2025 (6) TMI 32 - HC - Companies Law

Corporate Insolvency Resolution: Independent Probe Upheld, Review Petition Rejected, IRP Report Remains Legally Valid and Significant

Suresh Kumari Versus Registrar Of Companies & Ors.

Suresh Kumari Versus Registrar Of Companies & Ors. - 2025:DHC:4669 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this review petition include:Whether the observations recorded in paragraphs (62), (70), and (75)(vii) of the earlier order dated 20.02.2025 create an erroneous impression that the Insolvency Resolution Professional (IRP) Report dated 09.08.2023 is a worthless or legally ineffective document.Whether the review petition discloses any error apparent on the face of the record warranting reconsideration of the earlier order under Section 114 read with Order XLVII Rule 1 and Section 151 of the Code of Civil Procedure, 1908.The scope and legal effect of the IRP Report dated 09.08.2023, including whether its findings are conclusive or require independent examination.The jurisdictional competence of the National Company Law Tribunal (NCLT) to adjudicate on the legality, probative value, and implications of the IRP Report and related proceedings under the Insolvency and Bankruptcy Code (IBC).The appropriateness of directions given to the Registrar of Companies (ROC) and other authorities to investigate the ACE Group of Companies uninfluenced by the IRP Report findings.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Whether the IRP Report dated 09.08.2023 is rendered useless or legally ineffective by the observations in the earlier orderRelevant legal framework and precedents: The Insolvency and Bankruptcy Code, 2016, particularly provisions relating to the appointment and functions of the IRP, and procedural rules under the Code of Civil Procedure for review petitions. The Court also referenced precedents including Arun Dev Upadhyaya v. Integrated Sales Service Limited and Swiss Ribbons Pvt. Ltd. v. Union of India regarding the maintainability of review petitions and the scope of judicial review.Court's interpretation and reasoning: The Court carefully examined the language of paragraphs (62), (70), and (75)(vii) of the earlier order. It found that nowhere in these paragraphs or the order as a whole was the IRP Report characterized as 'waste paper,' 'useless,' or devoid of legal effect. Instead, the Court recognized the report as a significant document that has been considered in multiple forums, including the Supreme Court, the High Court, and the NCLT.Key evidence and findings: The IRP Report was prepared pursuant to directions by the NCLT and involved verification of claims of secured and unsecured creditors. The report has been subject to scrutiny in various judicial proceedings, indicating its relevance.Application of law to facts: The Court emphasized that the IRP Report's findings are not conclusive or final. The report serves as a triggering document for further inquiry but requires independent examination and corroboration through additional evidence and materials.Treatment of competing arguments: The petitioner argued that the Court's observations undermined the report's credibility, while respondents contended that the review petition lacked merit and did not disclose any error apparent on record. The Court sided with the respondents, clarifying the actual intent of the observations.Conclusions: The Court concluded that the IRP Report retains legal relevance and is not rendered ineffective by the earlier order. The impression that it is useless is a misreading of the Court's observations.Issue 2: Maintainability of the review petition and presence of any error apparent on the face of the recordRelevant legal framework and precedents: Section 114 read with Order XLVII Rule 1 and Section 151 of the Code of Civil Procedure, 1908 govern review petitions. The threshold for review is the existence of an error apparent on the face of the record. The Court relied on authoritative decisions which restrict review to such errors and do not permit re-agitation of settled issues.Court's interpretation and reasoning: On examination, the Court found that the review petition did not disclose any such error apparent on the face of the record. The petitioner's grievance stemmed from a misinterpretation of the Court's prior observations rather than any factual or legal mistake.Key evidence and findings: The Court reviewed the pleadings and submissions, including replies filed by respondents and written submissions by an association of homebuyers, and found no basis to disturb the earlier order.Application of law to facts: The Court applied the strict standard for review petitions and held that the petition failed to meet the criteria for review.Treatment of competing arguments: The petitioner urged reconsideration based on perceived injustice, but the Court emphasized the need for finality and adherence to procedural safeguards.Conclusions: The review petition was