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2024 Supreme(Online)(KAR) 38614
HIGH COURT OF KARNATAKA
N.V. Anjaria, CJ, K.V. Aravind, J
Buoyant Technology Constellations Pvt. Ltd. – Appellant
Versus
Manyata Reallty – Respondent
WRIT APPEAL NO.498 OF 2024 (GM-RES)
For the Appellants/Petitioners: S. Basavaraj, M.S. Sham Sundar, Anish Acharya
For the Respondents: Om Prakash, S. Kiran Kumar, Kumar M.N.
The act of filing and registering a petition under the insolvency statute is a purely ministerial and administrative function. The registry possesses no adjudicatory power to determine maintainability or merits at the threshold; judicial functions exclusively commence after the professional submits a formal report for consideration.
Headnote:(A) Insolvency and Bankruptcy Code - Sections 95, 96, 97, 99 and 100 - Initiation of insolvency resolution process - Application by creditor - Role of registry at stage of filing - Whether administrative or adjudicatory - Held, purely a ministerial/administrative act - Registry has no jurisdiction to examine merits or maintainability of petition at threshold - Adjudicatory process commences only upon receipt of report from professional as per statutory framework - Judicial scrutiny occurs exclusively upon submission of report - Any attempt to read adjudicatory power at filing stage is against statutory scheme. (Paras 5, 5.2, 5.3, 7, 10).
(B) Writ jurisdiction - Maintainability - Seeking declaration to prevent registration of petition filed under statute - Not maintainable where statute provides specific procedure for progression - Judicial intervention must respect established statutory mechanisms and cannot usurp functions of the adjudicating authority. (Paras 8, 8.1).
Facts of the case:
A creditor filed an application against personal guarantors to trigger the insolvency resolution process. The trial court, exercising writ jurisdiction, declared the registration of the petition as illegal, reasoning that the registry should have evaluated the maintainability of the petition at the time of filing. The appellant challenged this decision, arguing that the reception of a petition is a ministerial act devoid of adjudicatory powers, and that the evaluation of maintainability belongs to the adjudicating authority at the appropriate statutory stage.
Findings of Court:
The court observed that the registry performs a procedural and clerical role upon receipt of petitions. The legislative scheme specifically entrusts the duty of examination and report submission to an appointed professional, with ultimate determination by the adjudicating authority. Permitting the registry to adjudicate maintainability would lead to an inverted and legally unsupported process.
Issues: Whether the registry of the adjudicating authority possesses the power to determine the maintainability or merits of an insolvency petition at the time of its presentation and registration.
Ratio Decidendi: The act of receiving and registering a petition is ministerial and administrative, not judicial. The adjudicatory process is distinct and triggered only after the professional reviews the application and submits a recommendation, ensuring that no premature determination of rights occurs at the filing stage.
Result: Appeal allowed; order of the lower court set aside to restore the insolvency petition for further processing in accordance with law.
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THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN W.P. No.26977/2023 DATED 06.03.2024 AND ETC.
THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE THE CHIEF JUSTICE MR. JUSTICE N.V. ANJARIA
and
HON'BLE MR. JUSTICE K.V. ARAVIND
C.A.V. JUDGMENT
(PER: HON'BLE THE CHIEF JUSTICE MR. JUSTICE N.V. ANJARIA)
Whether the aspect about the maintainability of petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 for its merit content could be examined by the Registrar of the National Company Law Tribunal at the stage of its filing and presentation;
Whether it is permissible in law for the Registrar of the National Company Law Tribunal (NCLT) to enter into even the elementary adjudicatory process in relation to controversy between the parties;
Whether receiving and registering the petition under Section 95 of the Insolvency Code is a ministerial function or also permits an adjudicatory act at that stage by the Registrar, NCLT;
At what stage the adjudicatory functions starts under the provisions of Chapter-III, Part-III of the Insolvency and Bankruptcy Code, 2016;
1.1 These are the questions arise for their analysis and decision while examining the challenge to the judgment and order dated 6th March 2024 of learned Single Judge, in the present appeal, preferred by the appellant-original respondent No.2, under Section 4 of the Karnataka High Court Act, 1961.
The Challenge
2. Learned Single Judge allowed the writ petition. It was declared that e-filing of the petition by the appellant herein under Section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘Insolvency Code’) to be non est and illegal, consequently setting aside all the connected proceedings. It was provided that any action taken upon registration of the proceedings shall stand obliterated.
2.1 In the writ petition filed under Article 226 of the Constitution, the prayers made were to declare that the e-filing of petition No.2903111/01786/2023 by the appellant respondent No.2 under Section 95 of the Insolvency Code was void ab initio and illegal. It was consequently prayed to restrict the NCLT from taking any action in furtherance of the said petition.
2.2 The NCLT was further sought to be restrained from completing the scrutiny of the petition and returning the petition for rectifying the defects and also to restrict from numbering and registering the petition or placing the petition for hearing. The third limb of the prayer was to direct the NCLT to return and cancel the lodging of the petition.
Case in the Writ Petition
3. Having seen the kind and nature of the prayers advanced as above in the writ petition, the case of the petitioner No.1 herein-M/s. Manyata Reallty may be looked into. Questioning the legality of filing of petition under Section 95 of the Insolvency Code by the appellant herein-Boyount Technology Constellation Pvt. Ltd., it was stated that the petitioner was a partnership firm registered under the Partnership Act, 1932 and that the petition under Section 95 of the Code against it was not maintainable.
3.1 It was stated that the petitioner with other entities, all are engaged in the business of real estate development. One of such entity is Manyata Infrastructure Developments Pvt. Ltd., which is a private limited company. The partners of the petitioner have interest in the said private limited company, it was stated. The said Manyata Infrastructure Pvt. Ltd. and the petitioner, it was averred, have been instrumental in developing several projects as a leader in the field of construction. It was stated that, the petitioner along with the land owners of certain properties entered into Memorandum of Understanding dated 23rd December 2009 and Addendum dated 20th July 2012 with respondent No.2-appellant herein-Buyont T
