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2020 (11) TMI 677 - HC - Insolvency and BankruptcyMaintainability of petition - availability of alternate remedy of appeal provided under Section 61 of the I.B. Code - Whether notification issued under Section 4 of the MPID Act and consequent attachment of the property including the bank account of the corporate debtor can be challenged by approaching NCLT under Section 60(5) of the I.B. Code? HELD THAT - Full Bench of this Court in the case between Vijay C. Pulijal vs. State of Maharashtra 2005 (9) TMI 303 - HIGH COURT OF BOMBAY held that the provisions of MPID Act are ultravires for want of legislative competence of the State legislature. The Full Bench of this Court took a view that the MPID Act transgressed into the field reserved for Parliament. The Full Bench held that the subject matter covered by the MPID Act squarely falls within the ambit of section 58-A and 58-AA of the Companies Act. Thus, it is clear that MPID Act is a complete Code and enacted to protect the interest of depositors in Financial Establishments. The Respondent, i.e. IRP, was mainly aggrieved by the issuance of notification dated 19/10/2018 under Section 4 of the MPID Act. As set out hereinabove Section 7 of MPID Act provides a remedy to the aggrieved person including the present Respondent, i.e. IRP, to approach the Designated Court pointing out the objection to the attachment of any property of the Financial Establishment or any portion thereof. The Designated Court is empowered to either make the order of attachment passed under sub-Section 1 of Section 4 absolute or varying it by releasing a portion of the property from attachment or cancelling the order of attachment entirely. Thus, it is clear that the Respondent-IRP is having a remedy to approach the Designated Court under Section 7 of the MPID Act. A bare reading of the provisions of the MPID Act clearly demonstrates that action taken under the MPID Act is to be challenged before the Designated Court under the MPID Act and the order passed by the Designated Court can be challenged in appeal before the High Court under section 11 of the MPID Act. Thus it is clear that Section 18 of the I.B. Code specifying duties of interim resolution professional, although provides in sub-Section 18(f) that he shall take control and custody of any asset over which the corporate debtor has ownership rights, however the same is subject to the determination to the ownership by a Court or Authority. In this particular case, such Court will be the Designated Court as per the provisions of the MPID Act. The appropriate forum to challenge the attachment of the account of the Respondent is the Designated Court under MPID Act where the Respondent can raise all contentions on merits and also can point out the provisions of I.B. Code and the effect of the same on the steps taken under the MPID Act. It will be for the MPID Court to consider the interplay of the provisions of the MPID Act and the I.B. Code and rule on the matter. Such ruling would obviously include even the aspect of prior appointment of IRP by NCLT and subsequent attachment of the said account by notification dated 19.10.2018 issued under Section 4 of the MPID Act. The Respondents can approach the Designated Court under section 7 of the M.P.I.D. Act seeking appropriate reliefs - Petition disposed off.
Issues Involved:
1. Maintainability of the Writ Petition in view of the availability of an alternate remedy of appeal under Section 61 of the Insolvency and Bankruptcy Code (I.B. Code). 2. Jurisdiction of the National Company Law Tribunal (NCLT) to entertain challenges against actions taken under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act). Detailed Analysis: 1. Maintainability of the Writ Petition: The primary issue was whether the writ petition challenging the NCLT's order was maintainable given the availability of an alternate remedy of appeal under Section 61 of the I.B. Code. The court observed that the power to issue prerogative writs under Article 226 of the Constitution is plenary and not limited by any other provision. The court stated that alternative remedies do not operate as a bar in cases where the order or proceedings are wholly without jurisdiction. Since the NCLT's order was found to be without jurisdiction, the writ petition was deemed maintainable. 2. Jurisdiction of NCLT: The second issue was whether the NCLT had jurisdiction to entertain challenges against actions taken under the MPID Act. The court noted that the MPID Act is a special statute enacted to protect the interests of depositors in financial establishments and has its own comprehensive mechanism for attachment and adjudication through designated courts. The court emphasized that the MPID Act provides a specific remedy for aggrieved parties to approach the designated court for challenging attachment orders. The court referred to the Supreme Court's judgment in Embassy Property Developments Pvt. Ltd., which clarified that the jurisdiction of the NCLT under Section 60(5) of the I.B. Code does not extend to decisions taken by statutory authorities under other laws. The court observed that the duties of the Interim Resolution Professional (IRP) under the I.B. Code, such as taking control and custody of assets, are subject to the determination of ownership by a court or authority, which in this case is the designated court under the MPID Act. The court also considered Section 32A of the I.B. Code, which provides for the cessation of liability for prior offences under certain conditions. However, it clarified that the criminal liability and attachment of properties under the MPID Act would still need to be adjudicated by the designated court under the MPID Act. The court concluded that the NCLT had no jurisdiction to interfere with actions taken under the MPID Act and that the designated court under the MPID Act is the appropriate forum for such challenges. Consequently, the NCLT's order directing the de-freezing of the bank account was quashed. Conclusion: The Bombay High Court held that the NCLT does not have jurisdiction to entertain challenges against actions taken under the MPID Act. The appropriate forum for such challenges is the designated court under the MPID Act. The writ petition was maintainable as the NCLT's order was without jurisdiction. The court quashed the NCLT's order directing the de-freezing of the bank account and allowed the respondents to approach the designated court under the MPID Act for appropriate reliefs.
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