2022 (2) TMI 1474 - HC - IBC

Exercise of excess jurisdiction - Jurisdiction of the NCLT in directing to RP to take physical possession of the immovable asset - case of appellant is that NCLT, Kolkata Bench does not possess the jurisdiction to adjudicate under the KMC Act, 1980 - HELD THAT - This Court finds no reason to agree with the stand taken by the appellants/ the KMC. Apropo the first proposition advanced on behalf of the appellants that the Hon ble Single Bench had observed on the want or lack of jurisdiction of the NCLT, Kolkata Bench apropo its order impugned dated December 17, 2019, this Court finds that the observations of the Hon ble Single Bench of its Judgement and Order dated 29th January 2021 2021 (3) TMI 430 - CALCUTTA HIGH COURT were only in the nature of a reiteration of the by now well-established legal proposition that the writ Court can only interfere when an inferior Tribunal or authority exercises a jurisdiction which it does not possess. This Court further finds that apropo the dictum laid down In Re Action Ispat and Power 2020 (12) TMI 535 - SUPREME COURT and In Re A Navinchandra Steels Private Ltd. 2021 (3) TMI 38 - SUPREME COURT , the appellants have been unable to make out a case that an irreversible position has been carved out by operation of law which would bar the NCLT from taking the Resolution Process forward under the IBC. Last, but not the least, this Court finds the legal position unassailable that the property dues of KMC carry a statutory flavour and therefore being in the nature of crown debts also do not take precedence over the dues of other classes of secured creditors. Application dismissed.

Issues Involved:
1. Jurisdiction of the NCLT in directing the RP to take over the immovable property.
2. Primacy of the IBC over other statutes, including the KMC Act.
3. Whether the property seized by KMC can be subject to the Corporate Resolution Process under the IBC.
4. Priority of statutory dues (crown debts) over secured creditors.

Issue-wise Detailed Analysis:

1. Jurisdiction of the NCLT:
The appellants argued that the NCLT lacked jurisdiction to direct the Resolution Professional (RP) to take physical possession of the immovable asset under the KMC Act, 1980. The Hon'ble Single Bench observed that the writ petition was maintainable as the NCLT, Kolkata Bench lacked jurisdiction to pass the order dated 17th December 2019. This was based on the principle that the High Court can interfere when an inferior Tribunal exercises jurisdiction it does not possess. The appellants relied on the Supreme Court judgment in M/s. Embassy Property Developments Private Ltd. vs. State of Karnataka & Ors., asserting that the NCLT had no power to pass orders in IBC proceedings concerning an immovable property already proceeded under the KMC Act.

2. Primacy of the IBC over Other Statutes:
The respondents countered that the IBC proceedings have an overriding effect, citing Section 238 of the IBC, which states that the provisions of the IBC shall have effect notwithstanding anything inconsistent in any other law. They referred to the Supreme Court judgment in Anand Rao Korada Resolutional Professional vs. Varsha Fabrics Private Ltd. and Ors., emphasizing that the NCLT and the NCLAT have exclusive jurisdiction over all issues pertaining to the insolvency process of a corporate debtor, including the disposal of its assets. The court agreed with this position, affirming the primacy of the IBC over the KMC Act.

3. Property Seized by KMC and Corporate Resolution Process:
The Hon'ble Single Bench addressed whether the property seized by KMC for statutory claims could be subject to the Corporate Resolution Process under the IBC. The court upheld the jurisdiction of the NCLT to direct the RP to take over the immovable asset, emphasizing the primacy of the IBC in a Corporate Resolution Process. The appellants failed to demonstrate that any irreversible steps had been taken under the KMC's order of attachment that would bar the NCLT from proceeding with the Resolution Process. The court cited the judgments in Action Ispat and Power and A Navinchandra Steels Private Ltd., which clarified that unless an irreversible situation is reached, the NCLT can proceed with the Resolution Process.

4. Priority of Statutory Dues (Crown Debts):
The court addressed the issue of whether KMC's property dues, being statutory in nature, take precedence over the dues of other secured creditors. It referred to the Supreme Court judgment in Commissioner of Income Tax vs. Monet Ispat and Energy Ltd., which held that statutory dues, being in the nature of crown debts, do not take precedence over secured creditors. This legal position was affirmed, indicating that KMC's dues do not override the claims of secured creditors under the IBC.

Conclusion:
The court dismissed the appeal, affirming the primacy of the IBC over the KMC Act and the jurisdiction of the NCLT to direct the RP to take over the immovable asset. The statutory dues of KMC do not take precedence over the claims of secured creditors under the IBC. The court found no reason to agree with the appellants' stand and upheld the decision of the Hon'ble Single Bench.

← Previous Next →