2025 (1) TMI 82 - HC - IBC

Company fails to appeal NCLT order within 45-day limit under IB Code Section 61, loses money laundering stay

Union Of India Versus M/s Udaipur Entertainment World Pvt. Ltd., Anup Jain, Balkrishan Upadhyay, Akshay Kavdia, Alok Jain, Ankit Laddha, Dr. A.R. Gupta, Arti Singhvi, Ashok Jain, Mahipal Singh, Gourav Nalwaya, Himmat Mehta, Indu Arora, Kamal Singhvi, Kamla Jain, Mahendra Chand Singhvi, Manju Sarupriya, Nidhi Chittora, Preeti Mehta, Raj Kumar Choudhary, Roshan Ara Sheikh, Sarita Rajdeo, Subhash Chandra Jain, Sulabh Jain, Suman Dwivedi, Nitin Dungarwal, Neehal Mahamulal Pathan Resolution Profession

The Rajasthan HC vacated a stay order in a money laundering case involving NCLT jurisdiction. The court found that the petitioner was aware of NCLT Mumbai ... Maintainability of petition - availability of alternative remedy - Money Laundering - territorial jurisdiction of Rajasthan High Court to entertain the writ petition challenging the order of the NCLT, Mumbai - jurisdiction of NCLT, Mumbai to vacate the attachment orders issued by the Enforcement Directorate (ED) under the PMLA, 2002 - vacation of attachment order in exercise of powers under Section 238 of the IB Code read with Rule 11 of the NCLT Rules - petitioner was not made party in the proceedings before the NCLT, Mumbai - violation of principles of natural justice. Violation of principles of natural justice - HELD THAT:- The order dated 27.09.2023 was passed by the High Court of Bombay after hearing and in presence of the counsel for ED but no such argument, which was raised herein as referred in the stay order dated 06.07.2023 was made by the counsel for ED, rather even after dismissal of the writ petition with aforesaid observations, the order dated 27.09.2023 was not put to challenge by the ED in any manner. It is not worthy that the SLPs preferred against the judgment and order dated 27.09.2023 have also been dismissed by the Hon'ble Supreme Court in NARESH SUNDARLAL JAIN VERSUS UDAIPUR ENTERTAINMENT WORLD PRIVATE LIMITED & ANR. [2023 (10) TMI 1478 - SC ORDER]. Further, a perusal of stay order dated 06.07.2023 also reveals that counsel for petitioner strongly raised another point that the petitioner was not impleaded as party in the CIRP before the NCLT, Mumbai and the order dated 24.02.2022 has been passed by the NCLT, Mumbai behind back of the petitioner, which suffers from blatant violation of the principles of natural justice. In respect of such plea of petitioner, for violation of principles of natural justice, this Court, having considered the rival contentions of counsel for both sides and gone through the undisputed documents on record, prima facie, finds that the petitioner was well aware about the pending proceedings before the NCLT, Mumbai under the IB Code - It is noteworthy that the ED also replied one letter and e-mail dated 22.06.2021, through its reply letter dated 25.06.2021 to the resolution professional. Thus, such material on record explicitly reflects that the petitioner cannot make out a case to the effect that petitioner was not aware about proceedings pending before the NCLT, Mumbai, at the instance of respondents under the IB Code and further, this factual aspect has also not been disputed by the counsel appearing for and on behalf of petitioner. Thus, prima facie, it appears that the petitioner cannot take resort of the violation of principles of natural justice and cannot plead unawareness to the proceedings before the NCLT, Mumbai and the order dated 24.02.2022 passed therein. Therefore, this Court is prima facie of the opinion that in such view of the undisputed factual matrix, the petitioner cannot be allowed to take a pretext of non-imleading him as party before the NCLT, Mumbai, rather it is a case where petitioner, knowingly and deliberately, himself did not opt to intervene in the matter and CIRP pending before the NCLT, Mumbai. Maintainability of petition - availability of alternative remedy - HELD THAT:- The petitioner was well aware of the proceedings and the order dated 24.02.2022 passed by the NCLT, Mumbai, yet he did not avail the statutory remedy of filing of appeal against the order dated 24.02.2022 before the NCLAT, Delhi within prescribed period of 45 days (30+15 days), which was available to the petitioner under Section 32 read with Section 61 of the IB Code, 2016. Hence, after losing the available statutory remedy, petitioner has invoked the writ jurisdiction of the High Court by filing the writ petition on 10.03.2023, which has been filed after a delay of about one year from passing of the impugned order dated 24.02.2022 by NCLT. From this angle also, petitioner has no prima facie case to sustain the stay order dated 06.07.2023 and same deserves to be vacated. Power and jurisdiction of the NCLT, to vacate the attachment orders issued by the ED - HELD THAT:- This Court refraining itself to give any findings on such