2023 (3) TMI 1381 - SC - Insolvency and Bankruptcy

Supreme Court dismisses PIL on insolvency, directs parties to NCLT. Section 60(5) application status remains open.

Abhilash Lal Versus Harsh Ghangurde and Others

The Supreme Court allowed the appeal, holding that the PIL challenging the insolvency resolution process constituted an abuse of process and should be ... Seeking rejection of the Resolution Plan and the liquidation of SHPL - it is alleged that the plan could not have dealt with land belonging to the municipal corporation without its prior approval under Sections 92 and 92-A of the Mumbai Municipal Corporation Act (MMC Act) 1988 - termination of contract agreement and no lease was ever executed in respect of the land belonging to MCGM in favour of SHPL. Whether the High Court of Andhra Pradesh was justified in entertaining the PIL and issuing an interim order? HELD THAT:- The appellant would have been relegated to pursue the objection to the maintainability of the PIL before the High Court. However, it is evident that this course of action need not be followed for the simple reason that the PIL was a complete abuse of process. The IBC provides forums and remedies. In the exercise of the jurisdiction conferred by Section 60(5), MCGM has moved the NCLT contending that the land in question which is situated at Mumbai cannot be included as a part of the assets of the Corporate Debtor. Since the application is pending before the NCLT, no opinion to be expressed on it. The provisions of the IBC were invoked for initiating the CIRP in respect of the Corporate Debtor. The first respondent who had evidently no locus in the proceedings chose to move a PIL ostensibly on the ground that he was seeking to safeguard the facility of the hospital for the benefit of the residents of Mumbai. The High Court should have rejected the PIL at the very threshold. It is apparent that the PIL was only intended to thwart the process which has been initiated under the IBC. The PIL was evidently motivated by extraneous considerations and should have been dismissed. Since the limited ambit of these proceedings relates to the recourse which was taken to the jurisdiction under Article 226 of the Constitution by the first respondent, no opinion expressed on the merits of the rights and contentions of the parties in the proceedings which are pending before the NCLT - recourse to the jurisdiction of the High Court under Article 226 of the Constitution in the form of a PIL constituted an abuse of process. Petition dismissed. Issues Involved:The issues involved in this judgment are related to the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, the necessity of prior approval from the Municipal Corporation for dealing with its properties, the maintainability of a Public Interest Litigation (PIL) challenging the insolvency resolution process, and the jurisdiction of the High Court under Article 226 of the Constitution.Resolution Plan Approval Issue:The Supreme Court allowed an appeal challenging the approval of a Resolution Plan, emphasizing the necessity of prior approval from the Municipal Corporation under Sections 92 and 92-A of the Mumbai Municipal Corporation Act before approving the plan. The Court highlighted the Corporation's right to control and regulate its properties, stating that the Resolution Plan could not override the Corporation's objections without its approval.Property Lease Agreement Issue:The Court clarified that the terms of the contract between the parties only constituted an agreement to enter into a lease and did not confer any right or interest until the lease was registered. The Court noted that the Corporation had not executed a lease agreement in favor of the debtor, emphasizing the Corporation's control over its public properties.Maintainability of PIL Issue:The Court addressed the maintainability of a PIL challenging the insolvency resolution process, stating that the High Court should have rejected the PIL as it was an abuse of process. The Court highlighted that the PIL was intended to thwart the insolvency process initiated under the Insolvency and Bankruptcy Code and was motivated by extraneous considerations.Jurisdiction under Article 226 Issue:The Court concluded that the High Court's jurisdiction under Article 226 was misused in the form of the PIL, which constituted an abuse of process. The Court dismissed the PIL and emphasized that the parties should pursue their rights and contentions in the proceedings pending before the National Company Law Tribunal.Conclusion:The Supreme Court allowed the appeal, holding that the PIL constituted an abuse of process and should be dismissed. The Court emphasized that the parties should pursue their rights and contentions in the proceedings before the National Company Law Tribunal, keeping the judgment dated 15 November 2019 as the governing principles. The Court did not express any opinion on the pending application under Section 60(5) of the Insolvency and Bankruptcy Code, keeping all rights and contentions open for the Resolution Professional.