Possession Disputes During Liquidation Fall Within NCLT’s Exclusive Jurisdiction: High Court Dismisses Writ as Non-Maintainable
- REEDLAW
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REEDLAW Legal News Network reports: In a significant ruling, the Gujarat High Court reaffirmed that disputes concerning possession or occupation of a Corporate Debtor’s assets during liquidation proceedings lie exclusively within the jurisdiction of the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016. The Court held that a writ petition challenging such orders is non-maintainable when an efficacious alternative remedy under Section 61 of the Code is available, thereby reinforcing the IBC’s self-contained adjudicatory framework.
The Gujarat High Court, Single-Judge Bench comprising Justice Niral R. Mehta, while adjudicating a Special Civil Application and a connected Civil Application for vacating Interim Relief, held that disputes relating to possession or occupation of a Corporate Debtor’s assets during liquidation proceedings fall squarely within the exclusive jurisdiction of the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016. The Court further held that writ jurisdiction under Article 226 of the Constitution cannot be invoked when the statute itself provides an effective appellate mechanism under Section 61 of the Code. Accordingly, the writ petition was dismissed as non-maintainable.
The Petitioners had invoked the extraordinary jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India, assailing the order dated 21 June 2024 passed by the National Company Law Tribunal, Ahmedabad Bench. By the impugned order, the Adjudicating Authority had directed the Petitioners to vacate the premises in their occupation, pay outstanding rent arrears, and hand over peaceful possession to the Liquidator of the Corporate Debtor within seven days. The order was passed in the course of liquidation proceedings initiated under the Insolvency and Bankruptcy Code, 2016 (IBC).
The Petitioners contended that they were lawful occupants under valid lease and licence agreements executed by the Corporate Debtor prior to the commencement of insolvency proceedings. It was submitted that the disputes arising from such contractual arrangements did not fall within the purview of the Adjudicating Authority under the IBC and were amenable only to civil or arbitral jurisdiction. The Petitioners further argued that the Tribunal had exceeded its authority in directing eviction and recovery of possession without any proceedings under Sections 43, 45, or 49 of the Code and that such directions could not be sustained in the absence of an avoidance order. They also contended that the availability of an appellate remedy under Section 61 of the IBC did not bar the writ jurisdiction of the High Court, as the Tribunal’s order was allegedly passed without jurisdiction.
The Liquidator opposed the petition and raised a preliminary objection regarding maintainability, submitting that an efficacious alternate remedy of appeal was available under Section 61 of the Code. It was asserted that the lease and licence agreements relied upon by the Petitioners had been executed and registered on 31 August 2021—the very day on which the Corporate Debtor was admitted into insolvency and a moratorium was declared—indicating a fraudulent intent to keep assets beyond the control of the insolvency process. The Liquidator contended that the Adjudicating Authority was fully empowered under Sections 35 and 60(5) of the Code to issue directions for taking control and custody of the Corporate Debtor’s assets during liquidation.
Upon hearing both sides, the High Court observed that the IBC constituted a complete and self-contained code, conferring exclusive jurisdiction on the National Company Law Tribunal in all matters “arising out of or in relation to the insolvency or liquidation of the Corporate Debtor.” The Court noted that the Liquidator, by virtue of Section 35 of the Code, was duty-bound to take control, custody, and possession of all assets and properties of the Corporate Debtor, and that disputes concerning such assets must necessarily be adjudicated by the Tribunal. The Court found that the impugned order had been passed in exercise of statutory jurisdiction and not without authority of law.
The Court further held that the writ jurisdiction under Article 226 could not be invoked merely because an adverse order had been passed, particularly when an effective statutory appellate remedy was available under Section 61 of the Code. In the absence of any patent lack of jurisdiction or violation of natural justice, interference under Article 226 was unwarranted. Consequently, the petition was dismissed, and the order of the Adjudicating Authority directing the Petitioners to vacate and hand over possession to the Liquidator was upheld.
Mr. S.N. Soparkar, Senior Advocate, with Mr. Arjun R Sheth, Advocate, represented the Petitioners.
For the Respondent/ Defendant: Mr. Kunal P Vaishna, Advocate, appeared for the Respondent No. 1.
Mr. Vyuvraj G. Thakore, Advocate, appeared for the Respondent No. 1.
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