Karnataka High Court
Buoyant Technology Constellations Pvt ... vs M/S Manyata Reallty on 16 October, 2024
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF OCTOBER, 2024
PRESENT
THE HON'BLE MR. N.V. ANJARIA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE K.V. ARAVIND
WRIT APPEAL NO.498 OF 2024 (GM-RES)
BETWEEN:
1. BUOYANT TECHNOLOGY
CONSTELLATIONS PVT. LTD.
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT 1956
(FORMERLY KNOWN AS MANTRI TECHNOLOGY
CONSTELLATIONS PVT. LTD.,)
HAVING ITS REGISTERED OFFICE AT
C-5, RICH HOMES, No.5/1, RICHMOND ROAD
BANGALORE - 560 001
REPRESENTED BY ITS DIRECTOR
MR. HARIKRISHNA REDDY
... APPELLANT
(BY SRI S. BASAVARAJ, SENIOR ADVOCATE &
SRI M.S. SHAM SUNDAR, SENIOR ADVOCATE A/W
SRI ANISH ACHARYA, ADVOCATE)
AND:
1. M/S MANYATA REALLTY
A PARTNERSHIP FIRM REGISTERED UNDER
THE PARTNERSHIP ACT, 1932
HAVING ITS REGISTERED OFFICE AT
NO 9/1, 1ST FLOOR, CLASSIC COURT
RICHMOND ROAD
BANGALORE - 560 025
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2. THE REGISTRAR
NATIONAL COMPANY LAW TRIBUNAL
BANGALORE BENCH
CORPORATE BHAWAN
12TH FLOOR, RAHEJA TOWERS
M.G. ROAD, BENGALURU - 560 001
3. UNION OF INIDA
MINISTRY OF CORPORATE AFFAIRS
B - WING, 2ND FLOOR
PARYAVARAN BHAVAN
CGO COMPLEX
LODHI ROAD
NEW DELHI - 110 003
... RESPONDENTS
(BY SRI OM PRAKASH, SENIOR ADVOCATE A/W
SRI S. KIRAN KUMAR, ADVOCATE FOR C/R1 &
SRI KUMAR M.N., CGC FOR R2 & 3)
---
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET
ASIDE THE ORDER PASSED BY THE LEARNED SINGLE
JUDGE IN W.P. No.26977/2023 DATED 06.03.2024 AND ETC.
THIS WRIT APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR
PRONOUNCEMENT THIS DAY, JUDGMENT WAS
PRONOUNCED AS UNDER:
CORAM: HON'BLE THE CHIEF JUSTICE MR. JUSTICE
N.V. ANJARIA
and
HON'BLE MR. JUSTICE K.V. ARAVIND
C.A.V. JUDGMENT
(PER: HON'BLE THE CHIEF JUSTICE
MR. JUSTICE N.V. ANJARIA)
Whether the aspect about the maintainability of petition
filed under Section 95 of the Insolvency and Bankruptcy Code,
2016 for its merit content could be examined by the Registrar
of the National Company Law Tribunal at the stage of its filing
and presentation;
Whether it is permissible in law for the Registrar of the
National Company Law Tribunal (NCLT) to enter into even the
elementary adjudicatory process in relation to controversy
between the parties;
Whether receiving and registering the petition under
Section 95 of the Insolvency Code is a ministerial function or
also permits an adjudicatory act at that stage by the Registrar,
NCLT;
At what stage the adjudicatory functions starts under the
provisions of Chapter-III, Part-III of the Insolvency and
Bankruptcy Code, 2016;
1.1 These are the questions arise for their analysis and
decision while examining the challenge to the judgment and
order dated 6th March 2024 of learned Single Judge, in the
present appeal, preferred by the appellant-original respondent
No.2, under Section 4 of the Karnataka High Court Act, 1961.
The Challenge
2. Learned Single Judge allowed the writ petition. It was
declared that e-filing of the petition by the appellant herein
under Section 95 of the Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as the 'Insolvency Code') to be non est
and illegal, consequently setting aside all the connected
proceedings. It was provided that any action taken upon
registration of the proceedings shall stand obliterated.
2.1 In the writ petition filed under Article 226 of the
Constitution, the prayers made were to declare that the e-filing
of petition No.2903111/01786/2023 by the appellant-
respondent No.2 under Section 95 of the Insolvency Code was
void ab initio and illegal. It was consequently prayed to restrict
the NCLT from taking any action in furtherance of the said
petition.
2.2 The NCLT was further sought to be restrained from
completing the scrutiny of the petition and returning the petition
for rectifying the defects and also to restrict from numbering
and registering the petition or placing the petition for hearing.
The third limb of the prayer was to direct the NCLT to return
and cancel the lodging of the petition.
Case in the Writ Petition
3. Having seen the kind and nature of the prayers
advanced as above in the writ petition, the case of the
petitioner No.1 herein-M/s. Manyata Reallty may be looked
into. Questioning the legality of filing of petition under Section
95 of the Insolvency Code by the appellant herein-Boyount
Technology Constellation Pvt. Ltd., it was stated that the
petitioner was a partnership firm registered under the
Partnership Act, 1932 and that the petition under Section 95 of
the Code against it was not maintainable.
3.1 It was stated that the petitioner with other entities, all are
engaged in the business of real estate development. One of
such entity is Manyata Infrastructure Developments Pvt. Ltd.,
which is a private limited company. The partners of the
petitioner have interest in the said private limited company, it
was stated. The said Manyata Infrastructure Pvt. Ltd. and the
petitioner, it was averred, have been instrumental in developing
several projects as a leader in the field of construction. It was
stated that, the petitioner along with the land owners of certain
properties entered into Memorandum of Understanding dated
23rd December 2009 and Addendum dated 20th July 2012 with
respondent No.2-appellant herein-Buyont Technology.
3.1.1 In light of the said Memorandum of Understanding, the
petitioner firm Manyata Pvt. Ltd. and appellant have entered
into separate joint developmental agreements between the
years 2010 and 2015. It was further stated that the joint
development agreements covering in total 103 Acres of land.
The petitioner produced one of such agreement dated 26th
August 2010.
3.1.2 It was alleged by the petitioner that the appellant did not
commence the development works, delayed the same and
failed to discharge its contractual obligation, that the
construction activity is at a stand-still and that losses were
suffered. Consequently, by notice dated 7th February 2019, the
petitioner and Manyata Pvt. Ltd., terminated six of the joint
development agreements and partially terminated three.
3.1.3 The issues and differences worsened. The petitioner-
Manyata Infrastructure Private Limited issued notice dated
16.07.2022 to the appellant reiterating the termination of Joint
Development Agreements. It was stated that the Memorandum
of Understanding dated 23.12.2009 as well as each of the joint
development agreements contained arbitration covenant. The
disputes between the parties came to be referred to the panel
of three arbitrators which was constituted pursuant to the notice
dated 10.10.2022 by the Manyata Development Private Limited
by invoking the arbitration clause. It is the allegation of the
petitioner that the appellant herein was interested in delaying
the arbitration proceedings and several proceedings were
instituted by it before the several courts. The details of such
legal proceedings were mentioned in the petition. It was also
alleged that the arbitral proceedings had reached at an
advanced stage.
