High Court Upholds NCLT Decision on Insolvency Process; Emphasizes Minimal Judicial Interference

The High Court upheld the NCLT's decision to initiate Corporate Insolvency Resolution Process against respondent no. 3, dismissing the petitioner's writ petition seeking to quash the orders. The court emphasized minimal judicial interference in IBC proceedings, stating that the order's uncontested nature did not make it collusive. The court advised the petitioner to pursue remedies under Section 65 of IBC for fraudulent initiation of proceedings and suggested excluding assets acquired through e-auction from insolvency. The judgment underscores adherence to legal procedures and the availability of legal remedies within the framework of the law.

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Issues:
1. Writ jurisdiction under Article 226 for quashing orders passed by National Company Law Tribunal (NCLT).
2. Challenge against the rejection of application for recall of order.
3. Power of courts to recall orders obtained fraudulently.
4. Provisions of Insolvency and Bankruptcy Code, 2010 (IBC) regarding initiation of proceedings.
5. Consideration of assets acquired through e-auction in Corporate Insolvency Resolution Process.
6. Judicial interference in proceedings under IBC.

Analysis:
1. The petitioner, a Firm through its proprietor, invoked the writ jurisdiction of the High Court under Article 226 to challenge the orders dated 29.8.2018 and 10.5.2018 passed by the NCLT initiating Corporate Insolvency Resolution Process against respondent no. 3. The petition was admitted, and a moratorium was declared against respondent no. 3. An Interim Resolution Professional (IRP) was appointed to proceed in accordance with Section 15 of IBC.

2. The petitioner applied for the recall of the order on the grounds of collusion between respondents no. 2 and 3. However, the NCLT rejected the application for recall citing lack of power to do so based on a previous decision of the National Company Law Appellate Tribunal (NCLAT). The petitioner challenged these orders, arguing that every court has the inherent power to recall orders obtained fraudulently or collusively.

3. The High Court noted that while there is no provision in IBC for reviewing the order admitting a petition under Section 9, the power to recall an order is akin to procedural review and can only be exercised in case of procedural defects or fraudulent means. The court found no procedural defect in the admission order and stated that the order was not collusive merely because it was uncontested by respondent no. 3.

4. Section 65 of IBC deals with fraudulent initiation of proceedings and imposes penalties for such actions. The court advised the petitioner to pursue proceedings under this section if it believes the initiation of the Corporate Insolvency Resolution Process was fraudulent. The court also suggested that the petitioner may apply to exclude assets acquired through e-auction from the insolvency process.

5. The High Court emphasized the minimal interference on the judicial side in IBC proceedings and declined to interfere with the NCLT's decisions. The court dismissed the writ petition but granted the petitioner the liberty to seek appropriate legal remedies as advised.

6. In conclusion, the judgment upholds the principles of IBC, highlights the importance of following legal procedures, and encourages parties to utilize the available legal remedies within the framework of the law.

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