2021 (11) TMI 485 - HC - Companies Law

Seeking direction to petitioner to maintain status quo qua the assets of the Respondent No.2, particularly when the RespondentNo.2 has not been admitted into CIRP till now - HELD THAT - The learned Single Judge has declined to stay the order of the NCLT dated 30.09.2021 granting status quo order, on the ground that the Appellant has already filed an application for vacation of the status quo order, which is pending adjudication before the Tribunal and is listed on a short date i.e. 15.11.2021. Learned Single Judge has also observed that the Tribunal will necessarily consider the Appellant s plea that the impugned order was without jurisdiction. What has also weighed with the learned Single Judge is the Appellant s own case that it has taken possession of the subject properties and merely because it has been directed to maintain status quo, no grave or irreparable loss is caused. There are no infirmity with the observations of the learned Single Judge and the order passed, which is impugned in the present appeal. Learned Senior Counsel does not dispute that the application for vacation of stay is pending adjudication and is listed on 15.11.2021 - appeal dismissed.

Summary

Issues:
Appeal against NCLT order granting status quo on assets, jurisdiction of NCLT, stay application dismissal by Single Judge, pending vacation of status quo order application.

Analysis:
The appellant challenged an order by the National Company Law Tribunal (NCLT) granting status quo on assets in response to an application filed by Respondent No. 1 to restrain the creation of third-party rights. The Appellant, a bank, had issued credit facilities secured by a mortgage and hypothecation over assets to the corporate debtor, which defaulted, leading to non-performing asset classification. The bank invoked SARFAESI Act provisions, issued notices, and took possession of the hospital property. However, the NCLT ordered status quo, prompting the bank to file applications seeking vacation of the order. The Single Judge dismissed the stay application, citing the pending application before the NCLT for vacation of the status quo order. The Single Judge noted the bank's possession of the property and lack of urgency due to the pending NCLT hearing. The Single Judge's decision was based on the bank's admission of possession and the pending application before the NCLT, scheduled for a hearing on 15.11.2021. The Single Judge's order was considered appropriate, as the bank's objection to NCLT's jurisdiction would be addressed by the Tribunal. The High Court found no error in the Single Judge's decision, dismissing the appeal and emphasizing that the NCLT should expedite the pending application for vacation of the status quo order. The High Court clarified that its decision did not assess the case's merits, leaving it to the NCLT for a lawful resolution without unnecessary delays.