3.1.4 It was then averred that the petitioner received Demand
Notice on 21.10.2023 from the appellant under Section 95 of
the Insolvency Code. Therein, the partners of the petitioner
firm were called upon to pay a sum of Rs.8,11,49,54,687/- for
the alleged debt of Rs.40 crores stated to be due under the
Agreement dated 06.11.2012. It is the say of the petitioner that
this very claim is the subject matter of one of the counter
claims by the appellant before the arbitrator. The said demand
notice was replied to by the petitioner raising several grounds.
3.1.5 It was contended that despite the reply given to the
notice, the appellant-respondent No.2 served copy of the
petition filed under Section 95 of the Code before the NCLT. It
was sought to be contended that the Ministry of Corporate
Affairs by the Notification dated 15.11.2019, notified Sections
94 to 187 of the Insolvency Code, (both inclusive) only in
relation to the personal corporate guarantors and that
therefore, it would not apply to the partners of the petitioner
firm. It was contended that the partnership firm was neither a
corporate debtor nor a corporate person.
3.1.6 It is the case that the provisions of Section 95 of the
Code are not applicable and that the petition filed by the
appellant could not have been maintained before the NCLT. It
was further contended that the intention on part of the
appellant-respondent No.2 was only to delay the arbitration
proceedings. It was claimed that the appellant wanted to take
benefit of Section 96 of the Insolvency Code inasmuch as upon
filing of the petition under Section 95 of the Code, the provision
of Section 96 would operate under which an interim moratorium
would come into force. It was submitted that the petition under
Section 95 of the Code could not have been registered by
respondent No.1-Registrar, NCLT.
Section 95 Petition
3.2 The case and contents of the petition under Section 95
of the Insolvency Code filed by the creditor-M/s. Buoyant
Technology Limited-appellant herein, may be highlighted. It is
stated that the petition was against the personal guarantors. It
was stated that admittedly there was a default on part of the
said corporate debtors which had failed to discharge its
obligation under the Loan Agreement dated 6th November 2012
as also in respect of invocation of personal guarantors. It was
stated that the corporate debtor-Manyata Infrastructure Private
Limited was a private limited company registered under the
Companies Act, 2013 and was an affiliate entity of Manyata
Reallty and that the individual partners of the firm had interest
in the said private limited company. It was further stated that
number of agreements were entered into amongst the financial
creditor-applicant-appellant, the corporate debtor-Manyata
Infrastructure as well as its affiliate concern-Manyata Reallty.
3.2.1 Following was the case pleaded in paragraph 4 of the
petition under Section 95,
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"The substructure of the Loan Agreement
dated 06.11.2012 was such that the M/s
Manyata Reallty had undertaken to stood as
the Corporate Guarantor and the partners of
the aforesaid firm. Personal Guarantors/
Respondents of the present Application, had
accordingly undertaken to serve as the
Guarantors in respect to the loan availed by
the Corporate Debtor/Principal Borrower."
3.2.2 It was further pleaded as under,
"... Although the M/s Manyata Reallty would
also qualify to be the Corporate Guarantor,
yet since it is a settled proposition of law that
any partnership concern constituted under the
provisions of the Indian Partnership Act, 1932,
by virtue of the law, is indispensable from its
partners and as such the liability of the
partners in any partnership concern is
unlimited. Therefore, all the partners of the
M/s Manyata Reallty (who have been arrayed
as Party Respondent in the instant
application) would qualify to fall under the
purview of 'Personal Guarantors' and since
the partnership concern M/s Manyata Reallty,
is indispensable from the aforesaid
Partners/Personal Guarantors."
3.2.3 It was further averred that the applicant-financial creditor
had entered into ancillary agreement referred to as contractual
framework with the corporate debtor as well as the corporate
guarantor, an affiliate named M/s. Manyata Reallty concern of
the corporate debtor for acquiring developmental rights in
respect of the part of the land at Bengaluru and that in lieu of
the said Understanding, the corporate debtor as well as its
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abovenamed connected entity agreed in the contractual
framework to grant developmental rights to the applicant. It
was stated that the applicant had disbursed the sum of
Rs.183,50,00,000/- on different dates to the corporate debtor
as well as its affiliated entity.
3.2.4 It was next stated that the corporate debtor and its
affiliate entity along with other partners thereof had agreed to
restructure the entire transaction in such a manner that a
certain sum out of total paid up amount already disbursed in
various trenches would be initially treated as loan/financial
debt. It was stated that as a consequence, Loan Agreement
dated 6th November 2012 was entered into which was a
separate and independent document, which was duly executed
by the applicant-financial creditor and the corporate debtor as
well as its affiliated entity.
3.2.5 It was further averred that both the entities-corporate
debtor and its affiliate concern agreed to treat the initially
disbursed sum of Rs.40 crores to be a financial debt within the
meaning of Section 5(8) of the Code. The applicant furnished
the details thereof as part of the pleadings, the details of the
treatment of total of Rs.183,50,00,000/- in various trenches on
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various dates to the said entities. It was sought to be
highlighted that the loan agreement envisaged certain
conditions attached to the advancement of Rs.40 crores and
the conditions were to be fulfilled by the said entities on or
before 31.03.2013 failing which, the said money was to be
returned to the financial creditor-applicant along with interest.
3.2.6 It was the case that there is material breach of the
covenants of the loan agreement and the corporate debtor and
its affiliated entity failed to respond despite the applicant-
financial creditor called upon them to repay the said loan
amount.
3.2.7 It was further pleaded and contended, extracting from
paragraph 13 of the application,
"It is pertinent to accentuate herein that
that the structure of the financial transaction
arising out of the Contractual Framework was
restructured in such a manner that the
Corporate Debtor would be deemed to be the
Principal Borrower and the affiliated entity,
namely, M/s Manyata Reallty along with its all
partners would be deemed to be the Personal
Guarantors and the Corporate Guarantor, as
the case may be. Since the Guarantor
namely, M/s Manyata Reallty, is a registered
partnership firms thus the partners of the said
firm are jointly and severally liable for the acts
of the firm and thereby would also be deemed
to be personal guarantors. Therefore, in the
light of the well settled legal proposition that
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the liability of partners in any partnership firm,
also applicable in the instant case to the Firm,
duly constituted under the provisions of Indian
Partnership Act, 1932, is unlimited. Thus,
relying upon the settled proposition of the law
and its principals, partners of the said
Guarantor Firm, ipso facto, would be deemed
to be as Personal Guarantors."
3.2.8 It was stated that the Demand Notice dated 21.10.2023
was issued upon the personal guarantors under Rule 7(1) of
the Insolvency and Bankruptcy (Application to Adjudicating
Authority for Insolvency Resolution Process for Personal
Guarantors to Corporate Debtors) Rules, 2019. The reply was
received and the personal guarantors failed to comply with their
obligations. It was stated that the default has admittedly
occurred at the end of the corporate debtor.
