High Court stays NCLT's IBC petition order to protect ongoing revival scheme

The High Court stayed the NCLT's order admitting a petition under the IBC, appointing an IRP, and declaring a moratorium, to prevent disruption of the ongoing revival scheme in the Company Court. The petitioner was directed to appeal to the NCLAT within four weeks. The High Court emphasized avoiding conflicting orders and protecting creditors' interests. The Court refrained from commenting on the revival scheme's merits or the NCLT's order, disposing of the petition and pending applications accordingly.

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Issues Involved:
1. Challenge to the NCLT order dated 10th October 2019.
2. Conflict of jurisdiction between the Company Court and NCLT.
3. Maintainability of the writ petition.
4. Impact of the NCLT order on the revival scheme pending before the Company Court.

Detailed Analysis:

1. Challenge to the NCLT order dated 10th October 2019:
The petitioner, an ex-Director/Promoter of VDPL, challenged the NCLT's order which admitted a petition under Section 7 of the IBC, appointed an IRP, and declared a moratorium under Section 14 of the IBC. The petitioner argued that the NCLT's order halted the revival efforts of VDPL, which were already under consideration by the Company Court.

2. Conflict of jurisdiction between the Company Court and NCLT:
The petitioner contended that the Company Court had been actively engaged in the revival scheme of VDPL, having admitted petitions under Sections 529(A) and 530 of the Companies Act, 1956, and appointed a Provisional Liquidator. The Company Court facilitated mediation, resulting in a settlement with over 80% of VDPL's creditors. The petitioner argued that the NCLT's order created a jurisdictional conflict, disrupting the ongoing revival process.

3. Maintainability of the writ petition:
Counsel for the Union of India and other respondents argued that the writ petition was not maintainable due to the availability of an alternative remedy under Section 61 of the IBC, which allows appeals to the NCLAT. They cited Section 63 of the IBC, which bars jurisdiction of civil courts in matters where the NCLT has jurisdiction.

4. Impact of the NCLT order on the revival scheme pending before the Company Court:
The Company Court had extensively deliberated on the revival scheme, which involved settlements with a significant majority of creditors. The NCLT's order, by appointing an IRP and declaring a moratorium, threatened to nullify these efforts. The Court noted that the NCLT's decision overlooked the Supreme Court's guidance in Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., which emphasized avoiding parallel proceedings to prevent chaos and ensure effective resolution.

Conclusion:
The High Court acknowledged the detailed efforts of the Company Court in formulating the revival scheme and the potential disruption caused by the NCLT's order. To prevent conflicting orders and protect the interests of creditors and stakeholders, the High Court stayed the NCLT's order until the Company Court pronounced its judgment or the matter was decided by the NCLAT. The petitioner was directed to approach the NCLAT within four weeks, and the NCLAT was instructed to consider the matter comprehensively, including the orders of the Company Court. The High Court refrained from commenting on the merits of the revival scheme or the NCLT's order. The petition and all pending applications were disposed of accordingly.

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