The Supreme Court bench comprising of Hon'ble Mr. Justice Krishna Murari and Hon'ble Mr. Justice Sanjay Kumar expounded on the absence of civil remedies against third parties under Section 66 of the Insolvency and Bankruptcy Code, 2016.
Brief Facts:
The Applicant was a financial creditor of M/s. Leading Hotels Limited (hereinafter referred to as “LHL”). LHL was facing insolvency under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”).
They approached the Court by filing a Special Leave Petition (Criminal). The purpose was to challenge an interim order which was issued by the Delhi High Court. The interim order extended the transit anticipatory bail that had been granted to the Respondents. The Respondents were suspended directors of LHL.
The Applicant’s petition was dismissed by the Court. Despite the dismissal, the applicant made a subsequent application to this Court, seeking clarification of the aforementioned order.
Observations of the Court:
It was held that the Applicant's intention in seeking clarification is actually an indirect attempt to circumvent the judgement and order issued by the Tripura High Court in the writ petition.
It was observed that Section 66(1) aims to hold individuals personally liable for fraudulent trading and recoup losses incurred. It does not empower the NCLT to pass orders against other organisations or legal entities involved in business transactions with the corporate debtor.
Therefore, an application under Section 66(1) by the resolution professional does not prevent any civil action for the recovery of dues payable to the corporate debtor from other organisations or legal entities. Such legal action is independent of Section 66(1).
Considering these circumstances, the Top Court opined that the Resolution Professional or the successful resolution applicant, as the case may be, should pursue civil remedies against third parties for the recovery of dues payable to the corporate debtor, as available under the law. However, such remedies against third parties are not available under Section 66 of the IBC. The civil remedies that may be available under the law are separate and independent from Section 66.
The decision of the Court:
The Supreme Court dismissed the application.
Case Title: Gluckrich Capital Pvt. Ltd v The State Of West Bengal
Case No.: Misc. Appln. No. 1302 of 2023
Coram: Hon'ble Mr. Justice Krishna Murari and Hon'ble Mr. Justice Sanjay Kumar
Advocates for Applicant: Advs. Mr. Santosh Paul, Ms. Anzu. K. Varkey
Advocates for Respondent: Adv. Mr. Ashish Batia
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