Case Note & Summary
The writ petition was filed by Dharamshi K. Patel and Kamala D. Patel, shareholders and suspended directors of Evershine Wood Packaging Private Limited (the corporate debtor), challenging the order dated 23.06.2023 passed by the National Company Law Tribunal (NCLT), Chennai Bench, in CP(IB) No. 13/2023. The NCLT had admitted the company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) and appointed an Interim Resolution Professional (IRP). The corporate debtor had availed credit facilities from Indian Bank from 2017 and defaulted on repayment. The bank declared the account as Non-Performing Asset (NPA) on 31.03.2021 with effect from 23.12.2020. A demand notice was issued on 10.11.2021, and the bank filed the Section 7 application. The corporate debtor admitted the debt and default, and had submitted One-Time Settlement (OTS) proposals, which were not accepted by the bank. The NCLT admitted the petition, leading to the present writ petition. The petitioners argued that the NCLT order was erroneous and that the bank had not considered the OTS proposal. The court, however, noted that the debt and default were admitted, and the NCLT had correctly applied the law. The court held that the writ petition under Article 226 was not maintainable as the petitioners had an alternative remedy of appeal under Section 61 of the IBC. The court dismissed the writ petition, upholding the NCLT order.
Headnote
A) Insolvency and Bankruptcy Code - Section 7 Admission - Debt and Default - The NCLT admitted the CIRP application under Section 7 IBC based on the financial creditor's claim and the corporate debtor's admission of debt and default. The court held that the existence of debt and default is sufficient for admission, and the writ petition challenging the order is not maintainable as the petitioners have an alternative remedy under Section 61 IBC. (Paras 1-4)
B) Constitutional Law - Article 226 - Alternative Remedy - The court held that the writ jurisdiction under Article 226 is not a substitute for the statutory appeal provided under Section 61 of the IBC, 2016. The petitioners failed to demonstrate any exceptional circumstances warranting interference. (Paras 1-4)
Issue of Consideration
Whether the NCLT order admitting the company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 is liable to be quashed in writ jurisdiction under Article 226 of the Constitution of India when the debt and default are admitted.
Final Decision
The writ petition is dismissed. The NCLT order dated 23.06.2023 in CP(IB) No. 13/2023 is upheld. No costs. Consequently, connected miscellaneous petitions are closed.
Law Points
- Admission of CIRP under Section 7 IBC requires only existence of debt and default
- not adjudication of disputed facts
- Writ jurisdiction under Article 226 is not a substitute for statutory appeal under Section 61 IBC
- NCLT's satisfaction regarding default is based on material available
- OTS proposal does not negate default unless accepted
Case Details
WP.No.712/2024 and WMP.Nos.730 & 732/2024
Mr.P.H.Arvind Pandian (Senior counsel for M/s.Ananda Gomathy) for petitioners, Mr.P.V.Murlidhar for R1, Mr.B.Thilak Narayanan for R2
Dharamshi K. Patel and Kamala D. Patel
Indian Bank, Shriraam Shekher (Resolution Professional), and National Company Law Tribunal
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India seeking certiorari to quash NCLT order admitting CIRP application under Section 7 IBC.
Remedy Sought
Petitioners (shareholders and suspended directors of corporate debtor) sought quashing of NCLT order dated 23.06.2023 admitting the company petition and appointing IRP.
Filing Reason
Petitioners challenged the NCLT order on the ground that the bank did not consider the OTS proposal and that the admission was erroneous.
Previous Decisions
NCLT, Chennai Bench, by order dated 23.06.2023 in CP(IB) No. 13/2023, admitted the company petition under Section 7 IBC and appointed an Interim Resolution Professional.
Issues
Whether the NCLT order admitting the CIRP application under Section 7 IBC is liable to be quashed in writ jurisdiction when debt and default are admitted.
Whether the writ petition is maintainable in view of the alternative remedy of appeal under Section 61 IBC.
Submissions/Arguments
Petitioners argued that the NCLT order was erroneous and that the bank had not considered the OTS proposal.
Respondents argued that the debt and default were admitted, and the writ petition was not maintainable due to alternative remedy.
Ratio Decidendi
The existence of debt and default is sufficient for admission of a CIRP application under Section 7 IBC. A writ petition under Article 226 is not maintainable when there is an alternative remedy of appeal under Section 61 IBC, and no exceptional circumstances are shown.
Judgment Excerpts
This writ petition is filed by the Shareholders and suspended Directors of the Corporate Debtor, namely, Evershine Wood Packaging Private Limited, seeking for issuance of a writ of certiorari to quash the order passed by the National Company Law Tribunal [in short 'NCLT'], Division Bench-II, Chennai, dated 23.06.2023 in CP[IB].No.13/2023, admitting the Company Petition with directions and appointing Interim Resolution Professional [IRP] with further direction.
It is admitted that the Corporate Debtor committed default in payment of loan/debt and hence, a Demand Notice was issued on 10.11.2021.
Procedural History
The financial creditor (Indian Bank) filed an application under Section 7 IBC before NCLT, Chennai, which was admitted on 23.06.2023. The petitioners (shareholders and suspended directors) filed the present writ petition under Article 226 challenging the NCLT order. The writ petition was reserved on 09.12.2024 and delivered on 23.01.2025.
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 7
- Constitution of India: Article 226
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 13(2)
