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2019 (12) TMI 1538 - HC - Insolvency and BankruptcyConstitutional validity of provisions of Insolvency and Bankruptcy Code, 2016 and more particularly Section 3(8), Section 3(23) and Section 238 and also Sections 7, 8 9 - Government companies - HELD THAT We would not wish to express any opinion on the maintainability of all the proceedings before the NCLT. We do not think that once the petition was pending in this Court, can we prevent M/s.Hindustan Antibiotics Ltd. to proceed with it only because some orders have been passed by the NCLT in the company petition. These orders also have not gained finality on account of the reference to a third member. Further, on the core issue about the applicability of the Code to M/s.Hindustan Antibiotics Ltd., the members of the National Company Law Tribunal are divided in their opinion. There is now a reference made to the third member. We do not think that the National Company Law Tribunal should precipitate the matter when a constitutional challenge is pending before this Court. None can dispute that it is only this Court which can deal with the challenge raised to the constitutional validity of the provisions of the IBC. We do not think that the NCLT would be well advised in proceeding with the matter. We think that the petitioner has made out a strong prima facie case for grant of interim relief and balance of convenience is also in its favour. Issue notice to the learned Attorney General for India on the point as to whether the provisions of IBC, as alleged, are ultra vires Article 14 and other relevant Articles of the Constitution of India - Notice be also issued to other respondents, returnable on 22.1.2020.
Issues:
1. Challenge to the provisions of Insolvency and Bankruptcy Code, 2016 by M/s.Hindustan Antibiotics Ltd. 2. Applicability of Insolvency and Bankruptcy Code to Government companies. 3. Jurisdiction of National Company Law Tribunal (NCLT) in light of pending constitutional challenge. 4. Prima facie case for grant of interim relief and balance of convenience. Analysis: 1. Challenge to the provisions of Insolvency and Bankruptcy Code (IBC): M/s.Hindustan Antibiotics Ltd. filed a Writ Petition challenging the fairness and legality of certain provisions of the IBC, citing conflict with the Companies Act, 2013 and violation of Article 14 of the Constitution of India. The petitioner sought various reliefs, including a stay on recovery proceedings initiated by multiple respondents. The petition is pending before the High Court. 2. Applicability of IBC to Government companies: M/s.Hindustan Antibiotics Ltd., a Government of India enterprise, argued before the NCLT that being a Government company, the IBC should not be applied to them. The company's ownership by the Government and control by the Department of Pharmaceuticals were highlighted. The NCLT proceedings raised legal and constitutional issues, leading to a reference to a third member due to a division in opinion among the NCLT members. 3. Jurisdiction of NCLT in light of pending constitutional challenge: The High Court expressed concerns over the NCLT's jurisdiction in the matter, emphasizing that the constitutional challenge to the IBC should be addressed by the Court, not the NCLT. The Court noted that the NCLT's jurisdiction is derived from the IBC and raised doubts about the NCLT's competence to decide on the constitutional validity of the IBC. The Court highlighted the need for a deeper examination of the issue, including the relevance of a Supreme Court judgment on a similar issue. 4. Prima facie case for interim relief: The High Court found that M/s.Hindustan Antibiotics Ltd. had established a strong prima facie case for the grant of interim relief. It noted the potential irreparable harm and loss the company could suffer if the NCLT proceedings were to continue. Consequently, the Court issued orders, including issuing notices to the Attorney General for India and other respondents, staying further proceedings in the NCLT Company Petition, and setting a date for further orders. In conclusion, the High Court's judgment addressed the challenges to the IBC provisions, the applicability of the Code to Government companies, the jurisdiction of the NCLT in the face of a constitutional challenge, and the grant of interim relief based on a prima facie case and the balance of convenience.
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