2021 (7) TMI 593 - HC - Insolvency and Bankruptcy

Maintainability of writ petition - petitions are filed on the premise that the appeals and stay petitions are not being taken up by the NCLAT - effective alternative remedy of appeal under Section 61 of I B Code - HELD THAT - As observed by the Apex Court in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT the IBC, 2016 is a Single Unified Umbrella Code, covering the entire gamut of the law relating to insolvency resolution of corporate persons and others in a time bound manner. The code provides a three-tier mechanism namely, (i) the NCLT, which is the adjudicating authority (ii) the NCLAT, which is the appellate authority (iii) the Supreme Court, which is the final authority, for dealing with all issues that may arise in relation to the re-organisation and insolvency resolution of corporate persons. An order passed by the NCLT is appealable to the NCLAT under Section 61 of the Code and the orders of the NCLAT are amenable to the appellate jurisdiction of the Supreme Court under Section 62. One of the issues that arose for consideration before the Division Bench in SULOCHANA GUPTA VERSUS RBG ENTERPRISES (P.) LTD. 2021 (1) TMI 240 - KERALA HIGH COURT , was the maintainability of the writ petition under Article 226 against an order of the NCLT. The Division Bench, after elaborate survey of precedents, answered the issue by holding that the writ petition to be not maintainable. In view of the exposition of the Honourable Supreme Court regarding the objective of the Code and the authoritative pronouncement of the Division Bench, the writ petitions are dismissed.

Summary

Issues involved:
Challenge against NCLT proceedings, maintainability of writ petitions, interference by High Court under Article 226, legality of Ext.P2 order, safeguarding interests of petitioners, impact on resolution process, adherence to IBC, 2016 provisions, appeal mechanism under Sections 61 and 62, relevance of previous judgments.

Analysis:

1. Challenge against NCLT proceedings:
The original petitions challenge the proceedings of the National Company Law Tribunal (NCLT) regarding the Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016. The process involved the appointment of an Interim Resolution Professional (IRP) and subsequent approval of a Resolution Plan by the NCLT. The petitioners, who are Operational Creditors, appealed against the NCLT's order before the National Company Law Appellate Tribunal (NCLAT), leading to the filing of writ petitions due to delays in the appeal process.

2. Maintainability of writ petitions:
The maintainability of the writ petitions is contested based on the availability of an alternative remedy of appeal under Section 61 of the Code. The argument is supported by a Division Bench decision citing that interference by the High Court under Article 226 may undermine the objectives of the Code. The respondents challenge the assertion that the NCLAT is not functioning, claiming that the delay in hearing appeals is due to defects that need to be rectified before admission.

3. Interference by High Court under Article 226:
The petitioners argue that the High Court can exercise jurisdiction under Article 226 to safeguard their interests until their appeals are considered by the NCLAT. They highlight a previous interim order by the High Court in similar circumstances as a precedent for such intervention in the interest of justice.

4. Legality of Ext.P2 order and impact on resolution process:
Concerns are raised regarding the legality of Ext.P2 order approving the Resolution Plan and its potential adverse effects if the resolution process continues before the appeals are heard. The petitioners and the 4th respondent contend that hasty implementation of the Resolution Plan could prejudice the Corporate Debtor and its creditors.

5. Adherence to IBC, 2016 provisions and appeal mechanism:
The judgment emphasizes the three-tier mechanism provided by the Insolvency and Bankruptcy Code, involving the NCLT as the adjudicating authority, the NCLAT as the appellate authority, and the Supreme Court as the final authority. It underscores the appealability of NCLT orders to the NCLAT under Section 61 and the subsequent appellate jurisdiction of the Supreme Court under Section 62, emphasizing the comprehensive framework of the Code.

6. Relevance of previous judgments:
The judgment refers to previous decisions, including the Supreme Court's observations in Swiss Ribbons Pvt. Ltd case, highlighting the economic importance and constitutional validity of the Insolvency Code. It also mentions a Division Bench decision regarding the maintainability of writ petitions against NCLT orders, ultimately dismissing the writ petitions in line with the previous judicial interpretations and the objectives of the Code.