2025 (12) TMI 378 - HC - Companies Law

Writ for consolidation of DRT, DRAT, NCLT cases under Articles 226/227 dismissed; IBC moratorium sufficient

Sanjeev Krishan Sharma Versus Punjab National Bank & Anr.

The HC dismissed the writ petition seeking supervisory directions for consolidation and expeditious disposal of interim applications pending before ... Invocation of supervisory jurisdiction of this Court, seeking directions for the expeditious adjudication and, preferably, after consolidation, of two Interim Applications - Petitioner would contend that the Petitioner is being compelled to face parallel and overlapping proceedings before two independent judicial fora - HELD THAT:- With regard to the general scope and limits of the High Court’s powers and discretion under Articles 226 and 227 of the Constitution in relation to proceedings arising out of the DRT and DRAT, the Hon’ble Supreme Court, in M.S. Sanjay v. Indian Bank [2025 (1) TMI 1676 - SUPREME COURT], summarized the governing principles for the exercise of such jurisdiction. A three-Judge Bench of the Hon’ble Supreme Court in PHR Invent Educational Society v. UCO Bank [2024 (4) TMI 466 - SUPREME COURT (LB)] emphatically reiterated that the High Courts should ordinarily refrain from entertaining petitions arising from the proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI] and the Recovery of Debts and Bankruptcy Act, 1993 [RDB Act], since both statutes constitute self-contained codes providing efficacious alternative remedies. The Apex Court clarified that the writ jurisdiction may be invoked only in exceptional contingencies such as lack of jurisdiction, violation of fundamental judicial procedure, reliance on repealed provisions, or breach of natural justice. The Hon’ble Supreme Court in Celir LLP v. Bafna Motors (Mumbai) (P) Ltd. [2023 (10) TMI 48 - SUPREME COURT]. reiterated that the High Courts should ordinarily refrain from exercising their writ jurisdiction where effective and efficacious statutory remedies exist, particularly under specialized legislations such as the SARFAESI Act and the RDB Act. Entertaining writ petitions without exhaustion of such remedies not only frustrates the legislative intent but also adversely impacts the recovery rights of banks and financial institutions. Proceedings under the SARFAESI Act or the RDB Act and those under the IBC operate within distinct statutory frameworks, each serving separate purposes, being governed by independent procedural mechanisms. Once proceedings under the IBC are admitted by the Adjudicating Authority against an entity or individual, a statutory moratorium automatically comes into effect, during which proceedings before other fora cannot continue. Accordingly, the apprehension of conflicting findings or parallel adjudication is wholly unfounded - If the IBC proceedings against the Petitioner have been duly admitted by the NCLT in accordance with law, they shall necessarily proceed in terms of the statutory mandate. Conversely, if the Petitioner’s contentions bear merit and the said proceedings are found to be in violation of the statutory scheme, the Petitioner is well within his right to raise appropriate objections before the NCLT and, if aggrieved, to avail of the appellate remedies as provided under the IBC. In such an eventuality, and subject to the outcome thereof, only the proceedings before the DRT would ultimately survive in accordance with law. The Petitioner has failed to demonstrate any violation of fundamental rights, statutory mandate, or principles of natural justice that would warrant the invocation of the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution - The conduct of the Petitioner in filing the present Petition, followed by a frivolous application seeking transfer of the matter from a duly constituted Division Bench to a Single Bench, is a blatant abuse of the process of law. It reflects not only procedural impropriety but also an attempt to manipulate the forum of adjudication. Such practice cannot be countenanced, for it undermines the integrity of the judicial process. The Petition, therefore, deserves to be dismissed with costs. Petition dismissed with costs of Rs. 1,00,000/- upon the Petitioner, to be deposited in favour of the Poor Patients’ Fund under the aegis of All India Institute of Medical Sciences (AIIMS), New Delhi, within two weeks from today. In case of default, the Registry is directed to list the matter before this Court after the expiry of two weeks for passing appropriate orders in this regard. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether a petition under Articles 226 and 227 of the Constitution is maintainable to seek directions for consolidation and expeditious disposal of interim applications pending before Debts Recovery Tribunals, without first availing the remedies provided under the Recovery of Debts and Bankruptcy Act, 1993 and allied statutes. (2) Whether the High Court, in exercise of its writ and supervisory jurisdiction, can stay or interdict personal insolvency proceedings initiated under Section 95 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, on the ground of alleged multiplicity of proceedings and possible conflicting decisions vis-à-vis DRT proceedings based on the same debt. (3) Whether grievances regarding discharge of a co-guarantor pursuant to settlement before the DRT, and the alleged resultant discharge or reduction of the petitioner's liability under the Indian Contract Act, 1872, can be examined in writ jurisdiction without resort to the statutory appellate remedies. (4) Whether the application seeking transfer of the writ petition from the Division Bench to a Single Bench, in the face of an express roster assigning DRT-related writ petitions to the concerned Division Bench, amounted to impermissible forum shopping and abuse of process warranting imposition of costs. