2020 (9) TMI 1036 - HC - Insolvency and Bankruptcy

Maintainability of application - CIRP process - It is not the case of the Writ Petitioners that there is any lack of jurisdiction on the part of NCLT in entertaining the Company Petition and it has merely contended that NCLT erred in passing the impugned order - HELD THAT - It is the contention of the petitioners herein that respondent Nos.4 and 5 had manipulated and falsified the accounts and misappropriated the funds apart from committing fraud. Therefore, these are the aspects which can certainly be considered by NCLAT, if appeals were preferred by the petitioners under Section 61 of the Code to it. In this view of the matter, we are not inclined to entertain the Writ Petition since the petitioners have an effective alternative remedy before the NCLAT under Section 61 of the Code - Granting liberty to the petitioner to avail the said remedy of appeal under Section 61 of the Code, this Writ Petition is dismissed - Petition dismissed.

Summary

Issues: Challenge to order passed by NCLT under Insolvency and Bankruptcy Code, jurisdiction of NCLT, availability of alternative remedy before NCLAT, allegations of fraud and misappropriation.

The High Court dealt with a Writ Petition challenging an order passed by the NCLT under the Insolvency and Bankruptcy Code, 2016. The NCLT had admitted a Company Application for Corporate Insolvency Resolution Process, appointing an IRP and declaring a moratorium. The petitioners, holding majority shares of the company, contended that the NCLT order was legally unsustainable. They alleged fraud and misappropriation against certain respondents. The petitioners did not dispute the jurisdiction of NCLT but argued that the order was erroneous. The High Court cited a Supreme Court judgment emphasizing NCLT's powers and jurisdiction under the Code, including the authority to address fraud allegations in insolvency proceedings. The court noted that the petitioners had an alternative remedy to appeal before NCLAT under Section 61 of the Code.

The High Court observed that the petitioners' allegations of fraud and misappropriation could be considered by NCLAT through the appeal process. Therefore, the court declined to entertain the Writ Petition, emphasizing the availability of an effective alternative remedy before NCLAT. The court dismissed the Writ Petition, granting the petitioners liberty to pursue the remedy of appeal under Section 61 of the Code. It was clarified that the court did not comment on the merits of the petitioners' contentions and ordered the closure of any pending miscellaneous petitions.