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2022 (1) TMI 163 - AT - Insolvency and BankruptcyJurisdiction - power of Adjudicating Authority to pass the interim order in the Application filed by the Appellant, the effect of which was to stop the implementation of the order dated 22nd August, 2020 passed by the District Magistrate - HELD THAT - In the CIRP proceedings in the present case, order for liquidation was passed on 31st May, 2021 by the Adjudicating Authority. By consequent order dated 16th November, 2021, the Adjudicating Authority has confirmed the auction sale of the Corporate Debtor held on 16th August, 2021. The act of providing internet services to the residents by other internet providers apart from the Appellant, emanated from the order of District Magistrate dated 22nd August, 2020 passed in exercise of jurisdiction under National Disaster Management Act, 2005, which action was sought to be indirectly challenged before the Adjudicating Authority. The act of permitting the residents to avail the internet service of other service providers, did not emanate from any proceedings under the Insolvency Resolution Process and was outside the Insolvency Resolution Process. Although, the order of the District Magistrate dated 22nd August, 2020 is said to have been challenged by the Appellant before the Allahabad High Court by filing a Writ petition, but there is no material to indicate that operation of order dated 22nd August, 2020 of the District Magistrate has been stayed. The Adjudicating Authority by issuing the interim order dated 27.10.2020 had virtually stopped the implementation of order of the District Magistrate dated 22nd August, 2020, which was outside the jurisdiction of the Adjudicating Authority. Impugned order is set aside - Appeal is dismissed.
Issues Involved:
1. Jurisdiction of the Adjudicating Authority (NCLT) to interfere with orders passed under the National Disaster Management Act, 2005. 2. Validity of the interim order passed by the Adjudicating Authority restraining the respondents from using other internet service providers. 3. Rights of residents to choose their internet service providers under the Competition Act, 2002 and National Disaster Management Act, 2005. 4. Compliance with the order of the District Magistrate dated 22nd August, 2020. Detailed Analysis: 1. Jurisdiction of the Adjudicating Authority (NCLT): The core issue was whether the NCLT had the jurisdiction to pass an interim order that effectively stopped the implementation of the District Magistrate's order dated 22nd August, 2020. The Tribunal referred to the Supreme Court's judgment in Embassy Property Developments Private Ltd. vs. State of Karnataka and Ors. (2020) 13 SCC 308, which clarified that NCLT does not have jurisdiction over matters that fall within the realm of public law and are outside the insolvency resolution process. The Tribunal emphasized that the order of the District Magistrate was issued under the National Disaster Management Act, 2005, and thus could not be interfered with by the NCLT. The Tribunal also cited Tata Consultancy Services vs. Vishal Ghisulal Jain, Resolution Professional, SK Wheels Private Limited, reiterating that NCLT's jurisdiction does not extend to disputes that do not arise solely from or relate to the insolvency of the corporate debtor. 2. Validity of the Interim Order: The Adjudicating Authority had initially passed an interim order on 27th October, 2020, restraining the respondents from using other internet service providers, which contradicted the District Magistrate's order. The Tribunal found that this interim order was beyond the jurisdiction of the NCLT as it interfered with the public law domain and the statutory order of the District Magistrate. The Tribunal held that the interim order was rightly set aside by the subsequent order dated 5th July, 2021, which allowed the respondents to provide necessary services through other agencies. 3. Rights of Residents: The District Magistrate's order dated 22nd August, 2020, issued under the National Disaster Management Act, 2005, and the Competition Act, 2002, granted residents the freedom to choose their internet service providers. The Tribunal upheld that the residents' fundamental right to access internet services and choose their providers could not be curtailed by any exclusivity clause in the agreement between the appellant and Jaypee Infratech Limited. The Tribunal noted that the residents had complained about the poor service quality provided by the appellant, which justified the District Magistrate's intervention to ensure residents' rights were protected. 4. Compliance with the District Magistrate's Order: The Tribunal observed that the appellant's application aimed to stall the implementation of the District Magistrate's order, which was outside the scope of the insolvency resolution process. The Tribunal affirmed that the NCLT's order dated 5th July, 2021, which dismissed the appellant's application and allowed the respondents to provide internet services through other providers, was in compliance with the District Magistrate's order. The Tribunal concluded that the NCLT's action of setting aside the interim order and facilitating the implementation of the District Magistrate's order was correct and did substantial justice. Conclusion: The Tribunal dismissed the appeal, affirming that the NCLT had no jurisdiction to interfere with the District Magistrate's order under the National Disaster Management Act, 2005. The Tribunal upheld the residents' right to choose their internet service providers and validated the NCLT's order dated 5th July, 2021, which allowed the respondents to provide necessary services through other agencies. The appeal was found to be without merit and was dismissed with no order as to costs.
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