2021 (11) TMI 485 - HC - Companies Law

High Court Upholds Dismissal of Bank's Stay Application, Emphasizes Pending NCLT Resolution

The High Court upheld the Single Judge's decision to dismiss the bank's stay application, emphasizing the pending NCLT application for vacation of the ... Stay of interim order - status quo order - possession under SARFAESI Act - vacation of status quo - jurisdiction of the National Company Law Tribunal - interlocutory application for vacationStay of interim order - status quo order - possession under SARFAESI Act - Validity of the learned Single Judge's refusal to stay the NCLT order dated 30.09.2021 directing status quo in respect of the corporate debtor's assets. - HELD THAT: - The Single Judge declined to grant interim relief because the appellant had already taken physical possession of the subject property and had filed an interlocutory application before the NCLT seeking vacation of the status quo order, which was pending and listed on a short date. The Court found no infirmity in the Single Judge's conclusion that, in view of the appellant's possession and the pending adjudication before the Tribunal, no grave or irreparable loss was shown that would justify interfering with the Tribunal's interim order. The Single Judge also recorded that the Tribunal would be required to consider the appellant's plea as to the Tribunal's jurisdiction when the interlocutory application is taken up. [Paras 5, 6, 7, 8]The refusal to grant a stay of the NCLT's status quo order was upheld and the appeal on this ground dismissed.Jurisdiction of the National Company Law Tribunal - interlocutory application for vacation - vacation of status quo - Objection to the jurisdiction of the NCLT and the direction for adjudication of the pending interlocutory application. - HELD THAT: - The High Court did not decide the jurisdictional objection on the merits but recorded that the appellant's objection to the Tribunal's jurisdiction must be raised and decided by the NCLT. The Court made it clear that it expressed no opinion on the merits and directed that the NCLT deal with the appellant's application for vacation of the status quo order and the jurisdictional plea in accordance with law, urging expedition and avoidance of unnecessary adjournments. [Paras 5, 9]The question of the NCLT's jurisdiction and the interlocutory application for vacation of the status quo order is to be considered and decided by the NCLT; the High Court refrained from expressing any view on the merits.Final Conclusion: The appeal is dismissed; the order of the learned Single Judge refusing to stay the NCLT's status quo order is upheld. The NCLT is directed to adjudicate the pending interlocutory application, including the appellant's jurisdictional objection, on its merits and expeditiously; no opinion is expressed on the substantive merits of the dispute. Issues:Appeal against NCLT order granting status quo on assets, jurisdiction of NCLT, stay application dismissal by Single Judge, pending vacation of status quo order application.Analysis:The appellant challenged an order by the National Company Law Tribunal (NCLT) granting status quo on assets in response to an application filed by Respondent No. 1 to restrain the creation of third-party rights. The Appellant, a bank, had issued credit facilities secured by a mortgage and hypothecation over assets to the corporate debtor, which defaulted, leading to non-performing asset classification. The bank invoked SARFAESI Act provisions, issued notices, and took possession of the hospital property. However, the NCLT ordered status quo, prompting the bank to file applications seeking vacation of the order. The Single Judge dismissed the stay application, citing the pending application before the NCLT for vacation of the status quo order. The Single Judge noted the bank's possession of the property and lack of urgency due to the pending NCLT hearing. The Single Judge's decision was based on the bank's admission of possession and the pending application before the NCLT, scheduled for a hearing on 15.11.2021. The Single Judge's order was considered appropriate, as the bank's objection to NCLT's jurisdiction would be addressed by the Tribunal. The High Court found no error in the Single Judge's decision, dismissing the appeal and emphasizing that the NCLT should expedite the pending application for vacation of the status quo order. The High Court clarified that its decision did not assess the case's merits, leaving it to the NCLT for a lawful resolution without unnecessary delays.