3.2.9 It was stated that thus by filing application under Section
95 of the Code read with Rule 7(2) of the Rules of 2019, the
applicant-financial creditor was entitled to commence the
insolvency proceedings against the debtor and its affiliate entity
and the partners who are personal guarantors. It was
submitted that the cardinal principles for triggering insolvency
within the ambit of Section 95 of the Code were satisfied from
the documents on record inasmuch as money was disbursed
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and that there was default by the corporate debtor which
default was reported by the Information Utility.
View in Impugned Judgment
3.3 It was held by learned Single Judge, who framed the
question as to whether petition filed by the appellant was
maintainable under Section 95 of the Code, thus proceeded to
address the merits of the petition. The core question required
to be considered was whether the Registrar while receiving the
petition could go into the merits and to decide the
maintainability.
3.3.1 Learned Single Judge proceeded to consider merits and
to analyse the provisions of the Code including the definition of
'corporate person', 'corporate debtor' and consider the aspect
that prima facie respondent was partnership firm and that in
view of notification dated 15th November 2019, the provisions
were not invocable. Learned Single Judge held that there was
no personal corporate guarantor and insolvency resolution
process could not have been initiated by the petitioner.
3.3.2 The submission of the appellant-respondent was that
respondent No.1-Registrar at the stage of scrutiny of the
petition cannot decide on the maintainability and could not
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have judged whether the petition fell within the ambit of the
provisions. The contention that the petition was at the stage of
scrutiny and had never come up before the Tribunal was
negatived by learned Single Judge observing thus, extracting
from paragraph 16 of the judgment,
"I decline to accept the said submission,
as it is fundamentally flawed. If a quasi judicial
authority or a Tribunal does not have
jurisdiction to entertain a petition merely
because it is at the stage of filing, it cannot be
permitted to be proceeded further. If these
submissions of the learned senior counsel is
to be accepted, then it would be diluting the
concept of jurisdiction itself, which dilution this
Court would never even attempt to make.
Therefore, if the petition is not fileable before
the Tribunal, it cannot be allowed to be
proceeded up to the stage of whether it is
entertainable. A non-fileable petition has dire
consequences, let alone its entertainment.
Therefore, such proceedings which are on the
face of it, de hors jurisdiction must be nipped
in the bud and should never be allowed to
germinate any further.'' (para 16)
3.3.3 Learned Single Judge leaned towards the aspect that the
effect of filing petition under Section 94 or 95 of the Code
would be the immediate operation of Section 96 of the Code
which has serious consequences in as much as it would place
interim moratorium upon the corporate debtor and that it is an
axiomatic consequence in the facts of the case. Learned
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Single Judge held, 'the very acceptance of filing by the Tribunal
is contrary to law'.
Insolvency Resolution Process
3.4 In order to address the subtle issue of law involved in the
controversy, surveying and comprehending the provisions
relating to insolvency resolution process in Chapter-III of the
Insolvency and Bankruptcy Code, 2016 is necessary. Section
94 and Section 95 respectively provide for filing of application
by debtor or creditor to initiate the insolvency resolution
process. Section 95 says that a creditor may apply for initiating
the insolvency resolution process by submitting an application.
3.4.1 Section 95 of the Code since relevant, is reproduced
herein,
"95. Application by creditor to initiate
insolvency resolution process -
(1) A creditor may apply either by himself, or
jointly with other creditors, or through a
resolution professional to the Adjudicating
Authority for initiating an insolvency resolution
process under this section by submitting an
application.
(2) A creditor may apply under sub-section (1)
in relation to any partnership debt owed to him
for initiating an insolvency resolution process
against--
(a) any one or more partners of the firm; or
(b) the firm.
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(3) Where an application has been made
against one partner in a firm, any other
application against another partner in the same
firm shall be presented in or transferred to the
Adjudicating Authority in which the first
mentioned application is pending for
adjudication and such Adjudicating Authority
may give such directions for consolidating the
proceedings under the applications as it thinks
just.
(4) An application under sub-section (1) shall
be accompanied with details and documents
relating to--
(a) the debts owed by the debtor to the
creditor or creditors submitting the
application for insolvency resolution
process as on the date of application;
(b) the failure by the debtor to pay the debt
within a period of fourteen days of the
service of the notice of demand; and
(c) relevant evidence of such default or
non-repayment of debt.
(5) The creditor shall also provide a copy of the
application made under sub-section (1) to the
debtor.
(6) The application referred to in sub-section (1)
shall be in such form and manner and
accompanied by such fee as may be
prescribed.
(7) The details and documents required to be
submitted under sub-section (4) shall be such
as may be specified."
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3.4.2 Section 96 says that when an application is filed under
Section 94 or 95 of the Code, an interim moratorium shall
commence in relation to all the debts and shall cease to have
effect on the date of admission of such application. During the
interim moratorium period, any legal action or proceeding
pending in respect of any debt shall be deemed to have been
stayed and the creditors of the debtor shall not initiate any legal
action in respect of any debt. The next provision is Section 97
under which the appointment of resolution professional is
provided for. Section 98 is about the replacement of the
resolution professional.
3.4.3 Section 99 provides for submission of the report by
resolution professional. The Section is extracted,
"99. Submission of report by resolution
professional.-
(1) The resolution professional shall examine
the application referred to in section 94 or
section 95, as the case may be, within ten days
of his appointment, and submit a report to the
Adjudicating Authority recommending for
approval or rejection of the application.
(2) Where the application has been filed under
section 95, the resolution professional may
require the debtor to prove repayment of the
debt claimed as unpaid by the creditor by
furnishing--
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(a) evidence of electronic transfer of the
unpaid amount from the bank
account
of the debtor;
(b) evidence of encashment of a
cheque issued by the debtor; or
(c) a signed acknowledgment by the
creditor accepting receipt of dues.
(3) Where the debt for which an application has
been filed by a creditor is registered with the
information utility, the debtor shall not be
entitled to dispute the validity of such debt.
(4) For the purposes of examining an
application, the resolution professional may
seek such further information or explanation in
connection with the application as may be
required from the debtor or the creditor or any
other person who, in the opinion of the
resolution professional, may provide such
information.
(5) The person from whom information or
explanation is sought under sub-section (4)
shall furnish such information or explanation
within seven days of receipt of the request.
(6) The resolution professional shall examine
the application and ascertain that--
(a) the application satisfies the
requirements set out in sections 94
or 95;
(b) the applicant has provided
information and given explanation
sought by the resolution professional
under sub-section (4).
(7) After examination of the application under
sub-section (6), he may recommend
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acceptance or rejection of the application in his
report.
(8) Where the resolution professional finds that
the debtor is eligible for a fresh start under
Chapter II, the resolution professional shall
submit a report recommending that the
application by the debtor under section 94 be
treated as an application under section 81 by
the Adjudicating Authority.
