TMI Blog2021 (4) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... iquidation Estate of a Corporate Debtor making such properties answerable to other liabilities of the Corporate Debtor as well? HELD THAT:- If an efficacious alternate statutory remedy is available to the petitioner to challenge the impugned order of the Tribunal, this Court shall not ordinarily entertain a writ petition. The fact that an appeal under Section 61 of the IBC is available to the petitioner, is not controverted by the petitioners. The issue of maintainability of writ petitions against orders of NCLT passed under IBC 2016, is no more res integra. In M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. VERSUS STATE OF KARNATAKA OTHERS [ 2019 (12) TMI 188 - SUPREME COURT] the Hon ble Apex Court considered the distinction between lack of jurisdiction of a Tribunal and a wrongful exercise of available jurisdiction and held that when Article 226 is sought to be invoked bypassing a statutory alternative remedy, the High Court should certainly take into account the distinction between the lack of jurisdiction and wrongful exercise the available jurisdiction. The Bank has security interests in the properties involved, under two heads. The properties are held by the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SATHYANARAYANA, SRI.P.VIJAYAKUMAR, ASGI, SRI.SHINU J.PILLAI, SMT.S.SUJA, SMT.MARIYA RAJAN, SMT.AISWARYA JAMES AND P.R.AJITH KUMAR, CGC JUDGMENT All these three writ petitions are filed challenging an interim order dated 01.02.2021 in MA No.76/KOB/2020 in MA/30/KOB/2019 in IA/71/KOB/2019 in IBA/240/2019 dated 01.02.2021 of the National Company Law Tribunal, Kochi Bench. 2. The 1st respondent-Union Bank of India extended various credit facilities to a Company named M/s.Raihan Healthcare Private Limited. The petitioners in the three writ petitions stood as guarantors and mortgaged their properties to the Bank as security for the advances to the Company. The first petitioner in WP(C) No.3872/2021 was Chairman and Managing Director of the Company. The Bank filed O.A. No.474/2018 before the Debt Recovery Tribunal-II, Ernakulam to recover dues from the Company. 3. While the O.A. was pending, the Bank invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) and filed application IBA/240/2019 before the National Company Law Tribunal (NCLT) for initiating Corporate Insolvency Resolution Process (CIRP) against the Company. The application was admitted by the NCLT o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Insolvency and Bankruptcy Code 2016 contending that the lease executed by the petitioners in favour of the Corporate Debtor is invalid in view of Section 65A of the Transfer of Property Act and therefore the mortgage of the land in favour of the Bank is also invalid. 7. The learned counsel for the petitioners argued that the Liquidator filed the application invoking Sections 36 and 60(5) of the Insolvency and Bankruptcy Code 2016. Section 36(4)(c) provides that personal assets of a shareholder or the partner of a Corporate Debtor shall not form part of the Liquidation Estate. The assets of the petitioners cannot be treated as assets of the Corporate Debtor. Assets of the petitioner would not automatically form the assets of the Corporate Debtor. As the application filed by the Liquidator was to transfer the assets of the petitioners, there is an inherent lack of jurisdiction for the Tribunal to proceed and pass an order therein. 8. The learned counsel for the petitioner further pointed out that Section 60(2) of the Insolvency and Bankruptcy Code 2016 provides that when an insolvency proceeding is pending against the Corporate Debtor, insolvency proceedings against personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions or for effective liquidation of the Corporate Debtor. The IBC provides for an effective alternate remedy of filing appeal against the orders of the Tribunal by invoking Section 61. When an appeal is permitted under Section 61 of the IBC, this Court should not interfere with the liquidation proceedings. The learned Senior Counsel relied on the judgment of the Apex Court in Sulochana Gupta and another v. RBG Enterprises Private Ltd. (2020 SCC OnLine KER 4153). 13. The learned counsel representing the Liquidator opposed the writ petition and urged that the writ petition is not maintainable. Citing the judgment of the Apex Court in Gujarat Urja Vikas Nigam Limited v. Amit Gupta and Others (2021 SCC OnLine SC 194), the learned counsel argued that even if the case involves an element of public law, the issues raised by the petitioners can be decided by NCLT and NCLAT and not by this Court in exercise of the powers under Article 226. The learned counsel stated that in view of Section 238 of the IBC, the provisions of the Code has overriding effect over all other laws in force and in any instrument having the force of law. The learned counsel relied on the judgments of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited v. State of Karnataka and Others [(2020) 13 SCC 308] the Hon ble Apex Court considered the distinction between lack of jurisdiction of a Tribunal and a wrongful exercise of available jurisdiction and held that when Article 226 is sought to be invoked bypassing a statutory alternative remedy, the High Court should certainly take into account the distinction between the lack of jurisdiction and wrongful exercise the available jurisdiction. 