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2021 (2) TMI 1376 - HC - Indian Laws


Issues:
1. Challenge to the bank's appeal before the Debt Recovery Appellate Tribunal (DRAT) falling under the moratorium of the Insolvency and Bankruptcy Code, 2016.
2. Maintainability of the writ petition by a shareholder against the DRAT order.
3. Jurisdiction of a constitutional court to entertain a writ petition against a quasi-judicial body.
4. The impact of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 on proceedings before the DRAT.
5. Validity of the DRAT's order and the role of the Resolution Professional (RP) as the liquidator of the company in liquidation.

Analysis:
1. The petitioner, a shareholder and director in a company, challenged the bank's auction of a property secured against credit facilities under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. The Debt Recovery Tribunal annulled the transaction, leading to an appeal by the bank before the DRAT during the pendency of insolvency proceedings initiated by an operational creditor under the Insolvency and Bankruptcy Code, 2016. The issue raised was whether the bank's appeal before the DRAT was affected by the moratorium under the Code.

2. The court addressed the maintainability of the writ petition by the shareholder against the DRAT order, emphasizing that a shareholder could challenge an order affecting the company's interests. Despite the bank's argument citing a Supreme Court judgment, the court held that a shareholder's right to seek redressal for perceived wrongs against the company remained intact, especially when a statutory authority was involved.

3. The judgment clarified the jurisdiction of a constitutional court to entertain a writ petition against a quasi-judicial body like the DRAT under Article 226 of the Constitution. It emphasized that the nature of the grievance determined whether Article 226 or Article 227 should be invoked against such bodies, which were considered amenable to the writ jurisdiction.

4. Regarding the impact of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 on DRAT proceedings, the court highlighted that the moratorium barred any recovery proceedings against the corporate debtor during insolvency. The DRAT's actions during the moratorium were deemed without jurisdiction, emphasizing the statutory prohibition against such activities.

5. The judgment also discussed the validity of the DRAT's order and the role of the Resolution Professional (RP) as the liquidator of the company in liquidation. The court set aside the DRAT's order and directed the RP to represent the company in the proceedings. It noted that the RP's position and the exclusion of the secured asset from liquidation proceedings could impact the DRAT's decision going forward.

In conclusion, the writ petition succeeded in challenging the DRAT's order, emphasizing the importance of upholding statutory mandates and correcting jurisdictional errors, while ensuring fair representation of the company's interests during insolvency proceedings.

 

 

 

 

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