2024 (12) TMI 1205 - HC - Companies Law

Constitutionality of Section 3 of the Judges (Protection) Act, 1985 - failure to pay debt - default on the part of a Corporate Debtor - forum shopping - suppression - multipicity of cases - wastage of time of the court - making unfair statements - prayer to restrain and prohibit the two learned members of the NCLT-1, Mumbai from functioning and exercising jurisdiction. HELD THAT - The view taken by the Hon ble Supreme Court in Swiss Ribbons Pvt. Ltd. and Anr. V/s. Union of India and Ors. 2019 (1) TMI 1508 - SUPREME COURT is now crystallized that even the non-payment of a part of the debt, when it becomes due and payable, will amount to default on the part of a Corporate Debtor. In such a case, an order of admission under Section 7 of the IBC must follow. If the NCLT notices that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. When there is a non-payment of debt under Section 3 (12) of the Code, when whole or any part or installment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor, as the case may be, it would amount to default and the proceeding under Section 7 of the IBC must follow. In view of the above, there are no illegality or error in the order dated 29th October, 2024. Forum shopping - suppression - multipicity of cases - wastage of time of the court - HELD THAT - The impugned order dated 29th October, 2024, can neither be termed as perverse or illegal. Merely because a different view could be possible, would not call upon this Court to quash and set aside the impugned order, in view of the law laid down in Syed Yakoob V/s. K.S. Radhakrishnan, 1963 (10) TMI 26 - SUPREME COURT and Surya Dev Rai V/s. Ram Chander Rai 2003 (8) TMI 527 - SUPREME COURT , this Petition to the extent of the challenge to this order, stands dismissed. Taking into account all the prayers put forth by the Petitioner, except the challenge to the impugned order dated 29 th October, 2024 and main Prayer Clause, all other prayers being practically copied and pasted , this Petition deserves to be dismissed. Petition dismissed - cost of Rs. 2.5 Lakhs imposed.

Issues Involved:

1. Constitutionality of Section 3 of the Judges (Protection) Act, 1985.
2. Absolute judicial immunity and rule of law.
3. Jurisdiction and bias of NCLT members.
4. Validity of orders passed under Section 7 of the IBC.
5. Protection under MSMED Act and jurisdiction of Civil Courts.
6. Constitutionality of SARFAESI Act, RDB Act, and IBC provisions.
7. Allegations of forum shopping and suppression by the petitioner.
8. Imposition of costs for misuse of judicial process.

Detailed Analysis:

1. Constitutionality of Section 3 of the Judges (Protection) Act, 1985:

The petitioner challenged the constitutionality of Section 3 of the Judges (Protection) Act, 1985, claiming it provides absolute immunity to judicial officers, even when acting unfairly. The court did not find merit in this challenge, as the petitioner failed to substantiate the allegations or provide a basis for questioning the Act's validity.

2. Absolute Judicial Immunity and Rule of Law:

The petitioner argued that absolute judicial immunity contradicts the rule of law and equality before the law. The court noted that judicial immunity is a well-established principle meant to protect judicial officers from undue influence and ensure independence. The petitioner's claims were deemed unsubstantiated.

3. Jurisdiction and Bias of NCLT Members:

The petitioner alleged bias and lack of jurisdiction by NCLT members in adjudicating matters under the MSMED Act. The court found no evidence supporting these allegations and noted that the petitioner did not seek a writ of quo warranto, which would have been the appropriate remedy to challenge the jurisdiction of the NCLT members.

4. Validity of Orders Passed Under Section 7 of the IBC:

The petitioner sought to quash orders passed by the NCLT under Section 7 of the IBC, claiming they were null and void. The court upheld the NCLT's orders, emphasizing that non-payment of debt constitutes default, warranting proceedings under Section 7 of the IBC. The court found no illegality or error in the NCLT's orders.

5. Protection Under MSMED Act and Jurisdiction of Civil Courts:

The petitioner claimed protection as an MSME under the MSMED Act, arguing that civil court jurisdiction is not ousted without an alternative forum. The court noted that the petitioner had multiple opportunities to present this argument in various forums but failed to establish a case for civil court jurisdiction over the matters in question.

6. Constitutionality of SARFAESI Act, RDB Act, and IBC Provisions:

The petitioner challenged the constitutionality of certain provisions of the SARFAESI Act, RDB Act, and IBC, claiming they were one-sided and unconstitutional. The court dismissed these claims, referencing established legal precedents that support the validity of these legislative provisions.

7. Allegations of Forum Shopping and Suppression by the Petitioner:

The court found that the petitioner engaged in forum shopping, misrepresentation, and suppression of facts. The petitioner filed multiple petitions with identical prayers across different forums, attempting to mislead the court. This conduct was deemed an abuse of the judicial process.

8. Imposition of Costs for Misuse of Judicial Process:

The court imposed a cost of Rs. 5 Lakhs on the petitioner for engaging in forum shopping and wasting judicial time. The petitioner was found to have repeatedly filed petitions with similar prayers, causing unnecessary delays and burdening the court's resources. The costs were directed to be distributed among various charitable organizations.

In conclusion, the court dismissed the petition with costs, finding no merit in the petitioner's claims and emphasizing the importance of adhering to established legal procedures and respecting the jurisdiction of specialized tribunals like the NCLT and NCLAT.

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