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2024 (11) TMI 676 - HC - IBCMaintainability of petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 - legality of filing of petition under Section 95 of the Insolvency Code by the appellant - petitioner was a partnership firm registered under the Partnership Act, 1932 - Ministerial versus Adjudicatory - whether respondent No.1-Registrar could enter into realm of adjudication? - HELD THAT - The conceptual and jurisprudential distinction between ministerial act and judicial act or administrative function and adjudicatory function came to be analysed elaborately, lucidly and pertinently by the Supreme Court in JAMAL UDDIN AHMAD VERSUS ABU SALEH NAJMUDDIN AND ANR. 2003 (2) TMI 509 - SUPREME COURT . Though slightly in different context, what was delineated and laid down by the Supreme Court provides a guidance to address the controversy involved in this case. It was in the context of presentation of election petition under Section 81 of the Representation of the People Act, 1951 that the Supreme Court discussed the difference between the ministerial function and adjudicatory function and further that by which authority and at which stage such functions, both of different kinds, could be performed. The gist of the plea raised by the appellant was the petition should have been presented either before the Designated Election Judge or the Chief Justice of the High Court and that having not been done, the petition was liable to be dismissed without trial. The Supreme Court considered the question as to whether the High Court was competent to frame rule for making provision for receiving the election petitions presented to the High Court under Section 81 of the Representation of the People Act. It is in that context that the Supreme Court elucidated the difference between ministerial act and adjudicatory act. It was observed, By no stretch of imagination can it be said that the presentation of an election petition is part of the trial of an election petition . The Supreme Court in Jamal Uddin Ahmad observed that the judicial function entrusted to a Judge is inalienable and differs from administrative or ministerial function which can be delegated for once whereof may be secured through authorisation. The status in the nature of duty discharged by respondent No.1-Registrar at the time of receiving the petition under Section 95 of the Code, satisfies the above tests. The Registrar has no discretion, but to receive and register the application once the procedural requirements are fulfilled. Registering Petition, a Ministerial Act - HELD THAT - The Registrar of NCLT is necessarily part of the administrative segment of the Tribunal. As an administrative staff, the office of the Registrar would receive the applications filed under Section 95 of the Code along with the documentations presented therewith. The function of receiving the petitions which are filed or presented is a procedural stage. It is an administrative or ministerial function - The examination of the petition on merits for its maintainability or any such other stand point of merit, is foreign and alien at such stage. The aspect whether the petition presented with the Registrar is maintainable, is a part of merit and it necessarily travels in the realm of judicial function. The Registrar is not entitled to look into this aspect. There will be gainsaying that the Registrar of NCLT acting to receive the applications under Section 95 of the Code which was the stage of filing of the application, acts administratively. The function of registering the applications filed under Section 5 of the Insolvency Code is a ministerial function and a procedural act. This stage does not store any adjudicatory process - Application of judicial mind towards merits has no place in discharge of a ministerial or clerical function. For the Registrar, it is not permissible at the time of registering the petition which is filed by the debtor or creditor. The case as pleaded by the applicant-appellant in its application under Section 95 of the Insolvency Code filed before the NCLT had definite adjudicatory element and demonstrable adjudicatory trappings. Jiwrajka Finally Answers 2024 (1) TMI 33 - SUPREME COURT - HELD THAT - The issue as to whether when the adjudicating function commences under the Insolvency and Bankruptcy Code, 2016 could be said to be no longer res integra in view of the judgment of Supreme Court in Dilip B. Jiwrajka. The Supreme Court stated therein as to when the adjudicatory function of adjudicatory authority commences. It was held that adjudicatory function of adjudicatory authority commences under Part III of the Code, 2016 after submission of a recommendatory report by the resolution professional. In challenging the constitutional validity of Section 95 to Section 100 of the Code, 2016 which was negatived by the Supreme Court, the same nature of submissions were advanced on behalf of the petitioners before the Supreme Court - Inasmuch as without judicial intervention for adjudication, there would operate an automatic interim moratorium, for the resolution professional would be appointed who would seek from the guarantor and would examine the information received and then submit report. Adjudicatory Stage Subsequent - HELD THAT - It is an inescapable conclusion that even the stage when the resolution professional functions together the information to prepare the report to be submitted to the adjudicatory authority-NCLT, the adjudicatory stage does not reach and no adjudication of rights of the parties takes place. Therefore, it could not be said at any stretch of imagination that the Registrar, NCTL, while accepting or receiving the petition under Section 95 of the Code, 2016 has any adjudicatory permission, much less such power, or that at such stage of filing petitioner, adjudication can take place in any manner whatsoever. Moratorium A Statutory Effect - HELD THAT - If for the reason of filing Section 