NCLT has Jurisdiction to Adjudicate Disputes solely relating to Insolvency of Corporate Debtor: Madras High Court [Read Order]

NCLT - insolvency of corporate debtor - Madras High Court - Taxscan

The Madras High Court ruled that the National Company Law Tribunal (NCLT) has jurisdiction to adjudicate disputes solely relating to the insolvency of corporate debtors.

The petitioner, M/s.Kotak Mahindra Bank ltd claimed to be a financial creditor of the corporate debtor in the NCLT proceedings and there is a dispute between the petitioner and the respondent. The first respondent is the mother-in-law of the principal promoter and the human agency in control of the respondent corporate debtor.

The petitioner herein was not a party, the charge created in respect of a property in favor of the petitioner herein by the corporate debtor was called into question and some observations were made by a Single Bench. An appeal has been preferred by the first respondent herein from the relevant order to question the order of the Single Bench, including the said observations.

The respondent represented by Mr.P.S.Raman, senior counsel, says that it is her right to have the order passed by the Single Bench set aside and if the NCLT decides the matter before it on the basis of the observations of the Single Bench, the first respondent may be seriously prejudiced thereby.

It is the further submission of the respondent that the NCLT has adjourned the matter till August 26, 2021, and what the first respondent proposes to contend before the NCLT is that it would be improper to proceed with the NCLT proceedings without the appeal preferred by the first respondent being disposed of.

“The Insolvency and Bankruptcy Code, 2016 (IBC) is time-bound. … The complexities in this matter and pending litigations before various courts have been a major impediment in conducting CIRP. Since the matter is pending before the Division Bench of the Hon’ble High Court of Madras, all the parties shall place this matter before Hon’ble High Court for direction whether this Adjudicating Authority can proceed as per IBC Rules and Regulations and what shall be the fate of CP/709/2018 pending on the file of this Adjudicating Authority”, the NCLT observed.

The division bench headed by Chief Justice Sanjib Banerjee and Justice P.D. Audikesavalu said that the NCLT, Chennai has sought to pass the buck. The order may also be seen to be irreverent and verging on the contumacious to remind this court that while the NCLT functions on a time-bound basis, the time element may not apply to court proceedings. To such an extent, the NCLT may do well to stay within the bounds of its authority and adhere to the limits of propriety in conformity with the superior authority that this court exercises. It is for the NCLT to decide whether the matter before it ought to be decided or not, whether any injunction operates or impedes the progress of the matter before it, and the parties cannot be asked to approach this Court for this Court to hand-hold the NCLT and guide it through its proceedings. Indeed, the order and the part thereof extracted above betrays the total non-application of mind in that all the parties before the NCLT were not, and could not have been, parties to the proceedings pending before the Division Bench of this Court and, to such extent, the parties before the NCLT, who are not parties to the proceedings pending in this court, could not have been left to the vagaries of a matter to which they were not parties.

“The NCLT would do well to confine itself to its area of specialization and deal with the matter in accordance with the law without waiting for any advice or assistance from this Court which this Court, in any event, is not obliged to extend,” the court said.

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