2022 (6) TMI 1336 - HC - Insolvency and Bankruptcy

Maintainability of petition - availability of alternative remedy - paramount contention advanced by the appellants is that the learned single Judge egregiously erred in dismissing the writ petition on the ground of availability of alternative remedy - HELD THAT - When a provision is interpreted by the Tribunal to arrive at a conclusion in regard to the application filed before it it cannot be said that the Tribunal has passed the order without jurisdiction. At the most what the appellants could allege is only the illegality of the order passed which is a subject matter to be considered by the appellate Tribunal in terms of Section 61 of the Insolvency and Bankruptcy Code 2016 which is a well defined provision exemplifying the powers of the Tribunal - the appellate Tribunal is empowered to identify as to whether the approved resolution plan is in contravention of the provisions of any law for the time being in force and as to whether there has been any material irregularity in exercising the powers by the resolution professional during the corporate insolvency resolution period. Yet another aspect that has come to our mind is that from the order of the Tribunal it is clear that the secured creditor Bank has relinquished its security interest to the litigation estate and received proceeds from the sale of the estates by the liquidator in the manner specified in Section 53 of the Code 2016. It is an admitted fact that the appellants have offered a guarantee to the loan availed by the Corporate Debtor from the first respondent Bank. It is under the above circumstances the Company Law Tribunal has arrived at its conclusions in its impugned order. Since the order was passed by the Tribunal after providing an opportunity of hearing to the appellants and other interested persons and taking into account the legal questions raised by the appellants we are of the clear opinion that the learned single Judge was right in holding that there is no arbitrariness or illegality to be interfered with by exercising the power of judicial review under Article 226 of the Constitution of India. The appellants could not establish any jurisdictional error or other legal infirmities justifying our interference in an intra court appeal filed under Section 5 of the Kerala High Court Act 1958 - Appeal dismissed.

Summary

Issues Involved:
1. Availability of an efficacious alternative remedy.
2. Jurisdiction of the National Company Law Tribunal (NCLT).
3. Inclusion of personal properties in the liquidation estate.
4. Compliance with principles of natural justice.
5. Applicability of Section 36 of the Insolvency and Bankruptcy Code, 2016.
6. Validity of lease under Section 65A of the Transfer of Property Act.
7. Judicial review under Article 226 of the Constitution of India.
8. Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Availability of an Efficacious Alternative Remedy:
The learned single Judge dismissed the writ petition on the ground that the appellants had an efficacious alternative remedy to approach the National Company Law Tribunal (NCLT). The appellants challenged this decision, arguing that the finding was contrary to the judgment of the Apex Court in Embassy Property Developments Private Limited v. State of Karnataka and others [(2020) 13 SCC 308]. The court held that the appellants had an appellate remedy under Section 61 of the Insolvency and Bankruptcy Code, 2016.

2. Jurisdiction of the National Company Law Tribunal (NCLT):
The appellants questioned whether the NCLT had jurisdiction to include their personal properties in the liquidation estate. The Tribunal had previously ordered the inclusion of mortgaged leasehold land of the Corporate Debtor into the liquidation estate. The court found that the Tribunal's interpretation of the relevant provisions of the Insolvency and Bankruptcy Code, 2016, was within its jurisdiction.

3. Inclusion of Personal Properties in the Liquidation Estate:
The appellants contended that the NCLT's order to include their personal properties in the liquidation estate was against Section 36 of the Insolvency and Bankruptcy Code, 2016, which excludes personal properties from the liquidation estate. The court noted that the Tribunal had reconsidered the matter and clarified the inclusion of leasehold rights, not ownership rights, in the liquidation estate.

4. Compliance with Principles of Natural Justice:
The appellants argued that the NCLT's order was made without hearing them, violating the principles of natural justice. The court acknowledged that in the earlier round of litigation, the Tribunal's order was set aside due to lack of clarity and violation of natural justice. However, the Tribunal had since reconsidered the matter and provided an opportunity for the appellants to be heard.

5. Applicability of Section 36 of the Insolvency and Bankruptcy Code, 2016:
The appellants highlighted that Sections 36(4)(a)(iv) and (c) specifically exclude properties in possession of the Corporate Debtor under any contractual agreement and personal properties of Managing Directors or shareholders. The court found that the Tribunal had interpreted the provisions correctly and included only the leasehold rights in the liquidation estate.

6. Validity of Lease under Section 65A of the Transfer of Property Act:
The appellants questioned the validity of the lease itself under Section 65A of the Transfer of Property Act. The court did not find this argument sufficient to interfere with the Tribunal's order, as the Tribunal had provided a clear interpretation of the relevant provisions.

7. Judicial Review under Article 226 of the Constitution of India:
The appellants argued that the writ petition was maintainable under Article 226 of the Constitution of India, as the Tribunal's order was arbitrary and illegal. The court held that the learned single Judge was correct in dismissing the writ petition, as the appellants had an alternative remedy under the Insolvency and Bankruptcy Code, 2016.

8. Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016:
The court emphasized that the appellants could appeal the Tribunal's order under Section 61 of the Insolvency and Bankruptcy Code, 2016. The court also noted that the Tribunal should consider the period during which the matter was pending before the court when deciding on any delay condonation petition filed by the appellants.

Conclusion:
The appeal was dismissed, with the court finding no jurisdictional error or legal infirmity in the learned single Judge's judgment. The court extended the interim order for two weeks to allow the appellants to file an appeal before the appellate Tribunal. The court clarified that it had not decided the merits of the issues raised, leaving them open for consideration by the appellate authority.