The NCLT Bench comprising of Hon’ble Suchitra Kanuparthi, Member (Judicial) ruled that civil proceedings could not be a bar to the Resolution Professional exercising his/her powers. The NCLT was hearing a Miscellaneous application filed by the disputed possessor of one of the properties of the corporate applicant (Goa Auto Accessories Limited) who filed an application under Section 10 of Insolvency and Bankruptcy Code 2016 (“the Code”) read with Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016, for initiation of Corporate Insolvency Resolution process.

The ownership of the shed, which was one of the properties of the corporate applicant was disputed by the applicant in the instant miscellaneous petition in civil courts on the basis of an agreement signed between the corporate applicant and the applicant in the miscellaneous petition. Both sides claimed possession and hence filed suits before the Hon’ble Civil Court at Bicholim, Goa.

The NCLT, relying on the judgement of the Hon’ble High Court of Delhi in Liberty House Group Pte Ltd. Vs. State Bank of India and Ors, reported in (MANU/DE/0727/2019) said that the judgment “clearly states that no Civil Court shall have the jurisdiction to entertain any suit or proceedings in respect of any matter on which the National Law Company Tribunal has jurisdiction under the I & B Code, 2016.”

The NCLT further relied on a decision of the Supreme Court in Innoventive Industries Ltd. Vs. ICICI bank reported in MANU/SC/1063/2017, where it was held that the objective of the code is to bring the insolvency law in India under a single umbrella. The court also relied on the decision of the Supreme Court in Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta reported in (2019) 2 SCC 1, where it was held that, “speed is the essence and timelines are to be observed and the non-obstante clause in section 60(5) is designed to ensure that the NCLT along has jurisdiction when it comes to applications as and proceedings by or against a Corporate Applicant covered by the Code

The core issue in the instant case, according to the NCLT was that whether adjudication of a pending suit has an effect on the powers of the Resolution Professional to take possession of the property of the Corporate Applicant. Section 60 (5) of the Code was referred to by the NCLT to consider that it has encompassing jurisdiction, and reading it with Section 63 and Section 231 and Section 238 of the Code, it was stated by the court that the jurisdiction of the civil court was excluded in matters related to the Code. The court further observed, “The principles of comity would be affected if conflicting order were passed by the Civil Court and the NCLT the same would be detrimental to the resolution process”.

The court concluded that the civil dispute filed by the applicant to the miscellaneous application was only for recovery of monies and thus it shall have a limited bearing on the suit for possession by the Resolution Professional.

Link to judgment: Goa Auto Accessories and Mr. Suresh Saluja

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