Article 227 invoked to correct NCLT territorial jurisdiction error; orders quashed, proceedings transferred to proper Bench

HC held that despite availability of an appellate remedy, its supervisory jurisdiction under Article 227 could be invoked where the Tribunal acted without jurisdiction. Relying on precedents affirming judicial review as part of the Constitution's basic structure, HC found that the concerned NCLT lacked territorial jurisdiction and that exclusive jurisdiction lay with NCLT, Cuttack Bench. The corporate debtor's failure to contest proceedings did not amount to a valid waiver of objection to territorial jurisdiction. Finding a manifest jurisdictional error and grave injustice, HC declared the revisional application maintainable, quashed the impugned orders dated 5.9.2019 and 5.11.2019, and directed transfer of proceedings to NCLT, Cuttack.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the supervisory jurisdiction under Article 227 of the Constitution could be invoked against orders of the National Company Law Tribunal despite availability of an appeal under section 61 of the Insolvency and Bankruptcy Code, 2016.

1.2 Whether the National Company Law Tribunal, Kolkata Bench had territorial jurisdiction under section 60(1) of the Insolvency and Bankruptcy Code, 2016 to admit the section 7 application after the registered office of the corporate debtor was shifted to Odisha and the Cuttack Bench had started functioning.

1.3 Whether objection to territorial jurisdiction of the National Company Law Tribunal, Kolkata Bench was waived by the corporate debtor by its non-appearance despite alleged knowledge of the proceedings, and whether section 21 of the Code of Civil Procedure, 1908 applied.

1.4 Whether the admission order passed by the National Company Law Tribunal was vitiated by fraud and suppression of the fact of shifting of the registered office, rendering the proceedings a nullity.

1.5 Consequentially, whether the ex parte admission and subsequent order refusing recall were liable to be set aside and the proceedings transferred to the National Company Law Tribunal, Cuttack Bench.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Invocability of Article 227 jurisdiction despite alternative remedy under section 61 of the Code

Legal framework

2.1 The Court examined Articles 226 and 227 of the Constitution, and relied on precedent holding: (i) judicial review and superintendence are part of the basic structure; (ii) powers under Articles 226/227 cannot be ousted by special statutes; (iii) alternative remedy is a rule of discretion, not a bar, especially where there is lack of jurisdiction, manifest error, or violation of natural justice.

Interpretation and reasoning

2.2 Based on authorities including decisions in Embassy Property Developments, L. Chandra Kumar, Surya Dev Rai, Whirpool and others, the Court held that High Courts may interfere notwithstanding an alternative appellate remedy where: (a) the tribunal acts without jurisdiction or in excess of jurisdiction; (b) there is manifest error or patent illegality; or (c) grave injustice or violation of law is apparent on the face of the record.

2.3 The Court noted that the jurisdiction of the appellate forum under section 61 does not curtail the constitutional power of superintendence, and that Article 227 may be invoked to correct illegal assumption of jurisdiction and abuse of power by subordinate tribunals.

2.4 The Court held that in the present case the complaint was not of a mere erroneous order but of an order passed in patent disregard of section 60(1) of the Code and in the face of clear material demonstrating lack of territorial jurisdiction, thus going to the root of competence of the tribunal.

Conclusions

2.5 The revisional application under Article 227 was held to be maintainable notwithstanding the appeal provision under section 61 of the Code, since the challenge was based on illegal assumption of jurisdiction, constituting a nullity and warranting supervisory interference.

Issue 2: Territorial jurisdiction of NCLT, Kolkata under section 60(1) of the Code after shifting of registered office and commencement of Cuttack Bench

Legal framework

2.6 Section 60(1) of the Insolvency and Bankruptcy Code, 2016 provides that the adjudicating authority for insolvency resolution and liquidation of corporate persons is the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located.

2.7 Section 238 of the Code gives the Code overriding effect over inconsistent laws. The Court also noted that the Code has been held to be a complete code in itself.

Interpretation and reasoning

2.8 It was undisputed on the materials that: (a) the registered office of the corporate debtor was shifted from West Bengal to Odisha by special resolution and order of the Regional Director dated January 16, 2018; (b) the Registrar of Companies, Cuttack issued a certificate of registration on February 7, 2018 reflecting such change; and (c) the Ministry of Corporate Affairs had established NCLT, Cuttack Bench with territorial jurisdiction over registered offices in Odisha, and the Bench started functioning from March 18, 2019.

2.9 The Court noted that the corporate debtor had sought and obtained a "no objection" from the financial creditor for shifting its registered office to Odisha, and such fact was known to the creditor before institution and during pendency of the section 7 proceedings.

2.10 Relying on section 60(1), the Court held that territorial jurisdiction under the Code is not a matter of mere convenience or choice as under sections 15-20 CPC, but is statutorily fixed by the location of the registered office, conferring exclusive jurisdiction on the NCLT Bench within whose territory the registered office is situated.

2.11 The Court found that even if on the date of filing of the section 7 application the Kolkata Bench could be approached on the basis of the then functioning structure, once the Cuttack Bench commenced functioning with jurisdiction over Odisha, the Kolkata Bench ceased to have jurisdiction over matters relating to corporate debtors whose registered offices were in Odisha.

2.12 By analogy to the principle in Sardar Hasan Siddiqui that upon constitution of a new regional authority, pending matters automatically stand transferred and the old authority becomes functus officio for that region, the Court held that NCLT, Kolkata could not validly proceed with or pass orders in respect of a corporate debtor whose registered office stood within the jurisdiction of NCLT, Cuttack after that Bench had become functional.

