Read Order: Kotak Mahindra Bank vs. K Bharathi & Ors

LE Staff

Chennai, August 27, 2021: The Madras High Court has ruled that it cannot issue directions to the National Company Law Tribunal (NCLT) regarding whether it can proceed or not with a particular case. 

The Division Bench of Chief Justice Sanjib Banerjee and Justice P.D. Audikesavalu observed that NCLT would do well to confine itself to its area of specialisation and deal with the matter in accordance with law without waiting for any advice or assistance from the High Court which the HC, in any event, was not obliged to extend. 

The Division Bench also made it clear that parties could not be asked to approach the High Court to “hand-hold” NCLT and guide it through its proceedings. 

The observations came pursuant to a petition seeking direction to the NCLT to proceed with a matter pending before it, whereby the Tribunal had stated that the Insolvency and Bankruptcy Code (IBC) was time bound. Complexities in the matter and pending litigations before various courts had been major impediment in conducting the Corporate Insolvency Resolution Process (CIRP).

As the matter was pending before the HC, all parties were ordered to place the matter before HC for direction on whether NCLT could proceed as per IBC Rules and Regulations and what shall be the fate of case pending on its file, noted Justice Sanjib Banerjee. 

Going by the background of the case, the Petitioner was a financial creditor (FC) of corporate debtor (CD) in NCLT proceedings. The dispute arose between Petitioner and first Respondent herein, who was mother-in-law of sixth Respondent, principal promoter and human agency in control of second Respondent/CD. 

In proceedings in HC to which Petitioner was not a party, charge created in respect of a property in favour of Petitioner by CD was called into question and some observations were made by a Single Bench. Challenging the same, the First Respondent preferred appeal contending that it was her right to have the order passed by the Single Bench set aside and if NCLT decided the matter before it on the basis of observations of the Single Bench, first Respondent may be seriously prejudiced thereby. 

She further contended that it would be improper to proceed with NCLT proceedings without appeal preferred by her being disposed of. 

The Division Bench observed that though NCLT functioned on a time-bound basis, time element may not apply to court proceedings. To such extent, NCLT may do well to stay within bounds of its authority and adhere to limits of propriety in conformity with superior authority that the High Court exercised. 

It was for the NCLT to decide whether the matter before it ought to be decided or not, whether any injunction operated or impeded the progress of the matter before it, opined the Bench.

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