Case Note & Summary
The appeal arises from an order dated 09.10.2023 passed by the Adjudicating Authority (NCLT, Chennai) admitting a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by IDBI Trusteeship Services Limited (the Financial Creditor) against Tuscan Consultants and Developers Private Limited (the Corporate Debtor), of which the appellant S. Vasudevan is the suspended director. The Corporate Debtor had executed an unconditional and irrevocable Corporate Guarantee Agreement dated 29.06.2016 in favour of the Financial Creditor to secure the obligations of Ozone Projects Pvt Ltd (the Principal Borrower) under a Debenture Trust Deed. The Principal Borrower defaulted in repayment, and despite demand notices and extensions, failed to pay. Consequently, the Financial Creditor filed a Section 7 application against the Corporate Debtor before NCLT Chennai on 19.09.2022, and separately against Ozone Projects on 05.08.2022. The NCLT admitted Ozone Projects into CIRP on 01.05.2023, but that order was stayed by this Tribunal on 10.05.2023 in a related appeal. In the proceedings against the Corporate Debtor, no reply was filed despite multiple opportunities, as the parties were reportedly engaged in settlement talks. The NCLT closed the right to file a reply on 04.09.2023 and eventually admitted the application on 09.10.2023, initiating CIRP. The suspended director appealed, primarily contending that the NCLT Chennai lacked territorial jurisdiction because the registered office of the Corporate Debtor is in Bangalore. He relied on Section 60(1) IBC, which mandates that insolvency proceedings be conducted by the NCLT where the registered office is located. He further argued that the exception in Section 60(2) allows filing at the NCLT where the Principal Borrower's CIRP is pending, but at the time of filing the application against the Corporate Debtor, Ozone Projects' CIRP had not been admitted and was only pending at the filing stage, thus the exception did not apply. The arguments of the Respondent on this point are not recorded in the available excerpt. The Appellate Tribunal considered the provisions of Section 60(1) and (2) and the factual matrix. The text of the judgment provided is incomplete, and the final analysis and decision are not included. Therefore, the outcome of the appeal is not known from the given material.
Headnote
A) Insolvency Law - Territorial Jurisdiction - Interpretation of Section 60(1) and Section 60(2) of the Insolvency and Bankruptcy Code, 2016 - The appeal challenged the admission of CIRP against the Corporate Debtor (Corporate Guarantor) on the ground that NCLT Chennai lacked territorial jurisdiction because the Corporate Debtor's registered office was in Bangalore and no CIRP was pending against the Principal Borrower when the application was filed. The Appellant argued that the exception under Section 60(2) applies only when CIRP is pending, not merely upon filing. The matter was heard and the Tribunal reserved judgment (Paras 6-8).
Issue of Consideration
Whether the NCLT, Chennai had territorial jurisdiction to admit the Section 7 application against the Corporate Debtor (Corporate Guarantor) whose registered office is in Bangalore, when the CIRP against the Principal Borrower (Ozone Projects) was not yet admitted by the NCLT, Chennai at the time of filing, given Section 60(1) and (2) of the Insolvency and Bankruptcy Code, 2016.
Law Points
- Territorial jurisdiction under Section 60 of IBC
- 2016
- requirement of filing at place of registered office
- exception under Section 60(2) only when CIRP is pending against principal borrower
- mere filing of application not sufficient to establish jurisdiction
Case Details
2024 LawText (NCLAT) (01) 87
Company Appeal (AT) (CH) (Ins) No. 362 of 2023
Justice Sharad Kumar Sharma, Member (Judicial)
Mr. T K Bhaskar, Mr. Chandramouli Prabhakar (for Appellant); Mr. Angad Varma, Mr. Nikhil Mehndiratta, Ms. Nidhisha Choksi (for Respondent No.1); Mr. Amir Bavani (for Respondent No.2/RP)
IDBI Trusteeship Services Limited & Anr.
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Nature of Litigation
Appeal against admission of a Section 7 application under the Insolvency and Bankruptcy Code, 2016 by the National Company Law Tribunal, Chennai.
Remedy Sought
The Appellant (suspended director of the Corporate Debtor) sought to set aside the order of the NCLT admitting the application and terminating the CIRP.
Filing Reason
The Appellant contended that the NCLT Chennai lacked territorial jurisdiction as the registered office of the Corporate Debtor is in Bangalore, and the exception under Section 60(2) IBC was not applicable since no CIRP was pending against the Principal Borrower at the time of filing.
Previous Decisions
The Adjudicating Authority (NCLT, Chennai) by order dated 09.10.2023 in CP/IB/81/CHE/2023 admitted the Section 7 application and initiated CIRP against the Corporate Debtor. Additionally, the same NCLT admitted the CIRP against the Principal Borrower on 01.05.2023, which was stayed by this Tribunal on 10.05.2023 in CA (AT) (CH) (Ins) No. 134/2023.
Issues
Whether the NCLT, Chennai had territorial jurisdiction to entertain the Section 7 application against the Corporate Debtor whose registered office is in Bangalore, given the provisions of Section 60(1) and (2) of the Insolvency and Bankruptcy Code, 2016, particularly when no CIRP was pending against the Principal Borrower at the time of filing.
Submissions/Arguments
Appellant argued that under Section 60(1) of the IBC, the application should have been filed at the NCLT having jurisdiction over the place where the registered office of the corporate debtor is located, i.e., NCLT Bangalore. The exception under Section 60(2) requires a pending CIRP against the principal borrower, and since at the time of filing the application against the Corporate Debtor, the CIRP against Ozone Projects had not been admitted and was only pending at the filing stage, the condition was not met, rendering the NCLT Chennai without jurisdiction.
Judgment Excerpts
The Appellant submits that the said application was filed before the Ld. NCLT, Chennai on the plea that CIRP proceedings had already been initiated against the Principal Borrower ... and because the application against Ozone Projects was yet to be admitted, the above fact of mere filing of application under Section 7 ought not have been taken as to be the basis for the purposes of initiation of the proceedings under Section 7 of the I & B Code, 2016, before learned NCLT, Chennai, as against the Corporate Debtor.
the strength of the argument of the learned counsel for the Appellant has been that, in view of the stipulations made under Section 60(1) and 60(2) of the I & B Code, 2016, where it has been provided that, insolvency proceedings against a Corporate person shall be carried on before that NCLT in whose the territorial jurisdiction, the registered office of such Corporate Person is situated, subject to exception made in Section 60(2) of the Code, since CIRP proceedings was yet to be commenced against Ozone Projects, there was no pending CIRP proceedings as such and therefore the proceedings against the Corporate Debtor M/s. Tuscan Consultants & Developers, (the Corporate Guarantor to Ozone projects) ought to have been initiated before the learned NCLT, Bangalore
Procedural History
The Financial Creditor (IDBI Trusteeship) filed Section 7 application against Principal Borrower Ozone Projects on 05.08.2022. On 19.09.2022, it filed Section 7 application against Corporate Debtor (Tuscan Consultants) before NCLT Chennai. The NCLT admitted Ozone Projects into CIRP on 01.05.2023; that order was stayed by NCLAT on 10.05.2023 in CA (AT) (CH) (Ins) No. 134/2023. In the Corporate Debtor's case, no reply was filed. On 04.08.2023, last opportunity given subject to cost. On 04.09.2023, NCLT closed the right to file reply. IA No. 2675/2023 seeking recall of that order and IA No. 2676/2023 under Section 65 of IBC were filed. On 09.10.2023, NCLT admitted the application against Corporate Debtor. Appeal filed before NCLAT.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 7, Section 60(1), Section 60(2), Section 65