95 application, other proceedings initiated by the rival party in relation to the subject matter are slowed down or affected in their progress or stand postponed for some period, then it could not be complained that the invocation of law or remedy in law by other party amounts to abuse of process of law. A litigant is entitled to employ all legal means in pursuit to its right to legal adjudication and availment rights in that regard. This negates the submission on the part of the respondent-original petitioner that the filing of Section 95 application by the applicant had an effect of protracting and postponing the arbitral proceedings. Prayers Misconceived - HELD THAT - It is therefore clear that the stage of filing application under Section 94 or Section 95, is too preliminary a stage to perceive and conceive any adjudicatory attribute at that stage. The Registrar of the NCLT would receive and register the petition. Thereafter, the subsequent provisions from Sections 96 to 100 of the Code would operate. The resolution professional would examine the application as to whether it satisfies the requirements of Section 94 or 95, as the case may be, to recommend the acceptance or rejection of the application by submitting a report - it is impossible to conclude that the Registrar at the stage of receipt of the petition filed under Section 94 or 95 of the Code by the debtor or creditor, which is a stage even prior to Section 97 and 99 of the Code can decide on the maintainability of the petition by entering into merit and thus the realm of adjudication. The issue examined is only as to whether at the stage of receipt of the petition under Section 95, the Registrar, NCLT- respondent No.1, has power and jurisdiction to decide on the maintainability of such application and whether by adjudicating merits on that score at that stage, the petition could be rejected by the Registrar - All such questions of merits fall within the domain of adjudicating authority-the NCLT to be considered at the appropriate stage when the report of the resolution professional is forwarded to it. The judgment and order of learned Single Judge dated 6th March 2024 passed in writ petition No.26977 of 2023, allowing the petition, is hereby set aside - Appeal allowed.
Issues Involved:
1. Maintainability of a petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016. 2. Role of the Registrar, National Company Law Tribunal (NCLT), in adjudicating the maintainability of petitions. 3. Distinction between ministerial and adjudicatory functions of the Registrar. 4. Stage at which adjudicatory functions commence under the Insolvency and Bankruptcy Code, 2016. 5. Impact of interim moratorium under Section 96 of the Code. Issue-wise Detailed Analysis: 1. Maintainability of a Petition under Section 95: The core issue was whether the petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016, was maintainable. The learned Single Judge had declared the e-filing of the petition as void ab initio and illegal, setting aside all connected proceedings. The petition was filed by the appellant against a partnership firm, questioning whether the partners could be treated as personal corporate guarantors. The appellant contended that the partners were personal guarantors due to their involvement in a loan agreement and various joint development agreements. However, the respondents argued that the petition was misconceived as the partners could not be classified as personal corporate guarantors. 2. Role of the Registrar, NCLT: The judgment explored whether the Registrar of NCLT could adjudicate the maintainability of a petition at the filing stage. It was concluded that the Registrar's role is purely administrative and ministerial, involving procedural compliance checks without delving into the merits of the petition. The Registrar is not empowered to adjudicate or decide on the maintainability of the petition. 3. Distinction between Ministerial and Adjudicatory Functions: The judgment emphasized the distinction between ministerial and adjudicatory functions. Ministerial acts involve procedural tasks without discretion, such as receiving and registering petitions, while adjudicatory acts involve judicial discretion and decision-making. The Registrar's function at the filing stage is ministerial, focusing on procedural compliance without assessing the petition's merits. 4. Stage of Commencement of Adjudicatory Functions: Adjudicatory functions under the Insolvency and Bankruptcy Code commence after the submission of a report by the resolution professional, as per Section 100 of the Code. The resolution professional's role is recommendatory, not adjudicatory, and the adjudicating authority (NCLT) begins its function upon receiving the report. The Supreme Court in Dilip B Jiwrajka clarified that adjudication starts after the resolution professional submits the report, not at the filing stage. 5. Impact of Interim Moratorium under Section 96: The interim moratorium under Section 96 operates automatically upon filing a petition under Section 95, staying legal proceedings related to the debt. The judgment clarified that the statutory effect of the moratorium does not justify the Registrar's adjudication of the petition's maintainability. The moratorium is a statutory consequence and does not influence the Registrar's ministerial role. Conclusion: The judgment concluded that the Registrar, NCLT, performs a ministerial function when receiving and registering petitions under Sections 94 or 95 of the Code. The adjudicatory process begins only after the resolution professional submits a report, as outlined in Section 100. The judgment of the learned Single Judge was set aside, and the appellant's petition was restored for further proceedings in accordance with the law. The appeal was allowed, emphasizing the procedural nature of the Registrar's role and the statutory framework governing insolvency proceedings.
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