High Court grants interim relief to M/s. Hindustan Antibiotics Ltd. challenging Insolvency and Bankruptcy Code provisions

The High Court granted interim relief to M/s.Hindustan Antibiotics Ltd., finding a strong prima facie case against the Insolvency and Bankruptcy Code (IBC) provisions. The Court expressed doubts on NCLT's jurisdiction in deciding constitutional challenges to the IBC, emphasizing the need for a deeper examination by the Court. The Court stayed further NCLT proceedings, highlighting potential irreparable harm to the company. The judgment addressed challenges to the IBC, applicability to Government companies, NCLT's jurisdiction, and granted interim relief based on the balance of convenience.

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Issues:
1. Challenge to the provisions of Insolvency and Bankruptcy Code, 2016 by M/s.Hindustan Antibiotics Ltd.
2. Applicability of Insolvency and Bankruptcy Code to Government companies.
3. Jurisdiction of National Company Law Tribunal (NCLT) in light of pending constitutional challenge.
4. Prima facie case for grant of interim relief and balance of convenience.

Analysis:

1. Challenge to the provisions of Insolvency and Bankruptcy Code (IBC): M/s.Hindustan Antibiotics Ltd. filed a Writ Petition challenging the fairness and legality of certain provisions of the IBC, citing conflict with the Companies Act, 2013 and violation of Article 14 of the Constitution of India. The petitioner sought various reliefs, including a stay on recovery proceedings initiated by multiple respondents. The petition is pending before the High Court.

2. Applicability of IBC to Government companies: M/s.Hindustan Antibiotics Ltd., a Government of India enterprise, argued before the NCLT that being a Government company, the IBC should not be applied to them. The company's ownership by the Government and control by the Department of Pharmaceuticals were highlighted. The NCLT proceedings raised legal and constitutional issues, leading to a reference to a third member due to a division in opinion among the NCLT members.

3. Jurisdiction of NCLT in light of pending constitutional challenge: The High Court expressed concerns over the NCLT's jurisdiction in the matter, emphasizing that the constitutional challenge to the IBC should be addressed by the Court, not the NCLT. The Court noted that the NCLT's jurisdiction is derived from the IBC and raised doubts about the NCLT's competence to decide on the constitutional validity of the IBC. The Court highlighted the need for a deeper examination of the issue, including the relevance of a Supreme Court judgment on a similar issue.

4. Prima facie case for interim relief: The High Court found that M/s.Hindustan Antibiotics Ltd. had established a strong prima facie case for the grant of interim relief. It noted the potential irreparable harm and loss the company could suffer if the NCLT proceedings were to continue. Consequently, the Court issued orders, including issuing notices to the Attorney General for India and other respondents, staying further proceedings in the NCLT Company Petition, and setting a date for further orders.

In conclusion, the High Court's judgment addressed the challenges to the IBC provisions, the applicability of the Code to Government companies, the jurisdiction of the NCLT in the face of a constitutional challenge, and the grant of interim relief based on a prima facie case and the balance of convenience.

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