Sanchayita Lahkar

The High Court of Kerala Single Bench of Justice K. Natarajan set aside an ad interim injunction issued by a Sub Court in a suit filed against a company under liquidation. The court held that when liquidation proceedings are pending before the National Company Law Tribunal (NCLT), the jurisdiction of the Civil Court is barred under the Insolvency and Bankruptcy Code, 2016. Accordingly, the High Court quashed the Sub Court's order, declaring it to be passed "without jurisdiction" and hence "illegal and erroneous," and directed the respondent to approach the NCLT for appropriate relief.

The petitioners in the Original Petition (Civil) were Vysali Pharmaceuticals Limited, represented by its Liquidator, Kizhakkekara Kuriakose Jose, and the liquidator himself. The respondents included individuals and the Kerala State Industrial Development Corporation Limited. The dispute originated from a civil suit filed before the Sub Court, Ernakulam, seeking a permanent injunction against the petitioners and others.

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In the said civil suit, an application for ad interim injunction was moved under Order 39 Rules 1 and 2 of the Code of Civil Procedure, 1908 (CPC). The Sub Court, without issuing notice to the defendants, granted an ad interim injunction restraining the petitioners from interfering without due process of law.

The petitioners contended before the High Court that such an injunction was granted despite the pendency of insolvency proceedings before the NCLT. The petitioners had been subjected to an insolvency process vide order dated 13.10.2023 passed in CP(IB)/29/KOB/2022. A liquidation order was subsequently issued on 03.12.2024 in IA (IBC)/LIQ/6/KOB/2024. The liquidator had also published a notice dated 07.12.2024 and admitted claims in accordance with the Code.

Despite this, the Sub Court entertained the civil suit, which the petitioners argued was a direct violation of Section 63 and Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016. These provisions explicitly bar Civil Courts from entertaining any suit or proceeding in respect of matters within the jurisdiction of the NCLT.

The petitioners further contended that Section 231 of the IBC also prohibits the jurisdiction of Civil Courts in matters pending before the Adjudicating Authority or Board. Therefore, the injunction issued by the Civil Court was not only procedurally irregular but also substantively without legal sanction.

The respondents opposed the Original Petition on the grounds that the petitioners had alternate remedies available. Specifically, it was argued that the petitioners could have approached the same Civil Court under Order 39 Rule 4 CPC to vacate the injunction or could have filed a Civil Miscellaneous Appeal under Order 43 CPC. As such, invoking Article 227 of the Constitution was not warranted.

However, the learned counsel for the petitioners responded that when an order is passed without jurisdiction, the bar under Article 227 does not apply and the High Court can intervene directly.

The High Court took into account the fact that the 1st respondent, who filed the civil suit, had not disclosed the pendency of liquidation proceedings before the NCLT. The suit listed the company as the 1st defendant and identified it as a company under liquidation. The 3rd defendant was named as the Liquidator. Despite these indicators, the Sub Court failed to examine whether the suit was maintainable.

The High Court noted that as per Order 7 Rule 11 (a)(b)(c)(d) of CPC, the trial court is required to suo moto verify whether a suit is maintainable, whether it is barred by law, or whether the required court fee has been paid, even in the absence of any application to that effect. The trial court did not carry out this examination and instead proceeded to grant the injunction.

The High Court recorded: "On a perusal of the very cause title, the name of the 3rd defendant is shown as company liquidator, that clearly shows that the 1st defendant is under liquidation and liquidation proceedings is pending before the NCLT."

The court further observed: "However, the trial court ignored and passed the order by granting ad interim temporary injunction against the defendant."

Quoting the relevant statutory provision, the High Court stated: "It is also brought to the notice of this Court by the learned counsel for the petitioners that the NCLT is having jurisdiction under the IBC and as per Section 63, wherein it barred the civil court jurisdiction to entertain any suit."

On the applicability of Section 60(5) of the IBC, the High Court noted: "As per the NCLT, Section 60(5), if any claims made by any persons either party to the petition or other than party to the petition, they have to approach the NCLT for their grievance in respect of either the insolvency or any other grievance."

The court concluded that: "The jurisdictional Civil Court is barred for entertaining the very suit itself, when the suit itself is not maintainable, the question of granting ad interim injunction is illegal."

Regarding the maintainability of the Original Petition before the High Court under Article 227, the judgment stated: "When the order is illegal without jurisdiction, then this Court can entertain the petition under Article 227 of the Constitution of India."

The court also cited Section 231 of the IBC, reiterating: "Section 231 of IBC also bars the Civil Court for entertaining any suit when the matter is pending before the adjudicating authority or the Board."

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The High Court therefore concluded: "Such being the case, the order under challenge call for interference which is illegal and without any authority of law."

The High Court issued the following directions:

"Accordingly, this petition is allowed, and the order under challenge in I.A.No.3/2025 in O.S.No.41/2025 is hereby set aside and the I.A. is dismissed. The trial court is directed to hear the maintainability of the suit and dispose of the matter."

"The respondent is at liberty to approach the NCLT for necessary relief."

Advocates Representing the Parties:

For the Petitioners: Smt. D. Reetha, Sri. P.V. Vinod (Bengalam)

For the Respondents: Sri. S. Shyam, Sri. P.A. Mohammed Aslam, Shri. Arthur B. George, Shri. E.B. Thajuddeen, Shri. Irshad V.P., Shri. Sarath Sasi, Shri. Muhammed Riswan K.A., Shri. Midhun Mohan, Shri. Abdul Samad P.B., Shri. Ramshad K.R.

Case Title: Vysali Pharmaceuticals Limited & Anr. vs. T. Beena & Ors.

Neutral Citation: 2025: KER:41864

Case Number: OP(C) No. 800 of 2025

Bench: Justice K. Natarajan