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2018 Supreme(All) 1298
IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
PANKAJ MITHAL, MUKHTAR AHMAD, JJ.
Jaiprakash Associates Limited - Petitioners
Versus
Reserve Bank Of India And Others - Respondents
WRIT C. No., 31329 of 2018
Decided On : 24-09-2018
For the Petitioner: Rajendra Prasad Agrawal, Abhay Kumar Singh.
For the Respondent: Amit Saxena, Manish Trivedi.
The court emphasized the minimal interference of courts in financial matters and the necessity for the petitioner to participate in NCLT proceedings and raise objections as permissible by law.
Headnote:
RBI - Insolvency Proceedings - Banking Regulation Act, 1949, Section 35 AA; Insolvency and Bankruptcy Code, 2016, Section 3(12), Section 7 - The court discussed the legality of the RBI's direction to initiate insolvency proceedings against the petitioner, emphasizing the definition of 'default' under the IBC and the authority granted to RBI under Section 35 AA of the Banking Regulation Act. The court also highlighted the role of the NCLT in determining the existence of 'default' before admitting a petition under Section 7 of the IBC.
Fact of the Case:
The petitioner sought to quash the RBI's direction to initiate insolvency proceedings and to sanction a scheme of arrangement pending consideration before the NCLT. The respondents raised objections regarding the maintainability of the petition, citing the proceedings initiated in compliance with the Supreme Court and RBI's directions.
Finding of the Court:
The court dismissed the writ petition, stating that the petitioner should participate in the proceedings before the NCLT and raise objections as permissible by law. The court declined to keep the NCLT proceedings in abeyance, as requested by the petitioner's counsel.
Issues: The maintainability of the petition and the legality of the RBI's direction to initiate insolvency proceedings were key issues before the court.
Ratio Decidendi: The court emphasized minimal interference in financial matters and the role of expert forums, such as the NCLT, in deciding such issues. It highlighted the necessity for the petitioner to participate in the NCLT proceedings and raise objections as permissible by law.
Final Decision: The writ petition was dismissed, with liberty granted to the petitioner to participate in the NCLT proceedings and raise objections as permissible by law. The court declined to keep the NCLT proceedings in abeyance.
1. Heard Sri Ranjit Kumar, Senior counsel assisted by Sri R.P. Agrawal, learned counsel for the petitioner, Sri Anurag Khanna, Senior counsel assisted by Sri Amit Saxena & Sri J.K. Chokshi, learned counsel appearing for respondent no. 1, Reserve Bank of India and Sri V.K. Uhadhyaya, Senior counsel assisted by Sri Manish Trivedi, learned counsel for respondent no. 2 ICICI, Bank Limited.
2. The petitioner Jaipraksh Associates Limited (JAL) a public limited company and a holding company of Jaiprakash Infra-Tech Limited (JIL) has preferred this petition invoking extra-ordinary jurisdiction of this Court under Article 226 of the Constitution of India for quashing of the direction dated 14.8.2018 given by the RBI to the ICICI, Bank Limited for initiating insolvency proceedings against the petitioner; to quash the order dated 10.9.2018 passed in a company petition no. (IB) 330/ALD/2018, ICICI Bank Limited Vs. Jaiprakash Associates Limited instituted before National Company Law Tribunal (in short NCLT); and to direct the NCLT to sanction the scheme of arrangement filed by the petitioner which is pending consideration in company petition no.(AAA)90/ALD/2018 in accordance with law within a fixed period of time.
3. The prayers so made by the petitioner in the petition are reproduced herein below for the sake of convenience:-
(i) to issue a writ, order, or direction in the nature of certitorari quashing the impugned direction dated 14.8.2018 [Annexure-1 to this writ petition] given by the Reserve Bank of India [respondent no.1] to ICICI Bank Limited [respondent no. 2.]
(ii) to issue a writ, order, or direction in the nature of certitorari quashing the order dated 10.9.2018, [Annexure-2], and all proceedings and order passed in the Company Petition No. (IB) 330/ALD/2018- ICICI Bank Ltd Vs. Jaipraksh Associates Limited, which has been filed by Respondent no. 2 in the National Company Lat Tribunal, Allahabad Bench, [Respondent no. 3] pursuant to the impugned direction dated 14.8.2018 given by the Reserve Bank of India; and
(iii) a writ of mandamus directing the National Company Law Tribunal, Allahabad Bench [Respondent no. 3] to sanction the Scheme of Arrangement filed by the petitioner vide company petition No. (AAA) 19/ALD/2018 in accordance with law without any further delay and positively within such time as this Hon'ble court may deem fit.
4. In short and substance the petitioner is aggrieved by the direction of the RBI to the ICICI Bank to initiate insolvency proceedings against the petitioner before NCLT and wants quashing of the proceedings so initiated by the ICICI Bank against the petitioner.
5. At the very outset Sri Anurag Khanna and Sri V.K. Upadhyaya, Senior counsel for the respondents raised a preliminary objection regarding maintainability of this petition primarily for the reason that the proceedings before the NCLT have been initiated in pursuance of the directions of the Supreme Court and in turn that of the RBI. The petitioner has already filed objections taking the grounds on which the present petition has been filed before the NCLT and that the same can be considered and decided by the NCLT. Thus, there is no purpose for interference in exercise of writ jurisdiction in the matter.
6. Sri Ranjit Kumar, Senior Advocate made submissions not only meeting out the preliminary objections so raised on behalf of the respondents but substantially addressed the problem on merits as well.
7. Sri Ranjit Kumar argued that the directions of the RBI contained in its order dated 14th August 2018 is patently illegal and bad in law for the reason that insolvency proceedings can be initiated against the petitioner only if it is a 'defaulter'. In this regard he drew the attention of the Court to the provisions of Section 35 AA of the Banking Regulation Act, 1949 as inserted vide Banking Regulation (Amending) Ordinance, 2017 dated 4.5.2017 which authorizes the Reserve Bank of India to issue directions to any Banking company to initiate inso
