Gujarat HC Upholds NCLT’s Power to Direct Lessee to Vacate Corporate Debtor’s Property [Read Order]

The Gujarat High Court has dismissed a writ petition challenging an order of the National Company Law Tribunal (NCLT), upholding the Tribunal's jurisdiction to direct a lessee to vacate a corporate debtor's property and affirming the Liquidator's power to recover assets for the liquidation estate.

The petition was filed by Fivebro Water Services Pvt Ltd & Anr., challenging an NCLT order that directed them to vacate premises belonging to the liquidated corporate debtor, Doshion Pvt. Ltd., and hand over possession to the Liquidator. The petitioners contended that the NCLT acted without jurisdiction, arguing the dispute over rent and possession was a matter for a civil court or arbitration, not the NCLT.

Per contra, counsel for the Liquidator argued that the petitioners were not entitled to equitable relief as they had suppressed their close connection with the corporate debtor's suspended management. It was highlighted that the lease agreement for the Ahmedabad property was executed and registered on the very day the NCLT admitted the insolvency petition and declared a moratorium, which the Liquidator termed a clear attempt to siphon off the corporate debtor's assets and frustrate the liquidation process.

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A single bench of Justice Niral R. Mehta rejected the petitioner's jurisdictional arguments, holding that Section 60(5)(c) of the Insolvency and Bankruptcy Code (IBC) vests the NCLT with wide powers to adjudicate any question 'arising out of or in relation to' the liquidation proceedings of a corporate debtor.

The court placed strong emphasis on the petitioners' conduct, noting that the suspended directors of the corporate debtor were also directors of the petitioner companies. It termed the execution of the lease agreement on the day of the moratorium as a 'deliberate attempt to perpetrate fraud upon judicial proceedings'.

Relying on the principle that a writ court's discretionary jurisdiction under Article 226 is not exercised in favour of litigants with unclean hands, the bench declined to interfere. The court observed that any grievances regarding the NCLT's order could be effectively addressed through the statutory appeal remedy available under Section 61 of the IBC before the National Company Law Appellate Tribunal (NCLAT).

Finding the petition to be devoid of merit and filed with an oblique motive, the court dismissed the writ petition and vacated all interim relief, thereby upholding the NCLT's order to recover the corporate debtor's assets for the benefit of its creditors.

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