legal issue, at this stage, which may affect merits of the writ petition. However, such legal issue shall be considered and decided whenever the occasion comes to hear the writ petition on merits. Similar is in respect of all other contentions, made by the respective counsels for parties, which also touch to the maintainability and merits of the writ petition, hence, same shall be considered at the time of final hearing of the writ petition. Conclusion - i) The petitioner cannot take resort of the violation of principles of natural justice and cannot plead unawareness to the proceedings before the NCLT, Mumbai and the order dated 24.02.2022 passed therein - ii) The stay order was vacated, and the court directed the petitioner to address the jurisdictional issue and consider converting the writ petition under Article 226 of the Constitution. In the opinion of this Court, stay order dated 06.07.2023 is liable to be vacated and hence, as a final conclusion, the stay order is hereby vacated. The application filed by the respondents under Article 226(3) of the Constitution of India stands allowed and consequentially the stay application of petitioner is hereby dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe judgment primarily addresses the following core legal questions:Whether the Rajasthan High Court has territorial jurisdiction to entertain the writ petition challenging the order of the NCLT, Mumbai.Whether the NCLT, Mumbai had the jurisdiction to vacate the attachment orders issued by the Enforcement Directorate (ED) under the PMLA, 2002.Whether the writ petition filed by the petitioner is maintainable given the availability of an alternative statutory remedy.Whether the stay order dated 06.07.2023 should be vacated considering the alleged violation of principles of natural justice and the subsequent developments in related legal proceedings.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Territorial JurisdictionRelevant Legal Framework and Precedents: Article 227 of the Constitution of India grants the High Court superintendence over all courts and tribunals within its territorial jurisdiction.Court's Interpretation and Reasoning: The court noted the preliminary objection regarding the lack of territorial jurisdiction as the NCLT, Mumbai falls outside the jurisdiction of the Rajasthan High Court.Conclusions: The court allowed the petitioner to file an appropriate application to address the jurisdictional issue.Issue 2: Jurisdiction of NCLT to Vacate Attachment OrdersRelevant Legal Framework and Precedents: Section 238 of the IB Code, 2016, and Section 71 of the PMLA, 2002.Court's Interpretation and Reasoning: The court refrained from making a determination on this issue at this stage, noting that it pertains to the merits of the writ petition.Conclusions: The issue will be considered during the final hearing of the writ petition.Issue 3: Maintainability of the Writ PetitionRelevant Legal Framework and Precedents: Availability of an alternative statutory remedy under the IB Code, 2016.Court's Interpretation and Reasoning: The court noted that the petitioner did not avail the statutory remedy of appeal within the prescribed period, which raises questions about the maintainability of the writ petition.Conclusions: The delay in filing the writ petition and failure to pursue the statutory remedy undermines the petitioner's case.Issue 4: Vacation of Stay OrderRelevant Legal Framework and Precedents: Principles of natural justice and precedents regarding interim reliefs.Court's Interpretation and Reasoning: The court examined the factual matrix, including the petitioner's awareness of the NCLT proceedings and the subsequent dismissal of a related writ petition by the Bombay High Court.Key Evidence and Findings: The court found that the petitioner was aware of the NCLT proceedings and had not disclosed this during the initial stay order application.Conclusions: The stay order dated 06.07.2023 was vacated due to lack of a prima facie case and the petitioner's failure to disclose material facts.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes: 'The petitioner cannot take resort of the violation of principles of natural justice and cannot plead unawareness to the proceedings before the NCLT, Mumbai and the order dated 24.02.2022 passed therein.'Core Principles Established: The importance of pursuing statutory remedies within prescribed timelines and the necessity of full disclosure when seeking interim reliefs.Final Determinations on Each Issue: The stay order was vacated, and the court directed the petitioner to address the jurisdictional issue and consider converting the writ petition under Article 226 of the Constitution.The court's decision emphasizes the procedural requirements and jurisdictional boundaries that litigants must navigate when challenging tribunal orders, particularly in the context of insolvency and money laundering proceedings.