19. In Gujarat Urja Vikas Nigam Ltd . (supra) the Apex Court considered the legality of the order of NCLT in staying the termination by Gujarat Urja Vikas Nigam Ltd. of its power purchase agreement with the Corporate Debtor. The Apex Court noted that the NCLT has the sole jurisdiction to decide a dispute that arises from or relates to the insolvency of a Corporate Debtor and observed as follows: 71. The institutional framework under the IBC contemplated the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora. In the absence of a court exercising exclusive jurisdiction over matters relating to insolvency, the corporate debtor would have to file and/or defend multiple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court considered the issue in Kalpraj Dharamshi and Another v. Kotak Investment Advisors Ltd. and Another (2021 SCC OnLine SC 204). The Hon ble Apex Court held that non-exercise of jurisdiction by the High Court under 226 of the Constitution is not a hard and fast rule. The Apex Court held as follows: 59. By now, it is settled principle of law, that non-exercise of jurisdiction by the High Court under Article 226 of the Constitution is not a hard and fast rule, but a rule of self-restraint. As early as in 1969, in the case of Babu Ram Prakash Chandra Maheshwari (supra), this Court observed thus: It is a well-established proposition of law that when an alternative and equally efficacious remedy is open to a litigant he should be required to pursue that remedy and not to invoke the special jurisdiction of the High Court to issue a prerogative writ. It is true that the existence of a statutory remedy does not affect the jurisdiction of the High Court to issue a writ. But, as observed by this Court in Rashid Ahmed v. The Municipal Board, Kairana [1950 SCR 566], the existence of an adequate legal remedy is a thing to be taken into consideration in the matter of granti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a writ of certiorari to challenge the adverse order. As has been succinctly clarified by the Hon'ble Supreme Court that this writ of certiorari goes to a court. It may be issued at the request of parties, but it is not a writ which can be claimed by the parties. It is a writ which is directed or addressed to the court and the High Court can always issue it once it is satisfied that the orders impugned before it and challenged on the grounds mentioned above occasion a failure of justice. Thus, if the orders of the court or tribunal subordinate to this court result or occasion a failure of justice, then, this writ of certiorari can always be issued. There is no question of then refusing it merely because the opponent or opposite party says that the person or the party invoking this writ has an alternate and equally efficacious remedy. That means everything that the court or the tribunal has done can either be condoned or overlooked by us and thereafter the only remedy available to parties is by way of an appeal to correct the decision. If the decision itself has been rendered in utter breach of the rules of procedure or in violation of the principles of natural justice occasio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the IBC. But the question will be whether ownership rights of the properties which are still with the petitioners, though stands mortgaged to the Bank, can be included in the Liquidation Estate and that too without hearing the petitioners on the issue. 22. Section 36 of the IBC dealing with the Liquidation Estate reads as follows: 36. (1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3), which will be called the liquidation estate in relation to the corporate debtor. (2) The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors. (3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following:- (a) any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor cannot be included in the Liquidation Estate. 23. When assets owned by third parties, share holders and partners are expressly excluded from Liquidation Estate, whether the Tribunal can permit the Liquidator to include ownership rights of the petitioners in the Liquidation Estate? The impugned order of the Tribunal is to include the mortgaged properties in the Liquidation Estate. In the aforementioned context, there exists a lack of clarity in the impugned order as to whether what is directed to be included in the Liquidation Estate is leasehold rights of the Corporate Debtor or the ownership rights of the petitioners or both. The lack of clarity is in respect of a matter affecting the constitutional right of the petitioners under Article 300A of the Constitution. The Tribunal has the power to decide the legal issue whether the ownership rights of the petitioners can be included in the Liquidation Estate, if the petitioners are Directors/Promoters of the Company/ Corporate Debtor as described by the Tribunal in the order impugned. Therefore, this Court is of the considered opinion that the Tribunal shall reconsider the matter in the proper perspective, afresh. 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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