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TMI Blog2024 (4) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... have to go before the Tribunal and tell the Tribunal that it has no jurisdiction to entertain the petition. The very acceptance of filing by the Tribunal is contrary to law. It is declared that the e-filing by the 2nd respondent under Section 95 of the Insolvency and Bankruptcy Code, 2016 as non est and illegal and consequently, the proceedings at whatever stage they are, before the National Company Law Tribunal, stands quashed. Petition allowed. - HON'BLE MR. JUSTICE M. NAGAPRASANNA For the Petitioner (By Sri. Om Prakash, Senior Advocate A/W., Sri. C.K. Nandakumar, Senior Advocate for Sri. Vishwas N., Advocate) For the Respondents (By Sri. H. Shanthi Bhushan, DSGI A/W., Smt. Anupama Hegde, CGC For R1 And R3; Sri. M.S. Shyam Sundar, Senior Advocate A/W., Sri. Anish Acharya, Advocate for R2) ORDER The petitioner in W.P. No. 26977 of 2023 is a firm - M/s Manyata Reality ( the firm for short). Petitioners in W.P. No. 27032 of 2023 and 27346 of 2023 are the Directors of the said firm. The common stream of challenge in all these petitions is filing of petition before the National Company Law Tribunal ( the Tribunal for short) invoking Section 95 of the Insolvency and Bankruptcy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the Tribunal under Section 95 of the Code depicting a particular filing number before the Tribunal. The respondent/Company on the ground that it has preferred a petition before the Tribunal files a memo before the Arbitral Tribunal seeking adjournment of arbitration proceedings sine die. In the light of filing of petition before the Tribunal, the petitioners are knocking at the doors of this Court in these petitions. 5. The learned senior counsel Sri C.K. Nanda Kumar and Sri Om Prakash representing the petitioners would in unison submit that the Code does not relate to insolvency resolution of individuals and partnership firms. The jurisdiction for the respondent/Company is to approach the Debts Recovery Tribunal or Debts Recovery Appellate Tribunal. Since no insolvency resolution of individuals and partnership firms are brought under the ambit of the Code the only exception that the Code projects is that personal guarantor to corporate debtor only can be brought under Section 90 of the Code and thereby conferring jurisdiction upon the Tribunal. Since the petitioners, the Directors in the other two petitions are not personal guarantors of the corporate debtor nor the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the directors of the said firm. The respondent/Company and the petitioner-firm generate certain disputes between them. Those disputes are being arbitrated before an Arbitral Tribunal. It is a matter of record, as observed hereinabove, that the proceedings are proceeding before the Arbitral Tribunal. During the subsistence of those proceedings, the respondent/Company file/register a petition before the Tribunal invoking Section 95 of the Code. The issue is, whether it would be maintainable against the petitioners. Alleging that the Tribunal has no jurisdiction even to register a petition under Section 95 of the Code against the petitioners, they are at the doors of this Court. 10. To consider the issue whether registration of a petition under Section 95 of the Code before the Tribunal would be maintainable against the petitioners and the like partnership firm and the directors of the firm, it becomes necessary to notice certain provisions of the Code. Section 3 of the Code deals with definitions. Section 3(7) reads as follows: (7) corporate person means a company as defined in clause (20) of Section 2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94 to 187 [both inclusive];. (4) clause (g) to clause (i) of sub-section (2) of section 239; (5) clause (m) to clause (zc) of sub-section (2) of section 239; (6) clause (zn) to clause (zs) of sub-section (2) of section 240; and (7) section 249. [F. No. 30/21/2018-Insolvency Section] GYANESHWAR KUMAR SINGH, Jt. Secy. (Emphasis supplied) The notification, for the first time, draws in a personal guarantor to a corporate debtor to come under the ambit of the Code qua the provisions in the notification. The amendment runs through Section 2 to Section 249 of the Code. It becomes applicable to Section 94 to Section 187 as well inter alia. Therefore, the personal guarantor would come within the Code. This would mean an addition; addition would mean that, there is one more entity/individual that would come within the ambit of the Code apart from the Company who is described to be a corporate person. He or it is personal guarantor to the corporate debtor. It is only these which can come within the ambit of the Code. 13. A petition