(9) The resolution professional shall record the
reasons for recommending the acceptance or
rejection of the application in the report under
sub-section (7).
(10) The resolution professional shall give a
copy of the report under sub-section (7) to the
debtor or the creditor, as the case may be."
3.4.4 Section 100 is about the admission or rejection of the
application, reading as under,
"100. Admission or rejection of application -
(1) The Adjudicating Authority shall, within
fourteen days from the date of submission of
the report under section 99 pass an order either
admitting or rejecting the application referred to
in sections 94 or 95, as the case may be.
(2) Where the Adjudicating Authority admits an
application under sub-section (1), it may, on the
request of the resolution professional, issue
instructions for the purpose of conducting
negotiations between the debtor and creditors
and for arriving at a repayment plan.
(3) The Adjudicating Authority shall provide a
copy of the order passed under sub-section (1)
along with the report of the resolution
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professional and the application referred to in
sections 94 or 95, as the case may be, to the
creditors within seven days from the date of the
said order.
(4) If the application referred to in sections 94
or 95, as the case may be, is rejected by the
Adjudicating Authority on the basis of report
submitted by the resolution professional that
the application was made with the intention to
defraud his creditors or the resolution
professional, the order under sub-section (1)
shall record that the creditor is entitled to file for
a bankruptcy order under Chapter IV."
3.4.5 The above provisions for their nature, effect and
operation came to be discussed by the Supreme Court to
explain the statutory scheme emanating therefrom, in Dilip B
Jiwrajka v. Union of India [(2024) 5 SCC 435]. This decision
is referred to and discussed in its details in the succeeding
paragraphs.
4. Heard learned Senior Advocates Mr. S. Basavaraj and
Mr. M.S. Sham Sundar with learned advocate Mr. Anish Achar
for the appellant, learned Senior Advocate Mr. Om Prakash
assisted by learned advocate Mr. S. Kiran Kumar for
respondent No.1 and learned Central Government Standing
Counsel Mr. M.N. Kumar for respondent Nos.2 and 3, at length.
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Submissions of Appellant
4.1 Learned Senior Advocate for the appellant assailed the
impugned judgment and order by submitting that the learned
Single Judge exceeded his jurisdiction in upholding the
adjudication of maintainability of the petition filed under Section
95 of the Code by the Registrar, to conclude that the petition
was liable to be rejected. It was next submitted that the
adjudicatory role could be performed only at a subsequent
stage by the National Company Law Tribunal when it receives
the report from the resolution professional. It was submitted
further it was only NCLT who could examine the contents and
documents to pronounce upon the merits and maintainability at
that stage.
4.1.1 Learned Senior Advocate thereafter proceeded to
explain that the partners of the respondent were personal
corporate guarantors by pointing out aspects of loan having
been taken jointly by Manyata Reallty and the Pvt. Ltd.
Company-Manyata Infrastructure, the nature of liability of the
partners under the law and various other attendant aspects,
which according to the learned counsel make the persons
personal corporate guarantors. It is not necessary to elaborate
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these submissions, and give finding thereon, in view of what is
being decided herein.
4.1.2 Learned Senior Advocate submitted that merely that
moratorium under Section 96 of the Insolvency Code would
come into operation upon filing of Section 95 petition, is no
ground to judge the maintainability and to debar the creditor or
debtor to initiate the action permissible under the law. It was
submitted that coming into force of interim moratorium is
statutory consequence. It was further submitted the appellant
also filed a petition under Section 7 of the Insolvency and
Bankruptcy Code against the Company, which Company is a
corporate debtor. It was submitted that for Section 7 petition,
no interim moratorium would come into effect, unlike upon filing
of Section 95 petition. He relied on several decisions as to
continuance of arbitral proceedings vis-a-vis the coming into
operation of moratorium.
4.1.3 Learned Senior Advocate for the appellant extensively
relied on the decision of the Supreme Court in Dilip B Jiwrajka
(supra). On the basis of the law laid down by the Apex Court,
it was submitted that the adjudicatory role could never be
attributed to respondent No.1-Registrar, NCLT, when he
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receives and registers petition under Section 95 of the Code. It
was submitted that the petition has to travel through stages
before it reaches at the juncture where it would be adjudicated
for its maintainability, and therefore for approval or rejection by
the adjudicating authority.
Submissions of respondents-original petitioners
4.2 Learned Senior Advocate for the respondent-original
petitioner, on the other hand steadfastly supported the
judgment of learned Single Judge. It was submitted that the
application of the appellant under Section 95 of the Insolvency
Code was totally misconceived and on the bare facts, it was
not maintainable. In that light, it was submitted, the Registrar,
NCLT was justified to look into the merits of the case of the
petitioner to decide about maintainability of such petition. It
was submitted that the petition was filed against a firm and in
no way the partners of the firm could be treated as personal
corporate guarantors, nor they can be said to be stepping into
shoe of personal corporate guarantors to maintain the petition.
4.2.1 It was sought to be highlighted that the provisions of
Sections 94 to 187 having notified by the Ministry of Corporate
Affairs only in so far as they relate personal guarantors of
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corporate debtors. It was submitted that on merits, this aspect
was not satisfied which was a legal irregularity liable to be
considered at the stage of filing itself. Notification dated 15th
November 2019 issued by the Ministry of Corporate Affairs was
sought to be relied on.
4.2.2 Learned Senior Advocate for the respondent referred to
the definition of 'Corporate Person' as found in Section 2(7), of
'Corporate Debtor' contained in Section 2(8), that of 'person' in
Section 2(23) of the Code. He further referred to 'Corporate
Guarantor' in Section 5(5A) of the Code. On the basis of such
provisions, learned Single Judge contended that no personal
corporate guarantor is involved to maintain the petition.
4.2.3 Decision of the Supreme Court in Lalit Kumar Jain v.
Union of India [(2021) 9 SCC 321] was referred to for the
observations contained in paragraph 95, to highlight the
provisions in part-III of the Code as they operate before
amendment of 2018 and post amendment. Several decisions
were relied on by learned Senior Advocate for the respondent
to advance legal propositions and to buttress his submissions.
On the basis of the decision of the Supreme Court in S.
Govinda Menon v. Union of India [AIR 1967 SC 1274], it was
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submitted by referring to observations in paragraph 5 thereof
that writ of prohibition is issued to restrain the court or inferior
tribunal from exercising a jurisdiction which they do not
possess or when they exceed the jurisdiction. For same
proposition, another decision in Bengal Immunity Company
Ltd. v. State of Bihar [AIR 1955 SC 661, paragraphs 52 and
53] was pressed into service.
4.2.4 With reference to paragraph 334 in the decision of the
Apex Court in Mafatlal Industries Ltd. v. Union of India
[(1997) 5 SCC 536], the concept of 'jurisdiction' was
highlighted. Yet another decision in Indian Farmers
Fertilisers Cooperative Society Ltd. v. Bhadra Products
[(2018) 2 SCC 534], was relied on, again to submit that the
'jurisdiction' is a coat of many colours and the word take the
colour from the context it is placed.
