A Single Bench of Justice Sabyasachi Bhattacharya of Calcutta High Court has held that a writ petition Article 226 of the Constitution, challenging the NCLT Jusrisdiction in a matter, is maintainable despite existence of an alternate remedy in form of appeal before NCLAT.
The Court was hearing a writ petition filed by the Kolkata Municipal Corporation, challenging the order of NCLT directing it to hand over the property of a private-Respondent, to the Liquidator.
The Court observed that, “Although a wrongful exercise of available jurisdiction would not be sufficient to invoke the High Court’s jurisdiction under Article 226 of the Constitution, the ground of absence of jurisdiction could trigger such invocation”.
Case Background
The Kolkata Municipal Corporation had distrained a property in recovery of municipal tax dues from an assessee in exercise of its authority under Sections 217-220 of the 1980 Act.
The said assessee came within the purview of a Corporate Insolvency Resolution Process (CIRP), thus prompting the concerned Resolution Professional to approach the NCLT for handing over of physical possession of the property-in-question from the KMC.
KMC challenged the NCLT’s order for handing over of property as sans NCLT Jusrisdiction.
Issues Raised
(i) Whether a writ petition under Article 226 of Constitution of India is maintainable against an Order passed by NCLT?
The Single Bench has answered this question in the affirmative. It has held that availability of an alternative remedy would not be a bar where the order or the proceedings are wholly without jurisdiction. It further said that absence of jurisdiction on the part of the authority concerned (in this case NCLT) constitutes an exceptional case warranting interference under Article 226 of the Constitution.
In the present case, the Bench noted, the petitioners urged that NCLT has no jurisdiction under IBC to take custody of any asset except as subject to the determination of ownership by a court or authority.
Thus, it was held that the nature of challenge thrown in the writ petition is on the ground of absence of jurisdiction, bringing it within the fold of Article 226 of the Constitution.
(ii) Whether a property attached by Municipal Corporation can be subject of Corporate Insolvency Resolution Process under IBC, 2016?
Coming to the merits of the case, the Bench proceeded to examine whether a property which has already been attached by the Municipal Corporation (a statutory creditor) in lieu of a debt, can subsequently be made subject to CIRP.
It has held that an asset attached by a statutory authority can form subject matter of corporate insolvency resolution process under IBC 2016, thereby giving powers to the NCLT to pass necessary directions.
Reliance was placed on Embassy Property (supra) where it was held that the expression “IRP will take control and custody of assets subject to the determination of ownership by a court of authority” used in Section 18(1)(f) of the Kolkata Municipal Corporation Act, 1980 indicates that— the power of the resolution professional to take control of any asset, itself, is subject to the determination of ownership by a court or authority.
In the instant case, the Bench noted, KMC proceeded with acquiring possession of the property-in-question and putting up the same for attachment under its powers as flowing from Sections 217-220 of the 1980 Act.
It further observed that such action by KMC follows from non-payment of tax by an assessee and the cause of action arises upon presentation of a bill under Section 216 of the 1980 Act.
“After non-payment on the bill, there is no further scope for determination of the ownership of the property by the writ petitioner under the 1980 Act. The procedure, as laid down in Sections 217- 220, automatically follow.
In the present case, the Corporation followed such procedure and took possession of the disputed property for non-payment of tax. Thus, there was no further scope for any “determination” of ownership of the property by the KMC. As such, there arose no question of the task of the interim resolution professional, in taking control and custody of the asset, being subject to the determination of ownership by any authority, as contemplated under Section 18(f)(vi) of the IBC. Rather, the claim of the KMC, in the absence of any successful challenge thereto, attained finality, fastening a liability upon the corporate debtor.
As per the interpretation in Embassy Property (supra), such a finalized claim would come within the purview of “operational debt” under Section 5(21) of the IBC. Hence, the Resolution Professional has jurisdiction to take custody and control of the same,” the Court held.
Read the Order here:
