Calcutta High Court Dismisses Suit under Insolvency Code, Upholding NCLT Jurisdiction

The Calcutta High Court dismissed a suit based on the Insolvency and Bankruptcy Code, 2016, as it fell within the exclusive jurisdiction of the National Company Law Tribunal. The defendants' argument that the suit was barred under Sections 63 and 231 of the Code was upheld, leading to the dismissal of the suit. The court emphasized the restrictions on civil courts in matters related to insolvency proceedings, ultimately resulting in the defendants being granted the reliefs sought.

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Issues:
Dismissal of suit based on Insolvency and Bankruptcy Code, 2016.

Analysis:
The application before the Calcutta High Court sought the dismissal of the suit by defendant nos. 5 to 8 based on the argument that the cause of action of the suit is barred under the provisions of the Insolvency and Bankruptcy Code, 2016. The defendants contended that the suit was not maintainable due to the proceedings initiated before the National Company Law Tribunal, Kolkata, regarding insolvency, where defendant no. 5 was appointed as the Insolvency Resolution Professional. The plaintiff, a director and shareholder of defendant no. 9, had grievances against defendant nos. 5 to 8 regarding their functioning in the insolvency proceedings. The plaintiff sought declarations, injunctions, and damages, alleging negligence on the part of the State Bank of India and the insolvency professionals. The defendants argued that the suit was barred under Sections 63 and 231 of the Code, as the National Company Law Tribunal had jurisdiction over the matter.

The court noted that the defendant no. 9 was involved in insolvency proceedings before the National Company Law Tribunal, Kolkata, with defendant no. 5 appointed as the Insolvency Professional. Subsequently, an order for winding up of defendant no. 9 was passed by the Tribunal, and the Liquidator found minimal assets belonging to defendant no. 9. Sections 63 and 231 of the Insolvency and Bankruptcy Code, 2016 were crucial in this case. Section 63 bars civil courts from having jurisdiction over matters within the purview of the National Company Law Tribunal, which includes insolvency proceedings. Section 231 further restricts civil courts from assuming jurisdiction in matters where the Adjudicating Authority or the Board under the Code is empowered to pass orders. The court emphasized that the suit was barred by law under these provisions, and thus, the defendants were entitled to the reliefs sought. Consequently, the suit was dismissed, and related applications were disposed of accordingly.

In conclusion, the judgment by the Calcutta High Court centered on the dismissal of a suit based on the Insolvency and Bankruptcy Code, 2016. The court upheld the applicability of Sections 63 and 231 of the Code, emphasizing the exclusive jurisdiction of the National Company Law Tribunal over insolvency matters. The decision highlighted the limitations on civil courts in entertaining suits related to issues falling under the Code, ultimately leading to the dismissal of the suit in question.

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