The Karnataka High Court has held that filing a petition against a partnership firm or its Directors under Section 95 of the Insolvency and Bankruptcy Code, 2016, before the National Company Law Tribunal is not permissible or valid.
The legal proceedings included representation from Senior Counsels Om Prakash and CK Nandakumar, along with Counsel Vishwas N for the petitioner, and DSGI H Shanthi Bhushan among others for the respondents.
This case revolved around a firm and its directors contesting the application of Section 95 of the Insolvency and Bankruptcy Code ( IBC ) before the National Company Law Tribunal ( NCLT ). The dispute stemmed from a Joint Development Agreement between the firm and another company, leading to arbitration.
Subsequently, the company invoked Section 95 of the IBC, which the firm challenged by arguing that the IBC does not cover individuals or partnership firms for insolvency resolution.
On the other hand, the company argued that the firm’s actions made its directors akin to personal guarantors, justifying NCLT’s jurisdiction.
Both parties presented their arguments regarding the Tribunal’s jurisdiction, with the firm seeking dismissal of the petition and continuation of arbitration.
The Single Bench of Justice M Nagaprasanna emphasized that the petition’s maintainability directly challenges the Tribunal’s jurisdiction to hear such matters, as the Code explicitly prohibits it. The Court questioned why petitioners would approach a Tribunal lacking jurisdiction, highlighting that even the acceptance of such filings contradicts legal principles.
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