2019 (12) TMI 291 - HC - Companies Law

Maintainability of petition before the High Court in the case of Insolvency and Bankruptcy Code, 2016 - appellability of orders passed by the Adjudicating Authority - HELD THAT - It is seen from Section 61(1) that the language used is, notwithstanding anything to the contrary contained under the Companies Act, 2013, any person aggrieved by the order of the Adjudicating Authority under that Part (Part II) may prefer an appeal to the National Company Law Appellate Tribunal - However, in contrast, the very next Section, that is, Section 62 of the IBC provides for an appeal to the Supreme Court against an order of the NCLT to the Supreme Court, thereby creating an explicit distinction between the language of the two successive sections between the appeal preferable against the order of an Adjudicating Authority and that of the NCLT. Seen in such context, it cannot be presumed that the legislature carved out such a distinction without any meaning or reason. Going through the provisions of Part II of the IBC, as rightly argued on behalf of the petitioner, specific provisions have been laid down in the said Part, which confer power on the Adjudicating Authority (the NCLT) to pass an order. There are no other provisions than those referred to by the petitioner for passing any order by the Adjudicating Authority under Part II. Sub‐section (5) of Section 60 lays down that notwithstanding anything to the contrary contained in any other law for the time being in force, the NCLT shall have jurisdiction to entertain or dispose of the matters provided therein, including those mentioned in clause (c), that is, any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under the IBC - The said provision does not empower the Adjudicating Authority to pass any order, as contemplated in Section 61(1) of the IBC, but merely confer jurisdiction on the NCLT (the Adjudicating Authority) to incidentally decide questions of facts as well, arising out of or in relation to the insolvency resolution. The said provision confers power and jurisdiction on the Adjudicating Authority to deal with such questions while deciding matters under the IBC, which would culminate in orders under Part II, but do not provide for any occasion for the Adjudicating Authority to pass an order. Section 60(5) of the IBC is merely enabling, charting out the territory of the powers of the Adjudicating Authority, and does not contemplate any order being passed by the said authority. The issue of maintainability raised by the opposite party is turned down and it is hereby held that the present application under Article 227 of the Constitution is very much maintainable - In the present case, the perversity occasioned by meting out a step‐motherly treatment to the parties respectively is, by itself, a sufficient ground to interfere with the impugned order. Moreover, the supplementary affidavit sought to be filed being apparently relevant for a proper and complete adjudication of the proceeding, ought to have been permitted to be filed by the petitioner - application allowed.

Summary

Issues Involved:
1. Bias in the National Company Law Tribunal (NCLT) order.
2. Applicability of Rule 55 of the NCLT Rules, 2016.
3. Maintainability of the application under Article 227 of the Constitution of India.
4. Availability of an alternative remedy under Section 61(1) of the Insolvency and Bankruptcy Code (IBC), 2016.

Issue-wise Detailed Analysis:

1. Bias in the National Company Law Tribunal (NCLT) order:
The petitioner argued that the NCLT exhibited bias by allowing the financial creditor to file a rejoinder beyond the stipulated time while refusing the corporate debtor’s request to file a supplementary affidavit without assigning valid reasons. The petitioner contended that this demonstrated a lack of impartiality and violated the cardinal rule of fair play. The court noted that the NCLT accepted the financial creditor’s rejoinder filed significantly late without providing any justification, while rejecting the corporate debtor’s request in a single sentence, which indicated a partisan approach.

2. Applicability of Rule 55 of the NCLT Rules, 2016:
The opposite party argued that Rule 55 barred the filing of further pleadings without the tribunal's leave. However, the petitioner contended that Rule 55 of the NCLT Rules does not apply to insolvency resolution proceedings under the IBC. The court found merit in the petitioner’s argument, noting that the IBC has its own rules, and Rule 55 of the NCLT Rules is not mentioned in the IBC Rules. Therefore, Rule 55 cannot be automatically invoked in IBC matters. Even if Rule 55 were applicable, it does not require a written application for leave, and the tribunal’s refusal lacked a valid basis.

3. Maintainability of the application under Article 227 of the Constitution of India:
The opposite party argued that an appeal under Section 61(1) of the IBC was available, making the application under Article 227 inappropriate. However, the petitioner argued that Section 61(1) refers to specific orders under Part II of the IBC, and the refusal to grant leave for a supplementary affidavit is not one of them. The court agreed, stating that Section 61(1) does not cover the impugned order, making Article 227 the only remedy. The court emphasized that while alternative remedies generally restrict High Court interference, they do not constitute an absolute bar, especially when no alternative remedy is available.

4. Availability of an alternative remedy under Section 61(1) of the Insolvency and Bankruptcy Code (IBC), 2016:
The court examined Section 61(1) of the IBC, which allows appeals against orders of the Adjudicating Authority under Part II of the IBC. The court noted a distinction between Section 61(1) and Section 62, which provides for appeals to the Supreme Court against any order of the NCLT. The court concluded that the legislature intended for Section 61(1) to apply only to specific orders under Part II of the IBC. Since the impugned order did not fall within these provisions, it was not appellable under Section 61(1). Therefore, the petitioner had no alternative remedy but to approach the High Court under Article 227.

Conclusion:
The court held that the application under Article 227 was maintainable and that Rule 55 of the NCLT Rules did not apply to IBC proceedings. The court found the NCLT’s refusal to allow the supplementary affidavit biased and unjustified. Consequently, the court set aside the impugned order, allowing the corporate debtor to file the supplementary affidavit and directing the NCLT to consider it in the main matter. The court emphasized the importance of fair play and impartiality in judicial proceedings.