2022 (11) TMI 1283 - HC - Insolvency and Bankruptcy

Validity of order of NCLT - Not considering the Interlocutory Application raising the issue of jurisdiction - Section 10A of the Insolvency and Bankruptcy Code, 2016 (IBC) - Seeking consideration of application before proceeding to enter upon the merits of the Company Petition - HELD THAT - Admittedly the Petitioner has filed the interlocutory application before NCLT challenging its jurisdiction under section 10A of the IBC. It is pending there, the NCLT has heard both parties on said application for ten dates, written submissions are also filed by both the parties on that issue. Mr. Seervai and Mr. Joshi are ad idem on one point that is the NCLT has already heard the lawyers extensively on the aspect of jurisdiction viz on interlocutory application filed by the Petitioners, written submissions are also filed. Much time and energy is spent by the NCLT on hearing on the interlocutory application. In view of that it would be appropriate for the NCLT to decide the interlocutory application before proceeding to deal with the other issues. The Hon ble Apex Court in the case of Ramesh Kymal 2021 (2) TMI 394 - SUPREME COURT has dealt with the issue of Section 10A of IBC. As the NCLT has extensively heard both the parties on interlocutory application, hence the NCLT shall decide it before dealing with other issues. The Petition is allowed.

Summary

Issues:
- Jurisdiction of the National Company Law Tribunal (NCLT) under Section 10A of the Insolvency and Bankruptcy Code, 2016 (IBC) in deciding a company petition.
- Proper procedure to be followed by the NCLT in deciding on jurisdictional issues before proceeding to examine the merits of a case.

Analysis:

Issue 1: Jurisdiction of the NCLT under Section 10A of the IBC:
The petitioner sought direction against the NCLT to decide the pending Interlocutory Application regarding jurisdiction under Section 10A of the IBC before proceeding with the Company Petition. The petitioner argued that the NCLT erred in proceeding with the case on merits without deciding its jurisdiction, emphasizing that jurisdiction must be determined first to avoid an erroneous assumption of authority. The petitioner relied on legal precedent to support the claim that the NCLT should address the jurisdictional issue before delving into the merits of the case. The respondent, on the other hand, contended that the NCLT's approach to consider all issues together, including jurisdiction, was appropriate. The respondent cited various legal decisions to support the view that a case should be decided on all issues, including jurisdiction, as it involves a mixed question of law and facts.

Issue 2: Proper Procedure for NCLT in Deciding Jurisdictional Issues:
After hearing arguments from both parties, the Court acknowledged that the NCLT had extensively heard the lawyers and received written submissions on the jurisdictional issue raised in the interlocutory application. The Court noted that significant time and effort had been spent on this aspect. Citing a Supreme Court judgment, the Court emphasized the importance of the NCLT deciding the interlocutory application on jurisdiction before addressing other issues. The Court differentiated the cited legal cases by the respondent from the present case, emphasizing the specific challenge to the NCLT's jurisdiction in the current matter. Consequently, the Court allowed the petition, directing the NCLT to decide the pending interlocutory application concerning jurisdiction before proceeding with other aspects of the case.

In conclusion, the High Court of Bombay held that the NCLT should prioritize deciding the jurisdictional issue under Section 10A of the IBC before moving on to consider the merits of the case. The Court emphasized the need for procedural correctness and adherence to legal principles in determining jurisdictional matters. The judgment underscored the significance of addressing jurisdictional challenges promptly and separately to ensure a fair and just resolution of the legal dispute.