTEN SUBMISSION PRESENTED ON BEHALF OF THE PETITIONER BEFORE THE HON'BLE TRIBUNAL |
| Exhibit P12 | A TRUE COPY OF THE COMMON ORDER DATED 20.9.2021 IN M.A/207/KOB/2020 AND I.A/101/KOB/2021 |
| Exhibit P13 | A TRUE COPY OF THE CONSOLIDATED INDEX SUBMITTED BY THE PETITIONER BEFORE THE HON'BLE NCLT |
| Exhibit P14 | A TRUE COPY OF THE NOTIFICATION PUBLISHED IN MALAYALA MANORAM DAILY DATED 21.9.2021 |
2 issues framed by the court
Whether a writ petition under Article 226 is maintainable challenging an NCLT order dismissing applications when an alternative remedy under Section 61 of the IBC lies.
Whether the petitioner can claim violation of natural justice to invoke writ jurisdiction when the challenged order was passed on the petitioner's own applications.
Colour shows how this judgement treated each authority
Swiss Ribbons (P) Ltd. v. Union of IndiaRelied on¶33
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 · Who else cites this
Innoventive Industries Ltd. v. ICICI BankRelied on¶35
Innoventive Industries Ltd. v. ICICI Bank, AIR 2017 SC 4084 · Who else cites this
2 provisions across 2 enactments
V.K. Abdul Rahim
The Federal Bank Ltd.
Mr. Jasin Jose PonMattam
The National Company Law Tribunal Kochi Bench
P.B. Suresh Kumar
As recorded by the court registry
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