4.2.5 Learned Advocate proceeded to explain the nature and
power of jurisdiction under Article 226 of the Constitution from
paragraphs 15 to 18 in Embassy Property Developments (P)
Ltd. v. State of Karnataka [(2020) 13 SCC 308]. For similar
purpose, and also to highlight when the writ of certiorari could
be issued, yet another decision of the Apex Court in Central
- 27 -
Council of Research in Ayurvedic Sciences v. Bikaratan
Das [2023 SCC Online SC 996], was referred to for its
paragraphs 53 to 60.
Ministerial versus Adjudicatory
5. Since in accepting the prayer of the petitioner and setting
at naught the filing of the petition under Section 95 of the Code
by the appellant, the learned Single Judge has viewed that the
adjudicatory role is permissible by respondent No.1-Registrar
at the time of receipt of the petition, the distinction between
ministerial act or administrative function on one hand, and the
judicial function or adjudicatory task may be considered. The
core issue would be whether respondent No.1-Registrar could
enter into realm of adjudication.
5.1 The conceptual and jurisprudential distinction between
ministerial act and judicial act or administrative function and
adjudicatory function came to be analysed elaborately, lucidly
and pertinently by the Supreme Court in Jamal Uddin Ahmad
Vs. Abu Saleh Najmuddin and another [(2003) 4 SCC 257].
Though slightly in different context, what was delineated and
laid down by the Supreme Court provides a guidance to
address the controversy involved in this case. It was in the
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context of presentation of election petition under Section 81 of
the Representation of the People Act, 1951 that the Supreme
Court discussed the difference between the ministerial function
and adjudicatory function and further that by which authority
and at which stage such functions, both of different kinds, could
be performed.
5.1.1 Noticing few facts with relevance from Jamal Uddin
Ahmad (supra), the appellant before the Supreme Court was
declared duly elected in the elections held to the Badarpur
Legislative Assembly Constituency of Assam. The contesting
respondent filed an election petition under Sections 80/81 of
the Representation of the People Act, to challenge the election
of the appellant. The election petition was presented before the
Stamp Reporter-cum-Oath Commissioner of the High Court of
Assam. The Stamp Reporter received the election petition,
conducted preliminary scrutiny and put up the same before the
Designated Election Judge. The appellant upon receipt of the
copy of the election petition filed an application raising a
preliminary objection to the maintainability of the petition,
seeking its dismissal in limine under Section 86 of the
Representation of the People Act on the ground of non-
compliance with Section 81 of the Act.
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5.1.2 The gist of the plea raised by the appellant was the
petition should have been presented either before the
Designated Election Judge or the Chief Justice of the High
Court and that having not been done, the petition was liable to
be dismissed without trial. The Supreme Court considered the
question as to whether the High Court was competent to frame
rule for making provision for receiving the election petitions
presented to the High Court under Section 81 of the
Representation of the People Act. It is in that context that the
Supreme Court elucidated the difference between ministerial
act and adjudicatory act. It was observed, "By no stretch of
imagination can it be said that the "presentation" of an election
petition is part of the "trial" of an election petition".
5.1.3 The Supreme Court stated that the term "High Court" in
Section 81 denoted the institution as a whole and not literally
the High Court as constituted within the meaning of Article 216
of the Constitution. Even as it was highlighted that the
functions discharged by a High Court is divisible broadly into
judicial and administrative functions. It was stated that the
judicial functions cannot be delegated which are to be
essentially discharged by the Judges. On the other hand, the
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administrative functions need not necessarily be discharged by
themselves. There may be administrative or ministerial staff
which is, although part of the High Court, are invested with
discharging of administrative and ministerial functions of
dealing with the presentation of the cases.
5.1.4(a) The Supreme Court stated,
"Receiving a cause or a document and making
it presentable to a Judge for the purpose of
hearing or trial and many a functions post-
decision, which functions are administrative
and ministerial in nature, can be and are
generally entrusted or made over to be
discharged by the staff of the High Court, ..."
(para 13)
5.1.4(b) It was further observed,
"The Judges rarely receive personally any
document required to be presented to the
Court. Plaints, petitions, memoranda or other
documents required to be presented to the
Court are invariably received by the
administrative or ministerial staff, who would
also carry out preliminary scrutiny of such
documents so as to find that they are in order
and then make the documents presentable to
the Judge, so that the valuable time of the
Judge is not wasted over such matters as do
not need to be dealt with personally by the
Judge." (para 13)
5.1.5 The Supreme Court in Jamal Uddin Ahmad (Supra)
observed that the judicial function entrusted to a Judge is
inalienable and differs from administrative or ministerial
- 31 -
function which can be delegated for once whereof may be
secured through authorisation. The Supreme Court explained
thus,
"The judicial function consists in the
interpretation of the law and its application by
rule or discretion to the facts of particular cases.
This involves the ascertainment of facts in
dispute according to the law of evidence. The
organs which the State sets up to exercise the
judicial function are called courts of law or
courts of justice. Administration consists of the
operations, whatever their intrinsic nature may
be, which are performed by administrators; and
administrators are all State officials who are
neither legislators nor judges"
(See Constitutional and Administrative Law,
Philips and Jackson, Sixth Edition, p. 13). P.
Ramnath Aiyer's Law Lexicon defines judicial
function as the doing of something in the nature
of or in the course of an action in court, (p.
1015). The distinction between "judicial" and
"ministerial acts" is:
If a judge dealing with a particular matter
has to exercise his discretion in arriving at a
decision, he is acting judicially; if on the
other hand, he is merely required to do a
particular act and is precluded from entering
into the merits of the matter, he is said to be
acting ministerially."
(para 14)
(emphasis supplied)
5.1.5(a) The Supreme Court proceeded further to elaborate,
"Judicial function is exercised under legal
authority to decide on the disputes, after
hearing the parties, may be after making an
enquiry, and the decision affects the rights
- 32 -
and obligations of the parties. There is a
duty to act judicially. The Judge may
construe the law and apply it to a particular
state of facts presented for the
determination of controversy. A ministerial
act, on the other hand, may be defined to be
one which a person performs in a given
state of facts, in a prescribed manner, in
obedience to the mandate of a legal
authority, without regard to, or the exercise
of, his own judgment upon the propriety of
the act done (Law Lexicon, Ibid., p. 1234). In
ministerial duty nothing is left to discretion; it is
a simple, definite duty. Presentation of election
petition to the High Court within the meaning
of Section 81 of the Act without anything more
would mean delivery of election petition to the
High Court through one of its officers competent
or authorized to receive the same on behalf of
and for the High Court." (para 14)
(emphasis supplied)
5.1.6 The word 'ministerial' is defined in Black's Law Dictionary
(Ninth Edition) as 'of or relating to an act that involves
obedience to instructions or laws instead of discretion,
judgment or skill'. Similarly, the word 'ministerial act' is defined
as 'an act performed without the independent exercise of
discretion or judgment'. If the act is mandatory, it is also
termed as ministerial duty.
