2021 (8) TMI 1286 - HC - Companies Law

Jurisdiction - authority of the NCLT to continue with the avoidance application despite the resolution plan already being in place - HELD THAT - The legal issue is, indeed, of some substance and whether it is ₹ 15/- or ₹ 150 crore involved, it makes little difference. It is the importance of the legal issue that may have impelled this Court to receive the petition and, to be fair to the petitioner, the petitioner has been substantially heard. However, since the matter pertains to the Insolvency and Bankruptcy Code, which, as its name suggests, is a code unto itself, and specialised fora are created thereby or, at any rate to entertain proceedings thereunder, it may be better to allow the NCLT to answer the legal issue before the view expressed is tested elsewhere. Petition is disposed of by requesting the NCLT, Chennai, to dispose of the avoidance application together with the other applications that may have been filed in connection therewith as expeditiously as the business of that forum may permit, and, preferably, within eight weeks of the receipt of a copy of this order.

Summary

Issues:
1. Jurisdiction of the National Company Law Tribunal (NCLT) in entertaining an application after the acceptance of a resolution plan.

Analysis:
The petition before the Madras High Court challenged the jurisdiction of the NCLT in entertaining an application post the approval of a resolution plan in the corporate insolvency proceedings of Empee Distilleries Limited. The petitioner argued that once a resolution plan is accepted and approved by the Court, all matters related to the insolvency proceedings should be considered concluded, likening it to a civil suit reaching finality upon a decree. The petitioner contended that any pending applications, such as an avoidance application regarding a share transaction, should be deemed to have lapsed after the resolution plan's approval.

The specific transaction in question involved shares of Empee Distilleries Limited pledged to South (India) Hotels, which were later sold to Goodyield Investments Private Limited. The successful resolution applicant, SNJ Distilleries Private Limited, emphasized the importance of these shares as a valuable asset of the corporate debtor, estimating their market value to be significant despite the petitioner's factory remaining closed for three years. The petitioner raised concerns about the NCLT's authority to continue with the avoidance application post the resolution plan's acceptance, arguing that the transaction should be considered finalized.

The High Court acknowledged the legal significance of the issue at hand, irrespective of the monetary value involved, and decided to refer the matter back to the NCLT for resolution. The Court emphasized the specialized nature of insolvency proceedings under the Insolvency and Bankruptcy Code, suggesting that the NCLT should address the legal issue before further action is taken. The Court directed the NCLT to expedite the disposal of the avoidance application and related matters within eight weeks, imposing restrictions on share transactions and asset alienation of the petitioner until a decision is reached. The Court clarified that its observations were limited to outlining the disputes and did not prejudice any party's position before the NCLT or other legal forums.

In conclusion, the High Court disposed of the petition without providing a definitive answer to the legal issue, allowing the NCLT to adjudicate on the matter. The parties were granted the opportunity to present their arguments before the NCLT, with the petitioner instructed to file its counter-affidavit within a week. The Court refrained from awarding costs and closed the related interim applications.