High Court allows writ under Article 226, includes seized property in CIRP under IBC

The High Court held that the writ jurisdiction under Article 226 was maintainable due to the absence of jurisdiction by the NCLT. Additionally, the property seized by the KMC could be included in the CIRP under the IBC, as the KMC's claim had attained finality and was considered an operational debt. Consequently, the court dismissed the writ petition without any order as to costs and ordered urgent certified copies of the judgment to be supplied to the parties upon compliance with requisite formalities.

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Issues Involved:
1. Whether the writ jurisdiction of the High Court under Article 226 of the Constitution of India can be invoked despite the availability of an alternative remedy.
2. Whether the property seized by the Kolkata Municipal Corporation (KMC) in recovery of its statutory claims against the debtor can be the subject matter of a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).

Detailed Analysis:

Issue 1: Writ Jurisdiction under Article 226
The High Court examined whether it could exercise its writ jurisdiction under Article 226 despite the availability of an alternative remedy. The petitioner argued that the NCLT and the Resolution Professional lacked jurisdiction to take control and custody of the asset, which was under the statutory authority of the KMC. The court referred to the Supreme Court's decision in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka, which distinguished between a lack of jurisdiction and wrongful exercise of available jurisdiction. The High Court concluded that the challenge was based on the absence of jurisdiction, making the writ petition maintainable under Article 226. The court cited Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Commissioner of Income Tax vs. Chhabil Dass Agarwal to support its decision that the writ petition was maintainable in cases of jurisdictional absence, thereby deciding this issue in the affirmative.

Issue 2: Subject Matter of CIRP under IBC
The second issue addressed whether the property seized by the KMC could be included in the CIRP under the IBC. The court referred to Embassy Property Developments Pvt. Ltd. vs. State of Karnataka, which clarified that decisions by statutory authorities in the realm of public law are not within the scope of "arising out of or in relation to the insolvency resolution" under Section 60(5)(c) of the IBC. The court noted that once the KMC's claim for unpaid taxes had attained finality, it became an "operational debt" under Section 5(21) of the IBC. Therefore, the Resolution Professional had jurisdiction to take custody and control of the asset. The court also cited Commissioner of Income Tax vs. Monnet Ispat and Energy Ltd., which held that crown debts do not take precedence over secured creditors under the IBC. Consequently, the court decided that the finalized claim of the KMC could indeed be the subject matter of a CIRP, answering this issue in the affirmative and against the writ petitioner.

Conclusion
The High Court dismissed the writ petition, affirming that:
1. The writ jurisdiction under Article 226 was maintainable due to the absence of jurisdiction by the NCLT.
2. The property seized by the KMC could be included in the CIRP under the IBC, as the KMC's claim had attained finality and was considered an operational debt.

The petition was dismissed without any order as to costs, and the court ordered that urgent certified copies of the judgment be supplied to the parties upon compliance with requisite formalities.

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