5.1.7 The status in the nature of duty discharged by
respondent No.1-Registrar at the time of receiving the petition
under Section 95 of the Code, satisfies the above tests. The
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Registrar has no discretion, but to receive and register the
application once the procedural requirements are fulfilled.
Registering Petition, a Ministerial Act
5.2 The above proposition and principles apply analogically
and directly to the situation obtaining in the facts of the present
case. The Registrar of NCLT is necessarily part of the
administrative segment of the Tribunal. As an administrative
staff, the office of the Registrar would receive the applications
filed under Section 95 of the Code along with the
documentations presented therewith. The function of receiving
the petitions which are filed or presented is a procedural stage.
It is an administrative or ministerial function. What calls for at
that stage is the scrutiny of compliance of procedural
requirements to mean that the petition is filed in orderly
manner. The examination of the petition on merits for its
maintainability or any such other stand point of merit, is foreign
and alien at such stage. The aspect whether the petition
presented with the Registrar is maintainable, is a part of merit
and it necessarily travels in the realm of judicial function. The
Registrar is not entitled to look into this aspect.
- 34 -
5.2.1 The Supreme Court clearly stated that receiving an
election petition presented under Section 81 of the Act is
certainly not a judicial function which needs to be performed by
a Judge alone. In the same way, presentation of petition under
Section 95 of the Insolvency Code before the Registrar, NCLT
is not a judicial function and the judicial scrutiny does not take
place at such stage. As there is no discretion in receiving an
election petition and it is to be received when presented in the
same conceptual way, the Registrar does not have any
discretion to judge the maintainability of petition under Section
95 of the Code and for that purpose go into the merit part of the
contents of the petition. It is a ministerial function simpliciter.
5.2.2 If the Registrar who is a purely administrative authority
is entrusted with the power or permission to examine the
presentation of the petition for its merit contents, the
adjudicatory stages statutorily contemplated in the Insolvency
Code would turn upside down. The judicial task of examining
the merits of the case of the party presenting the petition
including its maintainability is a matter to be examined only by
the NCLT at the stage when such stage is reached. If at the
stage of presentation of petition such aspects are permitted to
- 35 -
be gone into by the ministerial staff, it may lead to even corrupt
practices and serious errors of judgments. Even otherwise, the
issues which are in the judicial domain cannot be permitted to
be dealt with or tested by the administrative wing. It would
amount to topsy turving the entire legal framework and
adjudicatory mechanism. If the administrative authority is
permitted to go into the merits, it would amount to creating
additional tier in the adjudicatory framework.
5.2.3 There will be gainsaying that the Registrar of NCLT
acting to receive the applications under Section 95 of the Code
which was the stage of filing of the application, acts
administratively. The function of registering the applications
filed under Section 5 of the Insolvency Code is a ministerial
function and a procedural act. This stage does not store any
adjudicatory process. The role of the Registrar while
registering the application under Section 95 of the Code is not
adjudicatory in nature and this duty of the Registrar, NCLT was
in no way adjudicatory trapping. Application of judicial mind
towards merits has no place in discharge of a ministerial or
clerical function. For the Registrar, it is not permissible at the
time of registering the petition which is filed by the debtor or
creditor.
- 36 -
5.2.4 The case as pleaded by the applicant-appellant in its
application under Section 95 of the Insolvency Code filed
before the NCLT had definite adjudicatory element and
demonstrable adjudicatory trappings.
Jiwrajka Finally Answers
5.3 The scheme of the provisions in Chapter-III, Part-II and
Part-III and the distinction between the two came to be
discussed by the Supreme Court in Dilip B Jiwrajka (supra).
It was stated that Part-II deals with the eventuality namely the
initiation of liquidation broadly in situations where the resolution
plan is not received or is rejected by the adjudicating authority
for non-compliance of the requirements specified for the
approval of such plan in Section 31 of the Code. The role of
resolution professional under Part-II provisions are contra-
distinguishable from the role ascribed to a resolution
professional in Part-III.
5.3.1 Section 94 and 95 of the Code provide for application for
the debtor or creditor for the initiation of the insolvency
resolution process in relation to insolvencies and bankruptcies
of the individuals and partnership firms. Section 97 provides
for appointment of resolution professionals. In contrast to Part-
- 37 -
II provisions where the role of adjudicating authority is
contemplated right at the threshold, the appointment of
resolution professionals under Part-III provisions does not mark
commencement of adjudicatory process. The duties of the
resolution professionals appointed under Part-III are as
contained in Section 99.
5.3.2 The resolution professional examines the application
which may have been filed under Section 94 or 95 of the Code,
thereafter the resolution professional may require a debtor to
prove the debt claimed to have been unpaid. The information
which the resolution professional gathers is to be channelised
for the purpose of functions to be discharged by him under
Section 99(1) of the Code. Section 99 provides for submission
of report by the resolution professional to the adjudicating
authority for approval or rejection of the application. Section
100 contemplates admission or rejection of the application by
the adjudicating authority. 'Adjudicating Authority' as defined in
Section 5(1) is the National Company Law Tribunal constituted
under Section 408 of the Companies Act, 2013.
5.3.3 The issue as to whether when the adjudicating function
commences under the Insolvency and Bankruptcy Code, 2016
- 38 -
could be said to be no longer res integra in view of the
judgment of Supreme Court in Dilip B. Jiwrajka (supra). The
Supreme Court stated therein as to when the adjudicatory
function of adjudicatory authority commences. It was held that
adjudicatory function of adjudicatory authority commences
under Part III of the Code, 2016 after submission of a
recommendatory report by the resolution professional. In
challenging the constitutional validity of Section 95 to Section
100 of the Code, 2016 which was negatived by the Supreme
Court, the same nature of submissions were advanced on
behalf of the petitioners before the Supreme Court. It was
contended that certain aspects made to operate by the statute
after filing application under Section 95 of the Code, 2016 was
highly prejudicial. Inasmuch as without judicial intervention for
adjudication, there would operate an automatic interim
moratorium, for the resolution professional would be appointed
who would seek from the guarantor and would examine the
information received and then submit report.