dismissed for lack of any error apparent on the face of the record.Issue 3: Jurisdiction and role of the NCLT regarding the IRP Report and related insolvency proceedingsRelevant legal framework and precedents: The Insolvency and Bankruptcy Code, 2016, particularly Sections 45 and related provisions governing the powers and duties of the IRP and the jurisdiction of the NCLT over insolvency resolution proceedings.Court's interpretation and reasoning: The Court recognized that the NCLT is the appropriate forum to examine the legality, probative value, and findings of the IRP Report. The NCLT has been seized of the matter following Supreme Court directions and is empowered to assess the report in light of all materials presented.Key evidence and findings: The corporate insolvency proceedings of the respondent company have been revived by the Supreme Court, and the NCLT has jurisdiction to evaluate the IRP Report and related issues.Application of law to facts: The Court declined to make any conclusive pronouncements on the IRP Report's findings, deferring to the NCLT's specialized jurisdiction.Treatment of competing arguments: The petitioner sought judicial endorsement of the IRP Report's findings, while respondents highlighted the ongoing NCLT proceedings. The Court balanced these by affirming the NCLT's primacy in these matters.Conclusions: The NCLT is the competent authority to decide on the IRP Report's validity and the related insolvency issues.Issue 4: Directions to investigate the ACE Group of Companies independently of the IRP Report findingsRelevant legal framework and precedents: Sections 206, 209, 216, 217, and 224 of the Companies Act, 2013, which empower the Registrar of Companies and other authorities to investigate company affairs and financial irregularities.Court's interpretation and reasoning: The Court modified earlier directions to clarify that the investigation against the ACE Group of Companies should proceed uninfluenced by the IRP Report findings. This ensures an independent and unbiased inquiry into alleged financial malpractices.Key evidence and findings: The IRP Report triggered the investigation but is not conclusive evidence. Independent examination and unearthing of relevant material are necessary to substantiate any wrongdoing.Application of law to facts: The Court ensured that statutory powers under the Companies Act are exercised on an independent basis, maintaining procedural fairness.Treatment of competing arguments: The petitioner sought reliance on the IRP Report, whereas the Court emphasized the need for independent evidence-based investigation.Conclusions: Investigations shall be conducted independently of the IRP Report findings, preserving the integrity of the inquiry process.3. SIGNIFICANT HOLDINGS'It has nowhere been observed by the Court that the IRP Report dated 09.08.2023 is in any manner a waste paper, useless or has no legal effect, or that the same can never be acted upon.''The issue as to whether or not any actions or inactions on the part of the IRP are within or outside the scope of Section 45 and other relevant provisions of the IBC; and additionally, whether or not the findings recorded therein are substantiated or corroborated in any manner, are matters that clearly lie in the domain of the NCLT.''The findings contained in the report are supposed to be independently examined and relevant material should be unearthed to substantiate the role of the concerned companies and nexus, if any, in the alleged financial malpractices.''Respondent Nos. 1 & 2 shall investigate the matter against the ACE Group of Companies uninfluenced by the findings in the report of the IRP dated 09.08.2023 in accordance with Sections 206, 209, 216, 217 and 224 of the Companies Act, 2013.'Core principles established include:The IRP Report is a significant but not conclusive document; its findings require independent judicial or quasi-judicial scrutiny.The NCLT is the competent forum to adjudicate on the legality and probative value of the IRP Report within insolvency proceedings.Review petitions under the Code of Civil Procedure require demonstration of error apparent on the face of the record and cannot be used to re-litigate issues or correct mere misinterpretations.Investigations by statutory authorities must be conducted independently, uninfluenced by preliminary reports, ensuring procedural fairness and integrity.The Court reaffirms the principle of finality in judicial orders while allowing the specialized tribunal (NCLT) to resolve complex insolvency matters.Final determinations on each issue were:The review petition was dismissed for failure to disclose any error apparent on the face of the record.The IRP Report retains legal relevance and is not rendered ineffective by the earlier order.The NCLT shall examine the IRP Report's findings and related insolvency issues.The investigation into the ACE Group of Companies shall proceed independently of the IRP Report.