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Maintainability of writ for consolidation and expeditious disposal of IAs pending before DRTs Legal framework (as discussed): The Court examined the scope of Articles 226 and 227 of the Constitution with reference to the law laid down by the Supreme Court in decisions including M.S. Sanjay v. Indian Bank, PHR Invent Educational Society v. UCO Bank, Celir LLP v. Bafna Motors (Mumbai) (P) Ltd., and earlier precedents such as United Bank of India v. Satyawati Tondon and Varimadugu Obi Reddy v. B. Sreenivasulu. These authorities reiterate that the SARFAESI Act and the RDB Act are self-contained codes with comprehensive remedies including appeals, and that High Courts should ordinarily decline to entertain writ petitions where efficacious statutory remedies exist, save in narrowly defined exceptional cases (lack of jurisdiction, defiance of fundamental judicial procedure, reliance on repealed provisions, or total violation of natural justice). Interpretation and reasoning: The Court noted that the petitioner did not challenge any specific order of the DRT or DRAT but instead sought directions for expeditious adjudication and consolidation of interim applications pending before DRT-II and DRT-III. The Court found, on examination of the DRT record, that although the matters had been listed on multiple dates, the petitioner had neither filed any application for early hearing nor made any discernible effort before the DRT to press for expeditious disposal; rather, adjournments had been sought and counsel had been absent on some occasions. The Court held that mechanisms for transfer and consolidation of proceedings are embedded within the RDB Act/SARFAESI framework and that the petitioner had not invoked those mechanisms. The Court emphasized that, under Section 20 of the RDB Act, an efficacious appellate remedy lies to the DRAT if the petitioner is aggrieved by any order or inaction. Seeking, through writ jurisdiction, a relief that squarely falls within the domain of the specialized fora, without first approaching those fora, was held to be an attempt to bypass the statutory scheme. In the absence of any pleaded or established exceptional ground (such as lack of jurisdiction or breach of natural justice), the petition was characterized as an abuse of process. Conclusions: The Court held that the writ petition, to the extent it sought directions for consolidation and/or expeditious disposal of interim applications pending before the DRTs, was not maintainable and constituted a clear abuse of the process of law. The petitioner ought to have pursued appropriate relief before the DRT/DRAT under the statutory framework rather than invoking Articles 226 and 227. Issue (2): Power of High Court to stay or interdict personal insolvency proceedings under Section 95 IBC pending before NCLT Legal framework (as discussed): The Court referred to Supreme Court decisions emphasizing that the Insolvency and Bankruptcy Code, 2016 is a complete code with its own checks, balances, remedies and appeals, and that High Courts should ordinarily refrain from interfering with IBC proceedings. Reliance was placed on Mohd. Enterprises (Tanzania) Ltd. v. Farooq Ali Khan and Bank of Baroda v. Farooq Ali Khan, where the Supreme Court deprecated High Court interference in IBC proceedings, and clarified the statutory scheme under Sections 95-100 IBC (including the non-adjudicatory role of the NCLT at the stage of appointment of resolution professional and preparation of the report under Section 99). The Court reiterated that when a specialized Tribunal is constituted to determine questions of law and fact within a complete statutory regime, judicial review must not supplant that adjudicatory process. Interpretation and reasoning: The petitioner sought a stay of personal insolvency proceedings under Section 95 IBC, alleging multiplicity and risk of conflicting decisions due to parallel DRT proceedings concerning the same debt and guarantee. The Court found that no material had been placed on record regarding the precise scope, stage or nature of the NCLT proceedings, nor was it shown that any application seeking appropriate relief had been filed before the NCLT. The Court held that such generic apprehension of overlapping or contradictory findings, without substantiation, cannot justify invocation of writ jurisdiction. It further clarified that proceedings under the SARFAESI/RDB Acts and under the IBC operate in distinct statutory fields with independent purposes and mechanisms. Once IBC proceedings are admitted, a statutory moratorium regime