2023 (4) TMI 1140 - HC - Insolvency and Bankruptcy

Overriding effect of forest law over IBC - Jurisdiction of NCLT over state government - Order passed by the National Company Law Tribunal, Ahmedabad on an application filed under Section 60 of the Insolvency and Bankruptcy Code, 2016 - Tribunal by the impugned order dated 06-07-2022 directs the State Government to permit functioning of the windmill by holding that it was essential to resolve insolvency of the corporate debtor i.e., the Company - Whether the Tribunal has exceeded its jurisdiction by passing the impugned order? HELD THAT - The Company could not have knocked at the doors of the Tribunal as it completely falls beyond the purview of the Code, being in the realm of public law, since the State has exercised its jurisdiction in drawing up the proceedings and directing forest clearances to be submitted by the corporate debtor, the petitioner, in exercise of powers conferred under the statute. Therefore, they are in the realm of public law. The Tribunal had no jurisdiction to direct functioning/continuing of the windmill without the forest clearances, merely because the State had granted such permission at an earlier point in time. The submission of the learned senior counsel for the Company is that if the State had passed an order, then the Tribunal would have no jurisdiction. According to him, the one that is passed is not an order. The said submission is noted only to be rejected, as it is a communication from the hands of the State and it is understood by the Company also to be an order only, as the averments in the application filed before the Tribunal demolishes the contention of the learned senior counsel for the Company. Therefore, none of the contentions of the learned senior counsel for the Company would merit acceptance. It is open to the Company to produce all the necessary clearances as is sought by the State if the Company wants to continue with the operations. In the event, the Company would furnish its documents for forest clearances, it is open for the State to consider the same and pass appropriate orders in accordance with law. Impugned order dated 06.07.2022 passed by the National company Law Tribunal, Ahmedabad Division stands quashed - Petition allowed.

Summary

Issues Involved:
1. Jurisdiction of the National Company Law Tribunal (NCLT).
2. Compliance with statutory requirements for forest clearances.
3. Validity of the State's order to suspend windmill operations.

Summary:

1. Jurisdiction of the National Company Law Tribunal (NCLT):
The primary issue for consideration was whether the NCLT exceeded its jurisdiction by passing the impugned order directing the State Government to permit the functioning of the windmill. The Court examined Section 60 of the Insolvency and Bankruptcy Code (IBC), which outlines the jurisdiction of the NCLT. The Court highlighted that the NCLT's jurisdiction is limited to matters directly related to the insolvency resolution process and cannot extend to issues falling outside the purview of the IBC, especially those involving public law.

The Court referred to several Supreme Court judgments, including Embassy Property Developments Pvt. Ltd. v. State of Karnataka and Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, which clarified that the NCLT does not have jurisdiction over matters requiring statutory compliance or involving public law. The Court concluded that the NCLT acted beyond its jurisdiction by interfering with the State's administrative actions concerning forest clearances.

2. Compliance with Statutory Requirements for Forest Clearances:
The second issue revolved around the compliance with statutory requirements for forest clearances. The Company had been granted permission to operate the windmill on an ad hoc basis, pending the renewal of forest clearances. The State's proceedings indicated that the Company had not submitted a complete forest clearance proposal despite being given ample time and opportunity. The State's communication emphasized the urgency and long-pending nature of the issue, directing the Company to comply with the necessary statutory requirements.

3. Validity of the State's Order to Suspend Windmill Operations:
The third issue concerned the validity of the State's order to suspend the windmill operations. The Court noted that the State had exercised its jurisdiction under the Forest (Conservation) Act, 1980, and other relevant statutes to ensure compliance with statutory requirements. The State's proceedings and subsequent communication to the Company were deemed valid administrative actions within the realm of public law. The Court rejected the Company's contention that the State's communication was not an order, affirming that it was a valid administrative directive.

Conclusion:
The Court allowed the writ petition, quashing the NCLT's impugned order dated 06.07.2022. The Court held that the NCLT had exceeded its jurisdiction by directing the State to permit the functioning of the windmill without the necessary forest clearances. The Company was directed to comply with the statutory requirements for forest clearances, and the State was permitted to take appropriate action in accordance with the law.