M.K. Resely and others v Union Bank of India, Meenachil East Urban Co-Operative Bank Limited, National Company Law Tribunal and Others

W.A. No. 537/2022 : 1 : IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY WEDNESDAY, THE 22[ND] DAY OF JUNE 2022 / 1ST ASHADHA, 1944 ## WA NO. 537 OF 2022 JUDGMENT DATED 22.04.2022 IN WP(C) 2832/2022 OF HIGH COURT OF KERALA ## APPELLANTS/PETITIONERS: - 1 M.K.RESELY SON M.S. KOCHUTHAMPI MURICKOLLI HOUSE, NADACKA PO ERATTUPETTA VILLAGE KOTTAYAM DISTRICT. PIN- 686 124. - 2 M K FAISAL SON OF M.S KOCHUTHAMPI MURIKOLLI HOUSE,NADAKAL (P.O) ERATTUPETTA VILLAGE, KOTTAYAM DISTRICT KERALA PIN 686 124. - 3 M K ANAS S/O M.S. KOCHUTHAMPI, MURIKOLLI HOUSE, NADAKAL (P.O) ERATTUPETTA VILLAGE, KOTTAYAM DISTRICT, KERALA PIN 686 124. - 4 ANCY MOL MURICKOLLI HOUSE, NADACKA(PO) ERATTUPETTA VILLAGE, KOTTAYAM DISTRICT PIN- 686 12. - 5 AMINA S MURICKOLLI HOUSE, NADACKA (PO) ERATTUPETTA VILLAGE KOTTAYAM DISTRICT PIN- 686 124, PIN – 686 124. - 6 DR. MOHAMMED ISMAIL SON OF M.K MOHMAMMED ALI, MADAVANA, PATHAIKKARA, PERINTHALMANNA, MALAPURAM DISTRICT KERALA 679 322. , PIN - 679322 - 7 M.K.NABEEL MURIKKOLIL HOUSE,NADACKAL P.O. W.A. No. 537/2022 : 2 : ERATTUPETTA VILLAGE, KOTTAYAM KERALA, PIN 686124, PIN – 686 124. - 8 SHAILA ISMAIL MADAVANA HOUSE, PATHIAKKARA P.O. PERINTHALMANNA, MALAPPURAM, KERALA 679 322. - BY ADVS. S.EASWARAN - V.K.PEERMOHAMED KHAN ## RESPONDENTS/RESPONDENTS: - 1 UNION BANK OF INDIA, ERATTUPETTA BRANCH, 1ST FLOOR,PARAANAL ARCADE, ARUVITHARA, SD MEENACHIL, ERATTUPETTA P.O., KOTTAYAM – 686 121, REPESENTED BY ITS CHIEF MANAGER, - 2 MEENACHIL EAST URBAN CO-OPERATIVE BANK LIMITED NO.4266,POONJAR, POONJAR THEKKEKARA PO., KOTTAYAM DISTRICT – 686 582 RESPRESENTED BY IT CHIEF MANAGER. - 3 C A MAHALINGAM SURESH KUMAR LIQUIDATOR OF MS.RAIHAN HEALTHCARE PRIVATE LIMITED, MS.SPP & CO., CHARTERED ACCOUNTANTS, NO.27/9,NIVEDH VIKAS, PANKAJA MILL ROAD, PULYAKULAM, COIMBATORE – 641 045. - 4 NATIONAL COMPANY LAW TRIBUNAL NATIONAL COMPANY LAW BHAVAN KAKKANAD KOCHI- 682 030, REPRESENTED BY ITS REGISTRAR, PIN – 682 030. BY ADVS. SRI.MANOJ RAMASWAMY (B/O) R2 BY SHINU J.PILLAI S.SUJA MARIYA RAJAN AKHILESH A.K. LEKSHMI SUMUKHAN R1 BY SRI. S.SREEKUMAR (SR.) R3 BY SRI. A.G. SATHYANARAYANAN R4 BY SRI. JAISHANKAR V. NAIR THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 22.06.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A. No. 537/2022 : 3 : ## **S. MANIKUMAR, CJ & SHAJI P. CHALY, J.** --------------------------------------------------------W.A. No. 537 of 2022 --------------------------------------------------------Dated this the 22[nd] day of June, 2022. ## **JUDGMENT** ## **SHAJI P. CHALY, J.** The petitioners in W.P.(C) No. 2832 of 2022 have preferred this appeal challenging the judgment of the learned single Judge dated 22.04.2022, whereby the writ petition was dismissed holding that the appellants have got an efficacious alternative remedy to approach the National Company Law Tribunal and therefore, the writ petition is not maintainable. 2. The basic material facts for the disposal of the appeal are as follows: The appellants mortgaged their properties to secure the dues of the company, M/s. Raihan Health Care Private Limited, availed from the first respondent, Union Bank of India, Erattupetta Branch. Thereafter, a lease deed was executed in favour of the company, which had mortgaged its leasehold property as a security for the facilities availed by it. Since there was failure on the part of the company in repaying the loan, the first respondent bank initiated an insolvency proceedings against the company and its assets. 3. Matters being so, the third respondent liquidator filed Ext. P1 W.A. No. 537/2022 : 4 : application before the National Company Law Tribunal seeking a direction to respondents 1 and 2 i.e., the Union Bank of India as well as Meenachil East Urban Co-operative Bank Limited respectively to hand over the personal properties of the appellants, which was mortgaged to them to enable him to conduct sale of such properties. The application was allowed by the Company Law Tribunal on 01.02.2021 and the same was challenged before this Court by filing W.P.(C) No. 3872 of 2021. This Court, as per Ext. P3 judgment dated 09.04.2021, allowed the writ petition by setting aside the order of the Company Law Tribunal and further directed the Tribunal to reconsider the issue again. 4. The Tribunal, in accordance with the directions issued by this Court, reconsidered the said application and it was allowed as per Ext. P14 order dated 20.01.2022 holding as follows: - “23. Hence, we affirm our order passed on 1[st] February, 2021 in MA/76/KOB/2020 and ordered as under: a) Both respondents are directed to hand over the physical possession of the mortgaged leasehold land of the Corporate Debtor (both Express Lease & Implied Lease lands used by the Corporate Debtor) to the Applicant in order to use as the Liquidation Estate of the Corporate Debtor. b) The Applicant is also permitted to add the mortgaged land W.A. No. 537/2022 : 5 : (Express Lease-100.16 Ares and Implies Lease-78.45 Ares) into the Liquidation Estate of the Corporate Debtor of the respondents 3 to 8, to the liquidation Estate of the Corporate Debtor. c) The Liquidator is directed to strictly follow the procedures to take over the property in question, as per the Regulations. 