2020 (3) TMI 854 - HC - Insolvency and Bankruptcy

Violation of Principles of Natural Justice - an opportunity of hearing to the petitioner before passing the impugned order, not afforded - Section-5(8)(F) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In the opinion of the Court, the petitioner has failed to make out any extra ordinary grounds to invoke Article-226 of the Constitution of India. As recorded in the preceding part of the order, the proceedings before the NCLT for proceeded in due course and the order-sheet also reflects the proceedings and the reasoned orders passed by the NCLT from time to time - The Court is therefore, of the view that though writ petition can be maintained, in view of the vast powers of the High Court under Article-226 of the Constitution of India. However, in the facts of this case, the Court is not inclined to exercise such powers in view of the existing statutory alternative efficacious remedy. The Court is of the view that any interference at this stage, even on the procedural aspect would bring ongoing proceedings under IBC to halt, which the Court is not inclined in view of time line that statute prescribes. In any case, where the petitioner has not challenged the ultimate order dated 07-02-2020, merely on procedural aspect, the Court is not inclined to quash and set aside the order dated 05-02-2020. Petition dismissed.

Issues Involved:

1. Non-following of principles of natural justice and lack of opportunity of hearing.
2. Recognition of the petitioner as a financial creditor under the Insolvency and Bankruptcy Code, 2016 (IBC).
3. Procedural errors in the Tribunal's decision-making process.
4. Invocation of Article 226 of the Constitution of India despite the availability of an alternative remedy.

Detailed Analysis:

1. Non-following of principles of natural justice and lack of opportunity of hearing:

The petitioner argued that the Tribunal reserved the order for proceedings on 05-02-2020 and pronounced it on 07-02-2020 without providing a copy of the order or an opportunity for a hearing. The petitioner contended that this action breached the principles of natural justice. The petitioner cited judgments from the Bombay High Court and the Supreme Court to support the invocation of Article 226 when natural justice principles are violated.

2. Recognition of the petitioner as a financial creditor under the Insolvency and Bankruptcy Code, 2016 (IBC):

The petitioner sought recognition as a financial creditor under Section 5(8)(F) of the IBC. The application was initially filed with the Interim Resolution Professional (IRP), who did not decide on it, prompting the petitioner to approach the NCLT under Section 60(5) of the IBC. The NCLT directed the Resolution Professional (RP) to consider the claim and submit it to the Committee of Creditors (COC). However, the RP did not recognize the petitioner as a financial creditor, leading to further legal proceedings.

3. Procedural errors in the Tribunal's decision-making process:

The petitioner claimed procedural errors by the Tribunal, including the lack of a hearing opportunity before reserving the order. The Tribunal's decision on 05-02-2020 was contested for procedural lapses. The petitioner argued that the Tribunal should have allowed a hearing before making a decision, especially since the petitioner's name appeared in the list of creditors provided by the IRP.

4. Invocation of Article 226 of the Constitution of India despite the availability of an alternative remedy:

The petitioner invoked Article 226 of the Constitution, arguing that the Tribunal's procedural errors justified bypassing the alternative remedy of appeal. The petitioner relied on multiple judgments to support this invocation, emphasizing that breaches of natural justice warrant direct intervention by the High Court.

Judgment:

The Court examined the submissions and documents, noting that the petitioner's application under Section 60(5) of the IBC was filed on 16-10-2019. The NCLT had directed the RP to consider the claim and submit it to the COC. However, the RP did not recognize the petitioner as a financial creditor, leading to further legal proceedings.

The Court found that the Tribunal had followed due process in its proceedings, with orders recorded chronologically. The impugned order of 05-02-2020 reserved the proceedings for orders, and the final decision was made on 07-02-2020. The Court noted that the petitioner had not challenged the final order dated 07-02-2020, which dealt with the petitioner's claim as a financial creditor.

The Court held that the petitioner had not made out extraordinary grounds to invoke Article 226. The Court emphasized that the NCLT had dealt with the petitioner's contentions and that the appropriate remedy was to appeal under Section 61 of the IBC. The Court concluded that interfering at this stage would halt the ongoing IBC proceedings, which are time-sensitive.

Conclusion:

The petition was dismissed, with the Court finding no merit in the petitioner's arguments regarding procedural errors and the invocation of Article 226. The Court advised the petitioner to pursue the available statutory remedy of appeal under Section 61 of the IBC.

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