Conclusions

2.13 The Court held that, on September 5, 2019, the date of admission, NCLT, Kolkata did not have territorial jurisdiction under section 60(1) to entertain and admit the section 7 application against the corporate debtor whose registered office was in Odisha; NCLT, Cuttack had exclusive jurisdiction.

2.14 The admission order was therefore passed in clear violation of section 60(1) and was without jurisdiction.

Issue 3: Applicability of section 21 CPC and waiver of objection to territorial jurisdiction by non-appearance / alleged knowledge

Legal framework

2.15 Section 21 of the Code of Civil Procedure, 1908 embodies the principle that objections as to place of suing (territorial or pecuniary jurisdiction) under sections 15-20 CPC must be taken at the earliest, failing which they are deemed waived.

Interpretation and reasoning

2.16 The Court emphasized that in civil suits a plaintiff can choose between forums under sections 15-20 CPC, which is why section 21 treats objections to territorial jurisdiction as technical and subject to waiver if not raised in time.

2.17 In contrast, under section 60(1) of the Code, territorial jurisdiction of NCLT is not discretionary or optional but is exclusively fixed by statute based on the location of the registered office. The provisions of sections 15-20 CPC regarding "place of suing" are therefore inapplicable to insolvency proceedings, in view of section 238 and the complete code nature of the IBC.

2.18 The Court rejected the financial creditor's reliance on section 21 CPC and case law on waiver of territorial objection, holding that those principles are founded on the CPC regime and are not attracted where a special statute like the Code prescribes a specific and exclusive forum.

2.19 The Court further held on facts that the corporate debtor never participated in the proceedings before NCLT, Kolkata and never submitted to its jurisdiction. The recall application was filed promptly upon information of the admission order from the interim resolution professional.

2.20 The Court distinguished precedents cited by the creditor where parties had fully participated in the proceedings and even pursued appeals before raising jurisdictional objections, holding that those were cases of active submission to jurisdiction, which was absent here.

2.21 The Court also relied on the principle that a tribunal of limited jurisdiction cannot acquire jurisdiction by consent, waiver, acquiescence or approval; if jurisdiction is lacking by statute, any decision is a nullity.

Conclusions

2.22 Section 21 CPC has no application to proceedings under the Insolvency and Bankruptcy Code where territorial jurisdiction is governed by section 60(1) and is exclusive.

2.23 The corporate debtor did not waive objection to territorial jurisdiction by non-appearance, and no amount of knowledge or acquiescence could confer jurisdiction on NCLT, Kolkata contrary to section 60(1).

2.24 The view of NCLT, Kolkata that objection to territorial jurisdiction was waived and had become technical and non-justiciable was held to be erroneous in law.

Issue 4: Fraud, suppression of material facts and nullity of NCLT proceedings

Interpretation and reasoning

2.25 The Court noted the following factual aspects:

(a) The corporate debtor had, prior to shifting its registered office, sought "no objection" from the financial creditor, and such consent was granted.

(b) The certificate from the Registrar of Companies, Cuttack clearly evidenced shifting of the registered office from West Bengal to Odisha with effect from the order of the Regional Director dated January 16, 2018.

(c) Despite knowledge of such shifting, the financial creditor's section 7 application continued to mention the registered office address as being in Kolkata, thereby invoking the jurisdiction of NCLT, Kolkata.

2.26 The Court found that the creditor suppressed the fact of shifting of the registered office and mis-stated the registered office address in the application, thereby wrongfully invoking the jurisdiction of NCLT, Kolkata.

2.27 The Court held that records revealed awareness on the part of the creditor of the correct registered office and the granting of "no objection", as subsequently acknowledged by NCLT itself in its order dated October 14, 2019. This fortified the inference of suppression and misrepresentation.

2.28 The Court, relying on established principles that fraud vitiates judicial proceedings, accepted the contention that the admission order dated September 5, 2019 was obtained by suppression and fraud and was therefore a nullity.

Conclusions

2.29 The Court held that the proceedings leading to the admission order suffered from suppression of material facts and misrepresentation as to the registered office, resulting in illegal assumption of jurisdiction.

2.30 The admission order was declared to be a nullity, liable to be set aside in exercise of supervisory jurisdiction.

Issue 5: Consequential relief - setting aside NCLT orders and transfer to NCLT, Cuttack Bench

Interpretation and reasoning

2.31 Having found that NCLT, Kolkata lacked territorial jurisdiction under section 60(1) and that the admission order was obtained through suppression, the Court held that NCLT, Cuttack had exclusive jurisdiction over insolvency proceedings of the corporate debtor.

2.32 Following the principle that on constitution of the competent regional authority pending matters automatically shift to that authority and that the earlier authority becomes functus officio for that region, the Court held that the proper course was to set aside the impugned orders and direct transfer of the insolvency proceedings to the competent Bench.

2.33 The Court also relied on precedent that, in exercise of Article 227, the High Court can itself correct jurisdictional errors and afford effective relief, rather than merely remanding the matter, where the legal position and facts are clear.

Conclusions

2.34 The revisional application was allowed.

2.35 The ex parte admission order dated September 5, 2019 and the order dated November 5, 2019 refusing recall were set aside and quashed.

2.36 The National Company Law Tribunal, Kolkata Bench was directed to transfer the insolvency proceedings to the National Company Law Tribunal, Cuttack Bench within two weeks from the date of communication of the High Court's order.

2.37 No order as to costs was made.

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