24. M.A. 76/KOB/2020 stands disposed of with the above directions. 25. Ivn. P/07/KOB/2021 has been filled by M.K Resely and two others & Ivn.P/08/KOB/2021 has been filed by M.K. Nabeel and another, who are respondents 3 to 8 in MA/76/KOB/2020 to intervene in IBA/240/2019 and for certain other reliefs. Since we have heard the arguments of the respondents 3 to 8 and decided the issue in M.A/76/KOB/2020, the question of intervention in IBA/240/2019 and grant the other reliefs sought for do not arise in this matter. Hence, both Ivn.P's stands disposed of.” It is, thus, challenging the legality and correctness of Ext. P14 order that the writ petition was filed. 5. The learned single Judge, after assimilating the factual and legal situations, has passed the impugned judgment holding that in the earlier round of litigation, the order of the Tribunal was set aside, since the order was lacking clarity, insofar far as what is directed to be included in the liquidation estate is the leasehold rights of the W.A. No. 537/2022 : 6 : Corporate Debtor or the ownership rights of the appellants or both. It is also held that if the ownership rights of the appellants are included in the liquidation estate, that would be against Section 36 of the Insolvency and Bankruptcy Code, 2016 and that would give rise to a cause of action to the appellants to invoke Article 226 of the Constitution of India, especially when the order is passed without hearing the appellants. 6. However, in the present writ petition, it is held that the Tribunal reconsidered the matter and passed Ext. P14 order directing the Bank to hand over the physical possession of the mortgaged leasehold land of the Corporate Debtor to the liquidator in order to use it as the liquidation estate of the Corporate Debtor. It was accordingly that the writ petition was dismissed holding that the appellant has got an appellate remedy under Section 61 of the Insolvency and Bankruptcy Code, 2016. It is, thus, challenging the legality and correctness of the judgment of the learned single Judge, the appeal is preferred. 7. The paramount contention advanced by the appellants is that the learned single Judge egregiously erred in dismissing the writ petition on the ground of availability of alternative remedy, since the said finding is contrary to the judgment of the Apex Court in _**Embassy**_ ## _**property Developments Private Limited v. State of Karnataka**_ W.A. No. 537/2022 : 7 : _**and others**_ [(2020) 13 SCC 308]. It is also pointed out that the questions raised before the learned single Judge as to whether the National Company Law Tribunal had jurisdiction to add personal properties of the appellants into the liquidation estate and whether the leasehold properties would be added into the liquidation estate of the company, especially when the lease itself is void in terms of Section 65A of the Transfer of Property Act, were not considered and adjudicated by the learned single Judge. 8. It is also submitted that the learned single Judge misdirected himself to the issue, however, answered the second question contrary to the findings of the Supreme Court in _**Embassy Property Developments Private Limited**_ (supra). It is also submitted that Sections 36(4)(a)(iv) and (c) specifically excludes the property which is in the possession of the Corporate Debtor under any contractual agreement and also the personal property of the Managing Directors or the shareholders. Therefore, according to the appellants, in terms of the legal circumstances pointed out above, the Tribunal ought not to have allowed the application and hence, the writ petition was perfectly maintainable, since the decision of the Tribunal is arbitrary and illegal. 9. That apart, it is contended that while rendering Ext. P3 judgment, the learned single Judge has held that the writ petition arising from an order passed by the National Company Law Tribunal is W.A. No. 537/2022 : 8 : maintainable, and therefore, the learned single Judge ought not have negatived the contention raised by the appellants holding that the appellants have an equally efficacious remedy under the Insolvency and Bankruptcy Code, 2016. 10. We have heard the learned counsel for the appellants Sri. S. Easwaran, learned Senior Counsel appearing for the first respondent Sri. S. Sreekumar, Sri. Jaishankar V. Nair, learned Central Government Counsel, Sri. A. G. Sathyanarayanan appearing for respondent No.3 and Smt. Shinu J. Pillai for respondent No.2, and perused the pleadings and materials on record. 