2022 (3) TMI 57 - HC - Insolvency and Bankruptcy

Court upholds NCLT order on Insolvency case, dismisses challenge, affirms Resolution Professional authority

John Zachariah, Mrs. Reena Paul, Mrs. Annu Mathew, Mr. Mathew John, Mr. K.G. Paul Versus Union Of India Ministry Of Corporate Affairs, National Company Law Tribunal

The High Court dismissed the petitioners' challenge to the National Company Law Tribunal's order quashing Ext.P11 Order, stating that the petitioners had ... Maintainability of applications filed before the NCLT against the personal guarantor - non-application of mind by the National Company Law Tribunal - applicability of law of limitation - HELD THAT:- Section 61 of the Insolvency and Bankruptcy Code provides that notwithstanding anything to the contrary contained under the Companies Act 2013, any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. The petitioners, therefore, have an efficacious alternate remedy. The proceedings under challenge are under the Insolvency and Bankruptcy Code. When the Code itself provides for an appellate remedy, this Court would not be justified in adjudicating on the sustainability of the order passed by the NCLT in writ proceedings. The Adjudicating Authority, under Section 100, is to decide whether to admit or reject the application for IRP. From a reading of Chapter III, Part III of the IBC, it is obvious that in the matter of initiating an IRP, the role of the Resolution Professional is limited to making appropriate recommendations to the Adjudicating Authority - Resolution Professional is required to give reasons in support of his recommendations. The Adjudicating Authority is the body which takes final decision in the matter. The Adjudicating Authority is not bound by the recommendation made by the Resolution Professional. In fact, a reading of other provisions in the IBC would make it abundantly clear that in the matter of issuing public notices inviting claims from the creditors and approving or rejecting repayment plan as also in passing Discharge Order, it is the Adjudicating Authority, who is the decision making authority, even though the Adjudicating Authority may not be justified in interfering with commercial wisdom of the Committee of Creditors. The Hon’ble Apex Court has held in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta and others [2021 (3) TMI 340 - SUPREME COURT] that merely because a duty has been imposed on Resolution Professional, it does not mean that the jurisdiction of NCLT is circumscribed. The argument of the petitioners that the role of Adjudicating Authority is reduced to that of a rubber stamp under the context of Sections 95, 97, 99 and 100 of the IBC, is hence not factually correct. This Court finds no illegality or unconstitutionality in Sections 95, 97, 99 or 100 of the IBC. Petition dismissed. Issues:1. Challenge to the order of the National Company Law Tribunal quashing Ext.P11 Order.2. Allegation of non-maintainability of applications against personal guarantors due to limitation.3. Challenge to the appointment of an Insolvency Resolution Professional against the petitioners.4. Constitutional challenge to Sections 95, 97, 99, and 100 of the Insolvency and Bankruptcy Code.5. Jurisdiction of the High Court in the matter.Issue 1:The petitioners, personal Guarantors to the Corporate Debtor, sought to quash the Ext.P11 Order of the National Company Law Tribunal, Kochi Bench. They argued that the applications against them were not maintainable due to being barred by limitation. The High Court noted that the petitioners had an alternative remedy under the Insolvency and Bankruptcy Code to appeal to the National Company Law Appellate Tribunal. The Court held that it would not adjudicate on the order passed by the NCLT in writ proceedings when the Code itself provided for an appellate remedy.Issue 2:The petitioners contended that the claims against them as personal guarantors were barred by limitation and that the proceedings were initiated against them were not maintainable in law. However, the Court observed that the petitioners did not raise the question of limitation before the NCLT previously. The Court also noted that the personal guarantee was limited to a specific amount, which was not exceeded. The petitioners' argument on limitation was not found to be a strong ground to challenge the order.Issue 3:The petitioners challenged the appointment of an Insolvency Resolution Professional against them, alleging non-application of mind by the NCLT and violation of principles of natural justice. They argued that the proceedings against them were not maintainable due to the claim being barred by limitation. However, the Court found that the NCLT had the authority to appoint an IRP and dismissed the petitioners' contentions regarding the appointment process.Issue 4:The petitioners challenged the constitutionality of Sections 95, 97, 99, and 100 of the Insolvency and Bankruptcy Code, alleging that these provisions conferred excessive powers on the Resolution Professional and reduced the role of the Tribunal to a rubber stamp. The Court analyzed the relevant sections and held that the Resolution Professional's role was limited to making recommendations, with the Adjudicating Authority retaining the final decision-making authority. The Court found no illegality or unconstitutionality in the challenged sections.Issue 5:The Court addressed the jurisdictional aspect of the High Court in the matter, considering the constitutional challenge raised by the petitioners. The Court held that the petitioners had failed in their writ petition and dismissed it. However, the petitioners were granted one month to approach the NCLAT, Chennai for redressal of their grievances, and the implementation of Ext.P11 was deferred for a month. The Court clarified that the Adjudicating Authority had the final decision-making power in Insolvency Resolution Process matters, and the Resolution Professional's role was advisory in nature.