NCLT Order Passed in Violation of Natural Justice: Kerala HC Allows Writ Petition Despite Remedy Under IBC [Read Order]

Challenge against invoke and encashing Bank Guarantee during Period of moratorium u/s 14 of IBC: Chhattisgarh HC dismisses petition citing pending Arbitration Proceedings[Read Order]

The petitioner is an allottee/homebuyer in Kerala Trade Centre at Marine Drive, Cochin. He had entered into an agreement for sale and construction with the corporate debtor. The corporate debtor in their capacity as the builder and the landowner M/s.Cherupushpam Films Pvt. Ltd., entered into an agreement on 8.12.2003, to construct a building named Kerala Trade Centre at Marine Drive, Cochin on a land having an extent of 43.35 Ares.

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Loans were availed for the construction from the SouthIndian Bank, Ernakulam. Sale deeds were executed by the landowners in favour of the petitioner and respondents Nos. 4, 5 and 6. The bank had charge over the property when the sale deeds were executed, though the same were not reflected in the encumbrance

certificates.

The 2nd respondent as the financial creditor, filed a petition before the first respondent on 10.10.2022, seeking to initiate proceedings against the corporate debtor. All creditors, including the petitioner, filed their claims before the Resolution Professional, and the same were adjudicated by him as per law. In the first CoC meeting, it was agreed that the petitioner, as well as other similarly placed creditors, were to be included in the CoC. Consequently, they were made members of the CoC. The 2nd respondent is also a member of the CoC.

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The 2nd respondent filed application praying for a rejection of the claim of the home buyers/space buyers/respondents 2 to 5, who already had registered allotments in their favour, and to reconstitute the CoC with valid voting share proportionate to the claim amounts and to stay all further proceedings of the CoC till the reconstitution of a valid CoC with valid voting share proportionate to the claim amount.

According to the 2nd respondent, the 3rd respondent Resolution Professional, had, wrongly admitted the claims of various home buyers who already are title holders of the property, based on the registered sale deeds executed in their favour, and made the petitioner and respondents 4 to 6 as members of the CoC with decisive voting rights.

It is contended that the petitioner has an efficacious remedy of appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 ('IBC 2016' for short), and hence is not entitled to maintain this writ petition. It is contended that the allottees in whose favour registered title deeds have already been executed can no longer be members of the CoC since their properties do not form part of the assets of the corporate debtor anymore, and claims of such allottees against the corporate debtors stood satisfied on receiving due title and possession. According to the 2nd respondent, such rights were included in the CoC illegally.

It is further submitted that the 2nd respondent does not intend to take any action against people like the petitioner, provided they also do not remain as members of the CoC. It is contended that IBC 2016 is a complete Code in itself, and in view of the decision of the Apex Court, no writ petition can be maintained against the order of the 1st respondent. The details of the amounts owed to the 2nd

respondent have also been narrated in the counter affidavit. It is also stated that even though the affidavit was filed, no counter affidavit was filed for more than a month, despite the copy of the same being served on the petitioner. It is also submitted that the affidavit only reiterates what had already been stated before the 1st respondent and does not contain any additional material.

It is evident from the admitted facts that the 1st respondent has accepted and recorded the affidavit which was filed after the hearing, and the order itself has been issued relying on the contents of the said affidavit. Since the petition was a contested one and had been argued and taken for orders, the 1st respondent ought to have heard the petitioner and similarly situated persons on the contents of the affidavit. This is all the more so since the prayer in the application was virtually to review the earlier decision of the CoC to include the petitioner and other holders of registered sale deeds as financial creditors on the admission of the senior creditor.

Since it is an order passed in violation of the principles of natural justice, it is only appropriate that the same is set aside and the matter is remanded back to the 1st respondent for passing orders after hearing the petitioner and other similarly situated persons on the contents of the affidavit and on the proposal to record the same and pass orders.

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