Civil Court Jurisdiction Barred Under IBC Sections 63 and 231 in NCLT-Related Disputes: Kerala High Court

In a significant ruling clarifying the boundaries of judicial authority, the Kerala High Court has reiterated that civil courts are strictly prohibited from entertaining suits or legal proceedings when the jurisdiction rests with the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016.

The case of T. Beena vs. Vysali Pharmaceuticals Ltd arose following a challenge to an order from the Sub Court, Ernakulam, which had initially granted an ad-interim injunction in a suit involving the company under liquidation.

The Conflict of Jurisdictions

The petitioner, T. Beena, filed a review petition arguing that the High Court’s previous decision—which set aside the trial court’s injunction—failed to recognize that the NCLT itself might lack jurisdiction over her specific claim. Consequently, she contended that the bar established under Section 231 of the IBC did not apply, leaving the door open for civil litigation.

Conversely, the respondent liquidator argued that the suit was fundamentally barred by law. Furthermore, the respondent highlighted that even if a claim is contested, the proper forum for redress remains the appellate mechanism within the NCLT framework, not the civil court system.

Legal Analysis: The Absolute Bar

Justice K. Natarajan, presiding over the case, meticulously reviewed the interplay between the IBC and the Code of Civil Procedure. The Court emphasized that Section 63 of the IBC serves as a blanket prohibition:

> "No Civil Court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which National Company Law Tribunal or the National Company Law Appellate Tribunal has jurisdiction under this Code."

The Court further addressed the requirement for prior approval under Section 33 (5) of the IBC, which mandates that the liquidator obtain permission from the Adjudicating Authority (NCLT) before instituting legal proceedings. The Bench observed that while the respondent company had not secured such permission, the petitioner similarly failed to adhere to the statutory requirements necessary to bypass the NCLT’s exclusive domain.

Key Observations

The judgment clarifies that the High Court’s power of superintendence is not merely procedural but serves as a vital tool to correct patent illegalities in the subordinate judiciary. As noted by the Court:

• On Jurisdiction: "Invoking Sections 63 and 231 of IBC, the Civil Court has no jurisdiction to entertain any suit when the matter is already pending before the Company Law Tribunal."
• On Supervisory Power: "This Court gets jurisdiction to interfere under Article 227 of the Constitution of India, where this court has been vested with the superintendent power over the court below."
• On Judicial Integrity: "If any suit is filed, and any order is passed by the Trial Court, in such a matter, it constitutes a patent illegality as it is made by granting an injunction by ignoring Section 33 (5) and Section 63 of the IBC."

Court’s Decision

Finding no merit in the contention that an error appeared on the face of the record, Justice Natarajan dismissed the review petition. The judgment reinforces the legislative intent behind the IBC: to centralize the resolution of insolvency-related disputes within specialized tribunals to ensure efficiency and uniformity.

This decision reinforces the principle that parties seeking relief against companies under liquidation must utilize the structures provided by the IBC, as the civil courts are rendered functus officio in such matters once the insolvency process has been triggered.