operates, regulating the continuation of other proceedings, and the statutory scheme itself addresses the interface between different fora. Any objection to the maintainability, limitation, existence or enforceability of the debt or guarantee in the IBC proceedings must be raised before the NCLT and, if necessary, before the National Company Law Appellate Tribunal, as the Code provides a complete hierarchy of remedies. Interdicting those proceedings at the writ stage would improperly pre-empt the statutory decision-making process of the Adjudicating Authority. Conclusions: The Court held that the prayer to stay or otherwise interdict the personal insolvency proceedings under Section 95 IBC before the NCLT was devoid of merit and not maintainable in writ jurisdiction. The IBC being a complete code, and the petitioner having adequate remedies before the NCLT and NCLAT, the High Court declined to interfere and expressly held that granting such relief would amount to impermissible judicial interference with the statutory IBC framework. Issue (3): Challenge to discharge of co-guarantor and alleged discharge of petitioner's guarantee under the Indian Contract Act, 1872 Legal framework (as discussed): The petitioner relied on Sections 133, 134, 139 and 141 of the Indian Contract Act, 1872 to contend that the unilateral release of a co-guarantor and his mortgaged property by the creditor, pursuant to settlement, resulted in discharge or reduction of the petitioner's liability as a co-surety. The respondents contested this, asserting that guarantees were separate and that the settlement did not in law discharge the petitioner. Interpretation and reasoning: The Court declined to adjudicate upon the substantive contractual and statutory questions relating to the effect of the settlement with the co-guarantor and the alleged discharge of the petitioner's guarantee. It noted that the discharge of the co-guarantor had been recorded by DRT-III by an order dated 08.04.2024 and that if the petitioner was aggrieved by that order, he had an efficacious statutory appellate remedy under the governing legislation. The Court held that writ jurisdiction cannot be used to undermine or bypass that appellate mechanism or to re-open issues of fact and mixed questions of law and fact (such as the effect of the compromise on other guarantors) which fall squarely within the jurisdiction of the DRT/DRAT. Accordingly, these contentions could not be entertained in the present writ proceedings. Conclusions: The Court held that any grievance regarding the discharge of the co-guarantor and the legal consequences thereof on the petitioner's liability must be agitated before the appropriate DRT/DRAT or within the IBC fora, as the case may be. Such issues were not examined on merits in writ proceedings in view of the available statutory remedies, and the related plea in the writ petition was rejected as misconceived in this forum. Issue (4): Application for transfer from Division Bench to Single Bench and allegation of forum shopping Legal framework (as discussed): The Court examined the sitting roster of the High Court effective from 12.08.2025, which specifically allocated 'Writ Petitions (AIIFR, BIFR, DRT, DRAT & Lokayukta)' to the concerned Division Bench. The petitioner invoked Article 215 of the Constitution and the Delhi High Court Act, 1966 to seek transfer of the writ petition from the Division Bench to a Single Bench on the basis of a later roster. Interpretation and reasoning: The Court noted that the substantive prayers in the writ petition related to proceedings before DRTs and therefore directly fell within Item No. 7 of the operative roster expressly assigning such matters to the concerned Division Bench. The petitioner had not challenged the legality or validity of the roster itself. The Court observed that, immediately after the Bench expressed reservations on maintainability on the first listing, the petitioner questioned the Bench's jurisdiction and sought transfer to a Single Bench. The Court characterized this conduct, against the backdrop of the clear roster allocation, as a calculated attempt to engage in forum shopping, motivated by apprehension of an unfavourable outcome rather than any genuine jurisdictional defect. Such conduct, in the Court's view, undermined the integrity of the judicial process and amounted to abuse of process. Conclusions: The Court rejected the transfer application as frivolous and held that the attempt to shift the matter from a duly rostered Division Bench to a Single Bench constituted impermissible forum shopping and abuse of process. Taking into account the overall conduct of the petitioner-including the filing of the misconceived writ petition and the transfer application-the Court imposed costs of Rs. 1,00,000/- to be deposited in the Poor Patients' Fund of AIIMS, with directions for listing in case of non-compliance. Overall disposition The Court concluded that no violation of fundamental rights, statutory mandate, or principles of natural justice had been demonstrated to justify exercise of extraordinary jurisdiction under Articles 226 and 227. The writ petition and all pending applications were dismissed, with costs, as misconceived and as an abuse of the process of law.