5.3.4 The Supreme Court held that the role of the resolution
professional was prior to adjudication process and that the
resolution professional is only a facilitator,
- 39 -
"The resolution professional is required to
examine the application and to ascertain two
things: firstly, that the application satisfies the
requirement of Section 94 or Section 95 and,
secondly, that the applicant has provided the
information and furnished the explanation which
is sought under sub-section (4). Having carried
out the process of examination and
ascertainment as specified in sub-section (6), the
resolution professional may either recommend
the acceptance or the rejection of the application
by submitting a report. The report has to record
reasons and a copy of the report has to be
furnished to the debtor or the creditor, as the
case may be. The role of the resolution
professional prior to the adjudication process by
the adjudicating authority comes to a conclusion
with the submission of a report. Upon the
submission of the report, the matter then lies
within the jurisdiction of the adjudicating
authority. This is evident from the fact that
Section 100(1) stipulates that the adjudicating
authority has to pass an order either admitting or
rejecting the application within fourteen days
from the date of the submission of the report
under Section 99." (para 53)
5.3.5 It was further observed in paragraph 54 that it was
salient aspect to emerge that the resolution professional does
not possess any adjudicatory function in terms of provisions of
Section 99. The Legislature considered it appropriate to impose
the resolution professional before the adjudicatory function of
the adjudicatory authority which commences under Section
- 40 -
100. It was stated that the resolution professional does not
have the power under part III which is counter part as in part II,
it was observed that under Section 99, part III which is ascribed
to the resolution professional to that of a facilitatory and is to
gather the relevant information on the basis of the application
which is submitted under Section 94 of Section 95 of the Code,
2016.
5.3.6 The Supreme Court further stated thus,
"...The role under Section 99 which is ascribed to
the resolution professional is that of a facilitator
and is to gather relevant information on the basis
of the application which has been submitted
under Section 94 or Section 95 and after
carrying out the process which is referred to in
sub-section (2), sub- section (4) and sub-section
(6) of Section 99, to submit a report
recommending the acceptance or rejection of the
application. Significantly, the statute has used
the expression "examine the application",
"ascertain" and "satisfies the requirements" and
"recommend" the acceptance or rejection of the
application. The use of these expressions leaves
no manner of doubt that the resolution
professional is not intended to perform an
adjudicatory function or to arrive at binding
conclusions on facts. The role of the resolution
professional is purely recommendatory in nature
and cannot bind the creditor, the debtor or, the
adjudicating authority." (para 54)
- 41 -
Adjudicatory Stage Subsequent
5.4 In view of the above, it is an inescapable conclusion that
even the stage when the resolution professional functions
together the information to prepare the report to be submitted
to the adjudicatory authority-NCLT, the adjudicatory stage does
not reach and no adjudication of rights of the parties takes
place. Therefore, it could not be said at any stretch of
imagination that the Registrar, NCTL, while accepting or
receiving the petition under Section 95 of the Code, 2016 has
any adjudicatory permission, much less such power, or that at
such stage of filing petitioner, adjudication can take place in
any manner whatsoever.
5.4.1 The role of adjudicatory authority starts once the report
is submitted by the resolution professional. Such report is also
a purely recommendatory and does not bind the adjudicatory
authority, stated the Supreme Court,
"The resolution professional submits a report to
the adjudicating authority. The report is purely
recommendatory in nature and does not Bind the
adjudicating authority. Section 100(1) requires
the adjudicating authority to pass an order either
admitting or rejecting the application within
fourteen days from the date of the submission of
the report under Section 99. The adjudicating
authority has the power to instruct the debtor and
- 42 -
the creditor to enter into negotiation if it admits
the application. It may also entitle the creditors to
file for bankruptcy if it rejects the application on
the ground that it was intended to defraud the
creditors or the resolution professional. The
provisions dealing with moratorium under
Section 101(2) (c) correspond broadly to the
provisions of Section 14(1)(b) in relation to Part
II. Significantly, clause (c) of Section 101(2)
which places a restraint on the transfer,
alienation or disposal of assets does not find a
place in Section 96(1)(b). It consequently
operates only after the admission of an
application under Section 100." (para 59)
5.4.2 The Supreme Court further observed,
"This analysis would indicate that the
adjudicatory function of the adjudicating authority
commences, under Part III, after the submission
of a recommendatory report by the resolution
professional. Evidently, bearing in mind the clear
differences between CIRP under Part II and
insolvency resolution process for individuals and
partnership under Part III, the legislature has
carefully calibrated:
(i) The role of the resolution professional;
(ii) The imposition of the moratorium; and
(iii) The stage at which the adjudicating authority
steps in under Part II, on one hand, and Part III,
on the other." (para 60)
5.4.3 The submission was negatived by the Supreme Court
that an adjudicatory role should be interposed on the stage of
Section 94(5). The role of adjudicating authority was
- 43 -
highlighted in the following observations. The adjudicatory
sphere commences once the realm of functions of resolution
professional ends,
"Section 100(1) stipulates that the adjudicating
authority must issue an order within fourteen
days of receiving the report, either admitting or
rejecting the application filed under Sections 94
or 95, depending on the circumstances.
Importantly, the adjudicating authority does not
mechanically accept or reject applications based
solely on the resolution professional's report.
Instead, it must actively engage in a fair process,
affording the debtor a fair opportunity to present
their case. The adjudicating authority arrives at
its determination by considering arguments
supported by relevant material particulars. In
essence, the adjudicating authority conducts an
independent assessment, not solely relying on
the resolution professional's report, to decide the
fate of applications under Section 94 or 95 IBC."
(para 73)
5.4.4 It was further illustrated thus,
"The true adjudicatory function of the authority
commences under Section 100 after the
submission of the report. Another reason why we
are not inclined to accept the submission is that
what is described as a jurisdictional question by
the petitioners may not be a simple matter to be
decided as a question of law. The jurisdictional
questions of the nature which have been
suggested by the petitioners, namely, on
whether there is a subsisting debt or whether the
relationship of debtor and creditor subsists,
would involve a decision on mixed questions of
- 44 -
law and fact. The entire scheme of Sections 99
and 100 implicates timelines which have been
laid down by Parliament. The entire process of
implementing these timelines would be rendered
nugatory if an adjudicatory role were to be read
into the provisions of Section 97(5). The final
reason which would militate against accepting
the submission is that the provisions of Section
99 do not as such implicate any adverse civil
consequences particularly if those provisions are
read in the manner in which we now propose to
elucidate." (para 74)
5.4.5 The contention was canvassed in Dilip B Jiwrajka (supra)
that sub-section (2) of Section 95 indicated that an application
under sub-section (1) can be initiated only in respect of
partnership debt owed to the creditor. The court rejected the
contention to observe that it was not a correct reading and that
provisions of sub-section (2) cannot control the ambit of sub-
section (1) of Section 95. This interpretation is of significance
also in the context of the present controversy.
5.4.6 Conclusions were drawn by the Apex Court in paragraph
86 and in paragraph 86.6, it was in terms observed and held
that no judicial determination takes place until the adjudicating
authority decides under Section 100 whether to accept or reject
the application. It was stated that the report of the resolution
- 45 -
professional was only recommendatory which would not bind
the adjudicatory authority.
Moratorium A Statutory Effect
6. The contention that moratorium period would come into
play by virtue of operation of Section 96 of the Code, and
therefore the Registrar while registering the application under
Section 95 is permitted or is justified to look into and assess
the merits in relation to maintainability of the petition is
misconceived and does not stand to reason, when the filing
and registering of the application under Section 95 of the Code
in its nature does not travel beyond administrative process and
that it is a procedural exercise. The moratorium under Section
96 of the Code is a statutory contemplation to operate as a
sequator. A party filing an application under Section 95 of the
Code would automatically get advantage of operation of
Section 96.