before the Tribunal can be filed invoking Section 95 of the Code by a creditor against a debtor, a corporate debtor. This was the tenor till 15-11-2019. The addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application; and (b) during the interim-moratorium period (i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. (2) Where the application has been made in relation to a firm, the interim-moratorium under subsection (1) shall operate against all the partners of the firm as on the date of the application. (3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (Emphasis supplied) So kicks in Section 97 of the Code. It reads as follows: 97. Appointment of resolution professional. (1) If the application under Section 94 or 95 is filed through a resolution professional, the Adjudicating Authority shall direct the Board within seven days of the date of the application to confirm that there are no disciplinary proceedings pending against resolution professional. (2) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If it were to be a case of consideration of a jurisdiction, when an application is entertained by the Tribunal, it would have been an altogether a different circumstance. The Code is worded in such a way and hedged with such conditions that it leaves not play in the joints, once the petition is registered before the Tribunal. The statutory functions, its effect would immediately begin to flow. 15. Both the learned senior counsel appearing for the respondent/Company have strenuously contended that it is after all filing of the petition. The Tribunal will decide whether it has jurisdiction to entertain the petition or not. This Court, at the stage of scrutiny of an application, should not entertain the writ petition. If filing of the petition did not result in any dire consequence this Court would have left it at that, and directed the Tribunal to decide the jurisdiction and proceed further. That is not the purport of the Code, as the petitioners and the like do not come within the ambit of the Code. If they do not come within the ambit of the Code, it touches upon the jurisdiction, to even file a petition, under Section 95 of the Code, by any creditor against a debtor and if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/= (Rupees Forty Crores only) was paid in advance having been treated as Interest bearing refundable deposits from the Developer to the Owners with effect from 1st January 2011, and shall carry simple interest at the rate of 24% per month which is payable by the Owners commencing from 1st January 2011 the time of actual amount of Rs. 183,50,00,000/- (Rupees One Hundred and Eighty-three Crores Fifty lakhs only) become due and payable under Principal Agreement and the Owners complying with all the conditions precedent set out herein below: (a) Denotification of lands for the survey numbers which are notified, from acquisition proceedings initiated by the Bangalore Development Authority; (b) Obtaining conversion orders for the lands wherever the same is not obtained for the survey numbers listed in the Schedule 'A' of the said Memorandum of Understanding and the Principal Agreement (c) Obtaining transfer of katha with regard to all the Lands which are listed in the Schedule 'A' of the said Memorandum of Understanding and the Principal Agreement to the name of the present owners in the records of the Bruhat Bangalore Mahanagara Palike (d) Making out good and marketa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras in the case of GOVERNMENT OF TAMIL NADU AND OTHERS VS. M/S. KAKKERA BROTHERS AND ANOTHER reported in 2006 3-L.W.676. The said judgments would not lend any support to the case projected by the learned senior counsel for the respondent company as none of them considered the purport of Section 95 of the Code qua entertainment of a petition against the petitioner and the like. The said judgments are inapplicable to the facts of the case at hand. 19. The maintainability of the petition before the Tribunal cuts at the root of the matter, as it relates to jurisdiction, to entertain the petition by the Tribunal. The Code does not permit it. If that be so, even a speck of paper cannot move before a fora that has no jurisdiction. It is un-understandable as to how and why the petitioners have to go before the Tribunal and tell the Tribunal that it has no jurisdiction to entertain the petition. The very acceptance of filing by the Tribunal is contrary to law. 20. For the aforesaid reasons, the following: ORDER (i) The Writ Petitions are allowed. (ii) It is declared that the e-filing in filing No. 2903111/01786/2023 of the petitions by the 2nd respondent under Section 95 of the Insolven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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