2019 (3) TMI 1688 - HC - Insolvency and Bankruptcy

High Court grants Rule, stays NCLT/NCLAT orders, finds writ maintainable despite alternative remedy, deems winding-up petition time-barred.

The High Court granted Rule and expedited the hearing, providing interim relief by staying the orders passed by the NCLT and NCLAT. The court found merit ... Maintainability of application - initiation of CIRP - constitutional validity of section 231 of the Insolvency and Bankruptcy Code, 2006 - Petitioner submitted that under the first part of section 231 of the IB Code, no civil Court shall have jurisdiction in respect of any matter in which the adjudicating authority is empowered by, or under, this IB Code to pass any order - whether exceptional case is made out warranting interference under Article 226 of the Constitution of India instead of relegating the petitioner to efficacious alternative remedy? HELD THAT:- It is well recognized and fundamental judicial procedure that if the judgment has to be pronounced by any one of the two or more judges, who heard the case, it will be pronounced only after the transcript of the judgment has/have been initialed by all the judges who have heard the case. Thus prima facie one page corrigendum issued upon pointing out the gross illegality would not cure the non-est purported judgment/ order dated 28th August, 2018. The manner in which the matter has been dealt by the adjudicating authority would shock the conscience of the Court. The High Court is required to exercise its extraordinary jurisdiction under Article 226 of the Constitution so as to prevent miscarriage of justice and/or to correct and/or to meet out justice. There are merit in the contention of the petitioner that winding up petition filed by the respondent only on 21st October, 2016 was time barred as it was filed after more than 3 years from the date of cause of action as claimed by the respondent No.2 in a suit filed earlier - We, however, prima facie find that such winding-up petition which itself was time barred and hence, non-est will not revive merely because it is transferred to the adjudicating authority. The petitioner has made out a case for admission - issue raised in the petition requires detailed consideration - Petition admitted. Issues Involved:1. Jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India.2. Constitutional validity of Section 231 of the Insolvency and Bankruptcy Code, 2006 (IB Code).3. Legality of the orders passed by the NCLT and NCLAT.4. Maintainability of the writ petition in the presence of an alternative remedy.5. Compliance with procedural requirements under Section 419(3) of the Companies Act, 2013.6. Time-barred nature of the winding-up petition.Detailed Analysis:1. Jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India:The petitioner invoked the jurisdiction of the High Court under Articles 226 and 227 challenging the orders passed by the NCLT and NCLAT. The petitioner argued that despite the availability of an alternative remedy, the writ petition is maintainable. The petitioner relied on several precedents, including *Calcutta Discount Co. Ltd. vs. Income Tax Officer* and *Whirlpool Corporation vs. Registrar of Trade Marks*, to assert that the High Court can exercise its jurisdiction in cases where there is a violation of fundamental rights, principles of natural justice, or where the order is without jurisdiction.2. Constitutional validity of Section 231 of the IB Code:The petitioner challenged the constitutional validity of Section 231 of the IB Code, which bars civil courts from granting injunctions in matters where the adjudicating authority under the IB Code is empowered to pass orders. The petitioner contended that the term 'any Court' should not include the High Court or Supreme Court, as it would violate the basic structure of the Constitution. The court, referencing *L. Chandra Kumar vs. Union of India*, opined that the term 'any Court' cannot be construed to include the High Court or Supreme Court, thus preserving the jurisdiction of constitutional courts.3. Legality of the orders passed by the NCLT and NCLAT:The petitioner argued that the orders passed by the NCLT and NCLAT were non-est due to procedural irregularities. Specifically, the petitioner highlighted that the judgment/order dated 28th August 2018 was signed and pronounced by only one member of the two-member bench, which is in violation of Section 419(3) of the Companies Act, 2013. The subsequent addendum-corrigendum issued on 30th August 2018 by the second member could not cure the defect. The court referenced *Surendra Singh vs. State of Uttar Pradesh* to emphasize that a judgment must be delivered by all judges who heard the case, and any deviation would render the judgment non-est.4. Maintainability of the writ petition in the presence of an alternative remedy:The respondent raised a preliminary objection regarding the maintainability of the writ petition, citing the availability of an alternative remedy. The court acknowledged that while an alternative remedy is a rule of self-imposed limitation, there are exceptions where the High Court can exercise its jurisdiction, such as when the statutory authority has not acted in accordance with the provisions of the enactment or there is a violation of fundamental principles of judicial procedure. The court found that the petitioner made out an exceptional case warranting interference under Article 226.5. Compliance with procedural requirements under Section 419(3) of the Companies Act, 2013:The court found that the judgment/order dated 28th August 2018, pronounced by only one member of the two-member bench, violated Section 419(3) of the Companies Act, 2013. The subsequent addendum-corrigendum issued by the second member on 30th August 2018 did not cure the defect, as the judgment must be delivered by all judges who heard the case. The court referenced *Surendra Singh vs. State of Uttar Pradesh* to emphasize the importance of compliance with procedural requirements in delivering judgments.6. Time-barred nature of the winding-up petition:The petitioner argued that the winding-up petition filed by the respondent on 21st October 2016 was time-barred, as it was filed more than three years after the date of the cause of action. The court, referencing *B. K. Educational Services Private Limited vs. Parag Gupta and Associates*, found prima facie merit in the contention that the winding-up petition was time-barred and non-est, and its transfer to the adjudicating authority did not revive it.Conclusion:The court granted Rule and expedited the hearing, granting interim relief in terms of prayer clause (c), which stayed the orders dated 28th August 2018 and the addendum-corrigendum dated 30th August 2018 passed by the NCLT, as well as the order dated 21st January 2019 passed by the NCLAT.