Safiya Malik

The High Court of Kerala Single Bench of Justice T.R. Ravi set aside a decision passed by the National Company Law Tribunal (NCLT), Kochi Bench, on the ground that the final order was rendered based on an affidavit filed after the hearing had concluded, without affording the petitioner an opportunity to respond. The Court directed that the matter be remanded back for fresh consideration after hearing the petitioner and similarly placed parties on the contents of the affidavit. The final order in question pertained to the rejection of the petitioner’s claim as a financial creditor and removal from the Committee of Creditors (CoC).

The petitioner, an allottee/homebuyer in the Kerala Trade Centre at Marine Drive, Cochin, had entered into an agreement for sale and construction with the corporate debtor. The corporate debtor, in collaboration with the landowner M/s. Cherupushpam Films Pvt. Ltd., entered into the said agreement on 8.12.2003. Loans were secured from the South Indian Bank for the construction. Registered sale deeds were executed by the landowners in favour of the petitioner and other respondents, even though the bank maintained a charge over the property, which did not reflect in the encumbrance certificates.

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Subsequently, the 2nd respondent, Phoenix ARC Private Limited, filed a petition before the NCLT on 10.10.2022 to initiate Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. Creditors, including the petitioner, submitted their claims before the Resolution Professional, which were adjudicated accordingly. At the first CoC meeting, it was agreed to include the petitioner and other similarly placed creditors in the CoC, and they were accordingly included. The 2nd respondent also became a CoC member.

Later, the 2nd respondent filed IA(IB)/310/KOB/2023 before the NCLT, Kochi, praying for the rejection of claims by the petitioner and others who held registered allotments, and for reconstitution of the CoC based on valid voting share proportionate to claim amounts. It was argued that the Resolution Professional had erred in admitting claims from persons who already had registered sale deeds and making them CoC members.

The petitioner and other respondents filed objections, and the Resolution Professional submitted a counter-affidavit. The matter was heard and reserved for orders on 28.02.2024.

After the matter was reserved, the 2nd respondent filed an affidavit dated 08.03.2024, agreeing not to enforce charge/mortgage rights on the petitioner’s units, subject to the condition that such persons are not treated as financial creditors or included in the CoC. The NCLT passed its final order on 09.04.2024, directing the Resolution Professional to reject the claims of the petitioner and other similarly situated allottees and to reconstitute the CoC. The petitioner challenged this decision.

The 2nd respondent contended that the petitioner had an alternative remedy under Section 61 of the Insolvency and Bankruptcy Code (IBC), 2016. It was further argued that registered title deed holders no longer had claims against the corporate debtor and could not remain in the CoC. It was submitted that the affidavit in question merely reiterated previously stated contentions and that the petitioner did not submit a counter despite being served.

The Court considered the preliminary issue of maintainability. It recorded “In Innoventive Industries Limited v. ICICI Bank & Anr. [(2018) 1 SCC 407], the Hon'ble Supreme Court has held that the IBC 2016 is a complete Code in itself”. It was noted that one objective of the Code is “to bring the insolvency law in India under a single unified umbrella with the object of speeding up the insolvency process”.

The Court referred to Phoenix ARC Private Ltd. v. Vishwa Bharati Vidya Mandir & Ors. [(2022) 5 SCC 345] where the Supreme Court held that a writ petition under Article 226 was not maintainable when an alternative statutory remedy existed under the SARFAESI Act. Notably, the same Phoenix ARC was the appellant in that case.

Further reference was made to Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. [(2019) 4 SCC 17] and Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company [2021 SCC OnLIne SC 313], where it was held that the IBC is a self-contained Code and the High Courts should refrain from interfering with the resolution process.

However, the Court stated that there are exceptions to the bar on writ jurisdiction, recording “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”.

Analysing the facts, the Court noted “A reading of Ext.P5 would show that the order has been rendered based on the affidavit filed on 8.3.2024, the details of which have been extracted in paragraph 24 of the order”. The Court further stated: “It is also evident from paragraph 27 of the order that the Tribunal has taken the affidavit on record and issued the directions for removing respondents 2 to 5, who were the home buyers/space buyers, from the CoC”.

The Court found that: “The claim of persons like the petitioner was accepted in 2022 in the presence of the secured creditor, and that is the reason why the petitioner is challenging his removal from the CoC”. Referring to the affidavit filed by the 2nd respondent, the Court noted: “They would not enforce their claim against persons like the petitioner on condition that they are not treated as financial creditors and do not remain as members of the CoC”.

Most crucially, the Court concluded that: “Since the petition was a contested one and had been argued and taken for orders, the 1st respondent ought to have heard the petitioner and similarly situated persons on the contents of the affidavit”. It held that passing an order based on the affidavit without hearing the affected parties violated principles of natural justice.

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The Court allowed the writ petition. It declared: "Ext.P5 is set aside. The 1st respondent is directed to pass fresh orders, after hearing the petitioner on the contents of the affidavit filed by the 2nd respondent, after the matter was taken for orders earlier."

It also recorded: "The period from 11.04.2024 to the date of this judgment shall stand excluded from the time fixed for completion of the resolution process."

Advocates Representing the Parties

For the Petitioner: Shri. P.B. Krishnan (Senior Advocate), instructed by Shri. Terry V. James
For the Respondents: Shri. Suresh Dutt Dobhal, Shri. Akhil Suresh, Shri. Shikhar Kumar, Shri. Nidhi Sam Johns, Shri. Harikumar G. (Gopinathan Nair)

Case Title: Jaju Babu v. National Company Law Tribunal & Ors.
Neutral Citation: 2025: KER:52039
Case Number: W.P.(C) No. 15670 of 2024
Bench: Justice T.R. Ravi