Writ Petition Is Maintainable Despite Remedy Under IBC, If NCLT Order Is Passed In Violation Of Natural Justice: Kerala High Court

The present writ petition was filed seeking the quashing of an order passed by the NCLT, Kochi Bench. By that impugned order, the adjudicating authority has directed the resolution professional to reject the claim filed by the home buyers, including the petitioner. The corporate debtor, who is the builder and the landowner, entered into an agreement to construct the building named Kerl Trade Centre at Marine Drive, Cochin. Sale deeds were executed by the landowners in favor of the petitioner and other persons. The financial creditor filed a petition before the adjudicating authority to initiate proceedings against the corporate debtor. All creditors, including the petitioner, filed their claim before the resolution professional. In the first CoC meeting, consensus was made to include the petitioner and other similar creditors in the CoC. The financial creditor was also made a member of the CoC. The financial creditor filed IA(IB)/3010/KOB/2023 in CP/IBC/33/KOB/2021 praying for a rejection of the claim of the home buyers/space buyers/respondents 2 to 5, who already had registered allotments in their favor, and to reconstitute the CoC with valid voting share proportionate. The petitioner filed an objection, and the resolution professional filed a counter affidavit. The tribunal reserved the case for orders on 28.02.2024. After the case was taken for orders, the financial creditor filed an affidavit on 08.03.2024. The adjudicating authority passed a final order directing the resolution professional to reject the claim of the home buyers/petitioners and respondents 4 to 6 and to reconstitute the CoC with valid representations/voting shares proportionate to their claim amounts. The petitioner argues that the order was passed based on an affidavit that was passed after concluding the hearing, and the petitioner was not given the opportunity to make his submissions on the affidavit. The financial creditor submitted that the petitioner has a remedy of appeal u/s 61 of the IBC, and hence the present writ is not maintainable. It submitted that the IBC is a complete code in itself and a writ against the decision of the adjudicating authority is not maintainable. Decision of the Hon'ble High Court The Hon'ble High Court discussed its own ruling in the case of Tharakan Web Innovations Pvt. Ltd. (M/s.) & Anr. v. National Company Law Tribunal, Kakkanad & Ors. [2022 SCC OnLine Ker 498], wherein it was held that the availability of an alternate remedy will not be a reason for not exercising jurisdiction when there is a violation of principles of natural justice or where the proceedings challenged are without jurisdiction. The bench observed that in the present case the final hearing was concluded and then the order was passed, based upon the affidavit of the respondent. The bench noted that it is evident from the admitted facts that the adjudicating authority has accepted and recorded the affidavit that was filed after the hearing, and the order itself has been issued relying on the contents of the said affidavit. The bench noted the adjudicating authority should have heard the petitioner and like persons on the contents of the affidavit. The Hon'ble Court allowed the writ petition and discussed that since it is an order passed in violation of the principles of natural justice, it is only appropriate that the same is set aside and the matter is remanded back to the adjudicating authority for passing orders after hearing the petitioner and other similarly situated persons on the contents of the affidavit and on the proposal to record the same and pass orders. Case Name: Jaju Babu v. NCLT & Ors. Case Number: W.P. (C) No. 15670 of 2024Citation: 2025 LiveLaw (Ker) 473 Bench: Hon'ble Mr. Justice T.R. Ravi For Petitioner: Shri P.B. Krishnan (Senior Advocate) instructed by Shri Terry V. James For Respondent: Shri Suresh Dutt Dobhal (for NCLT – Respondent No. 1) Shri Harikumar G. (for Phoenix ARC Pvt. Ltd. – Respondent No. 2) Judgment Date: 17.07.2025 Click Here To Download Order/Judgement

Writ Petition Is Maintainable Despite Remedy Under IBC, If NCLT Order Is Passed In Violation Of Natural Justice: Kerala High Court

Mohd.Rehan Ali

Tags