Case Note & Summary
The dispute arose out of insolvency proceedings against M/s Wind World (India) Limited, which held a lease over forest land for operating windmills. The lease expired in 2018, and the company applied for renewal in 2020. During pendency, the State Government granted temporary permission in 2020 to run the windmills, subject to forest clearances. In May 2022, the State suspended operations due to lack of clearances. Instead of challenging this administrative decision before a superior court, the company filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, Ahmedabad, in the pending insolvency resolution process. The NCLT passed an order on 06-07-2022 directing the State to permit windmill operations on the earlier conditions, holding it was essential for resolving the insolvency. Aggrieved, the State filed a writ petition under Articles 226 and 227 of the Constitution before the High Court of Karnataka, contending that the NCLT exceeded its jurisdiction by effectively exercising judicial review over an administrative decision. The High Court considered the scope of Section 60(5) IBC and the binding Supreme Court decision in Embassy Property Developments Pvt. Ltd. v. State of Karnataka (2020) 13 SCC 308, which held that NCLT, being a statutory tribunal, does not possess the power of judicial review. It observed that the State's suspension order was in the public law domain and could only be challenged before a constitutional court. The NCLT had acted beyond its statutory powers by suspending the State's order and permitting operations. Accordingly, the High Court allowed the writ petition, quashed the NCLT order as without jurisdiction and a nullity, and affirmed that the NCLT cannot be elevated to the status of a superior court for judicial review of administrative action.
Headnote
A) Insolvency Law - Jurisdiction of NCLT - Section 60(5) Insolvency and Bankruptcy Code, 2016 - NCLT Cannot Exercise Judicial Review Over Administrative Decisions - The NCLT, while dealing with an application under Section 60(5), directed the State Government to permit windmill operations, effectively reviewing the State's administrative suspension order. Such judicial review is not within the statutory powers of NCLT; it is a function of constitutional courts. Held that the order was passed without jurisdiction and is a nullity. (Paras 8-9) B) Constitutional Law - Judicial Review under Articles 226 and 227 - NCLT Not a Superior Court - Constitution of India, Articles 226, 227 - Following the Apex Court decision in Embassy Property Developments v. State of Karnataka, the NCLT is a creature of statute and cannot act as a constitutional court to suspend or review administrative decisions. The decision of the State Government to suspend windmill operations was in the public law domain, and only the High Court under Articles 226/227 has jurisdiction to review it. Held, the impugned order violates this principle and is set aside. (Para 10)
Issue of Consideration
Whether the National Company Law Tribunal exceeded its jurisdiction by passing the impugned order directing the State Government to permit functioning of the windmill, essentially exercising judicial review over an administrative decision
Final Decision
The High Court allowed the writ petition, holding that the NCLT order was without jurisdiction and a nullity. The impugned order dated 06.07.2022 passed by NCLT was quashed. The NCLT had exceeded its jurisdiction by exercising judicial review which is not within its statutory powers, following the Supreme Court's decision in Embassy Property Developments Pvt. Ltd. v. State of Karnataka.
Law Points
- Section 60(5) of Insolvency and Bankruptcy Code
- 2016
- NCLT does not have power of judicial review over administrative decisions
- decisions in public law domain can only be challenged in superior courts under constitutional jurisdiction
- moratorium under Section 14 does not suspend governmental statutory actions