6.1 This by itself does not give credence to the argument
that for such reason the Registrar would be entitled to go into
the aspect of maintainability of the petition and for that purpose
to delve into the merit part thereof. When legitimately invoked,
any provision of law can be used either as a shield or as a
- 46 -
sword to assert, defend and protect the rights by litigant. Filing
an application under Section 95 does not render non-
maintainable or examination of merits thereof at such stage,
would not be justified, merely for the reason that the applicant-
party will be invested with the benefit of Section 96.
6.1.1 For the reason of operation of Section 96 under the
statute, party filing application under Section 95 could not be
saddled with allegation of not acting bona fide. A litigant has
right to move the NCLT in accordance with the provisions of
Insolvency Code and to be governed by the provisions of the
Code cumulatively availing the remedy of filing application
under Section 95 could be resorted to as of right by the
applicant.
6.1.2 If for the reason of filing Section 95 application, other
proceedings initiated by the rival party in relation to the subject
matter are slowed down or affected in their progress or stand
postponed for some period, then it could not be complained
that the invocation of law or remedy in law by other party
amounts to abuse of process of law. A litigant is entitled to
employ all legal means in pursuit to its right to legal
adjudication and availment rights in that regard. This negates
- 47 -
the submission on the part of the respondent-original petitioner
that the filing of Section 95 application by the applicant had an
effect of protracting and postponing the arbitral proceedings.
Prayers Misconceived
7. It is therefore clear that the stage of filing application
under Section 94 or Section 95, is too preliminary a stage to
perceive and conceive any adjudicatory attribute at that stage.
The Registrar of the NCLT would receive and register the
petition. Thereafter, the subsequent provisions from Sections
96 to 100 of the Code would operate. The resolution
professional would examine the application as to whether it
satisfies the requirements of Section 94 or 95, as the case may
be, to recommend the acceptance or rejection of the
application by submitting a report. As held in Dilip B Jiwrajka
(supra), the stage of discharge of duties by the resolution
professional as above is not the adjudicatory process and the
functions which the resolution professional performs are not
adjudicatory in nature. Therefore, it is impossible to conclude
that the Registrar at the stage of receipt of the petition filed
under Section 94 or 95 of the Code by the debtor or creditor,
which is a stage even prior to Section 97 and 99 of the Code
- 48 -
can decide on the maintainability of the petition by entering into
merit and thus the realm of adjudication.
8. The submission of learned advocate for the appellant
could not brushed aside lightly when it was contended that the
prayers made in the writ petition was in the nature of anti-suit
injunction. The petitioner by seeking declaration as prayed for
wanted thwart at the threshold from presentation of the petition
under Section 95 of the Code which was not permissible once
it was filed with procedural compliance. It could be contended
on the basis of the principles laid down by the Supreme Court
in Modi Entertainment Network and another Vs. W.S.G.
Cricket Pte. Ltd, (AIR 2003 SC 1177) that injunction in the
nature of anti-suit injunction could hardly be granted inasmuch
as it has the effect of interfering with the jurisdiction of the
Court.
8.1 In the writ petition, Article 226 of the Constitution was
invoked to seek a prayer that the petition of the appellant under
Section 95 of the Code should not be registered and that the
registration was illegal. It is difficult to hold that the prayer of
such kind could have been made in the writ jurisdiction, much
less could be granted.
- 49 -
9. The various contentions raised by both the sides on
merits about the maintainability of the petition under Section 95
and for that purpose, whether the persons could be classified
as 'corporate guarantors', etc. are not gone into or dealt with on
merits.
9.1 The issue examined is only as to whether at the stage of
receipt of the petition under Section 95, the Registrar, NCLT-
respondent No.1, has power and jurisdiction to decide on the
maintainability of such application and whether by adjudicating
merits on that score at that stage, the petition could be rejected
by the Registrar.
9.2 All such questions of merits fall within the domain of
adjudicating authority-the NCLT to be considered at the
appropriate stage when the report of the resolution professional
is forwarded to it.
9.3 No opinion is expressed by this Court on the merit part of
the rival contentions. This Court has not travelled into that
arena.
- 50 -
Conclusion
10. In view of the foregoing discussion and reasons, the
following conclusions have to follow,
(i) Respondent No.1-the Registrar, National Company Law
Tribunal in receiving the filed or lodged petition under Section
94 or Section 95, respectively by a debtor or creditor, as the
case may be, to initiate the insolvency resolution process
before the Registrar of the National Company Law Tribunal,
performs pure administrative function.
(ii) The act of receiving of the petition initiating the
insolvency resolution process is ministerial and procedural in
nature. It is an elementary stage which does not have any
adjudicatory process.
(iii) This act on the part of the Registrar in receiving the
petitions under Sections 94 or 95 of the Code, as the case may
be, has no judicial trapping.
(iv) It is not permissible for the Registrar, NCLT, to go into
the merits of the petition and/or to decide about maintainability
thereof on merits, for, the Registrar does not discharge any
adjudicatory or judicial function at this stage.
- 51 -
(v) Once the petition under Sections 94 or 95 of the Code,
as the case may be, is filed and registered, it will follow the
course contemplated in Sections 96 to 100. The operation of
all these provisions is statutory.
(vi) The resolution professional who would be appointed
under Section 97, is required to submit report to the
adjudicating authority recommending for approval or rejection
of the application.
(vii) In view of the decision of the Supreme Court in Dilip B.
Jiwrajka (supra), this stage also is not adjudicatory.
(viii) It is the stage of Section 100 of the Insolvency and
Bankruptcy Code, 2016, which marks the commencement of
adjudicatory process.
(ix) The adjudicating authority within the stipulated time,
upon submission of the report under Section 99, shall either
admit or reject the application referred to in Sections 94 or 95,
as the case may be.
(x) It therefore necessarily follows that the adjudicatory
function could not be pinned or performed at the stage of
receipt of the petition by the Registrar, who has no legal
- 52 -
sanction to assume the role of adjudicator to decide the
maintainability of the petition.
Result
10.1 Resultantly and in view of what is held above, the
judgment and order of learned Single Judge dated 6th March
2024 passed in writ petition No.26977 of 2023, allowing the
petition, is hereby set aside.
10.2 As a consequence of setting aside of impugned
judgment and order of learned Single Judge, appellant's
petition No.2903111/01786/2023 presented under Section 95
of the Insolvency and Bankruptcy Code, 2016 shall stand
restored. It shall be proceeded with to be treated for its further
stages as per the provisions of the Insolvency Code, 2016, to
be taken to its logical end in accordance with law.
11. The present appeal stands allowed accordingly.
Sd/-
(N.V. ANJARIA)
CHIEF JUSTICE
Sd/-
(K.V. ARAVIND)
JUDGE
