Bar u/s 231 of IBC Not Automatic Ground to Reject Suit Challenging Sale Deed without Numbering of Plaint: Madras HC [Read Order]

The Madras High Court has held that the bar of jurisdiction under Section 231 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot automatically be invoked to reject a civil suit at the threshold, particularly at the stage of numbering of the plaint.

The Court said that a trial court performs only a ministerial function while numbering a suit, and it cannot assume the role of the defendants by prematurely rejecting the plaint before the suit is even taken on file.

In the matter of Civil Revision Petition filed by G. Jothipaul and N. Jagadeesan challenged an order of the Principal District Judge, Kanchipuram, which had rejected their plea at the stage of institution without numbering it.

The trial court had dismissed the plaint on two grounds: first, that the suit was barred by Section 231 of the IBC, which bars civil courts from entertaining matters falling within the jurisdiction of the National Company Law Tribunal (NCLT), and second, on the ground of limitation.

Before the High Court, the petitioners argued that the suit was filed seeking a declaration to nullify certain sale deeds, and therefore the relief sought did not fall within the jurisdiction of the insolvency tribunals.

The petitioners pointed out that they had earlier approached the High Court through writ petitions challenging the sale transactions, but those petitions were dismissed with liberty to approach the NCLT.

However, when they approached the tribunal, the NCLT declined to entertain the matter on the ground that it did not have the power to grant the relief sought. Thus, the petitioners modified the relief and instituted a civil suit.

Justice P.B. Balaji noted the case Selvaraj vs Koodankulam Nuclear Power Plant India and observed that “It is a trait law that the Courts are performing a Ministerial function at the time of institution and numbering of the suits and not any judicial function. The Court ought not to have taken up the role of the defendants and suo moto rejected the plaint by invoking power under Order VII Rule 11 C.P.C. that too without numbering the suit.”

The court set aside the order of the trial court accordingly. It directed the plaintiffs to re-present the plaint within two weeks along with a copy of the High Court’s order, and instructed the trial court to number the suit and proceed in accordance with law if the plaint is otherwise in order.

At the same time, the Court clarified that the defendants would still be at liberty to invoke Order VII Rule 11 CPC to seek rejection of the plaint after the suit is numbered and summons are served. The revision was allowed on these conditions.

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