11. The sole question that emerges for consideration is whether any manner of interference is required to the impugned judgment of the learned single Judge. 12. In order to understand the circumstances under which the earlier writ petition was allowed, it is only appropriate that the relevant part of Ext. P3 common judgment in W.P.(C) No. 3864 of 2021 and batch is extracted and they read thus: “23. When assets owned by third parties, share holders and partners are expressly excluded from Liquidation Estate, whether the Tribunal can permit the Liquidator to include ownership rights of the petitioners in the Liquidation Estate? The impugned order of the Tribunal is to include the “mortgaged properties” in the Liquidation Estate. In the W.A. No. 537/2022 : 9 : aforementioned context, there exists a lack of clarity in the impugned order as to whether what is directed to be included in the Liquidation Estate is leasehold rights of the Corporate Debtor or the ownership rights of the petitioners or both. The lack of clarity is in respect of a matter affecting the constitutional right of the petitioners under Article 300A of the Constitution. The Tribunal has the power to decide the legal issue whether the ownership rights of the petitioners can be included in the Liquidation Estate, if the petitioners are Directors/Promoters of the Company/ Corporate Debtor as described by the Tribunal in the order impugned. Therefore, this Court is of the considered opinion that the Tribunal shall reconsider the matter in the proper perspective, afresh. 24. The petitioners would state that they are entitled to notice and to be heard before the Tribunal takes any decision to include their property in the Liquidation Estate and that the impugned order of the Tribunal is violative of the principles of natural justice. The learned Counsel for the respondents on the other hand would urge that IBC does not contemplate issuance of notice to the petitioners and since this Court and the Apex Court have held that the IBC is a self contained Code, no notice need be issued to the writ petitioners, in respect of M.A.No.76/KOB/2020 in which the impugned order is passed by the Tribunal. 25. The Rule 51 of the National Company Law Tribunal W.A. No. 537/2022 : 10 : Rules, 2016 provides that the Tribunal may regulate its own procedure in accordance with the rules of natural justice and equity, for the purpose of discharging its functions under the Act. Since the petitioners in WP(C) No.4672/2021 are already before the Tribunal filing Intervention application, it would be only just, proper and equitable that the Tribunal hear the petitioners in these writ petitions also before taking a decision afresh. In the circumstances, the impugned order in MA No.76/KOB/2020 dated 01.02.2021 of the National Company Law Tribunal, Kochi Bench, Kerala (Ext.P4 in WP(C) No.3864/2021) is set aside to the extent it allows the Liquidator to add the mortgaged land of the petitioners into the Liquidation Estate. The Tribunal is directed to pass orders afresh on the issue of inclusion of the said land in the Liquidation Estate, in the light of the observations made herein above, after giving an opportunity of hearing to the petitioners, as expeditiously as possible. It is made clear that this judgment shall not be taken as one expressing any opinion on merits as to the inclusion of the properties of the petitioners in the Liquidation Estate.” 13. Therefore, it can be seen that the said writ petition was entertained, since the learned single Judge, at that point of time, found out that there was lack of clarity in the earlier impugned order W.A. No. 537/2022 : 11 : with respect to the assets that are included in the liquidation estate and further that the said order was violative of the principles of natural justice. Anyhow, now as per the direction issued by the learned single Judge in Exhibit P3 judgment, the Tribunal reconsidered the matter and has clearly entered into a finding with respect of the liquidation estate by giving a probable and possible interpretation to the relevant provisions of the Insolvency and Bankruptcy Code, 2016, which is quite clear and evident from paragraphs 21 and 22 of the order of the Tribunal as extracted above. 14. Therefore, in our considered opinion, when a provision is interpreted by the Tribunal to arrive at a conclusion in regard to the application filed before it, it cannot be said that the Tribunal has passed the order without jurisdiction. At the most, what the appellants could allege is only the illegality of the order passed, which is a subject matter to be considered by the appellate Tribunal in terms of Section 61 of the Insolvency and Bankruptcy Code, 2016, which is a well defined provision exemplifying the powers of the Tribunal. 15. Sub-Section (1) of Section 61 clearly specifies that notwithstanding anything to the contrary contained under the Companies Act 2013, any person aggrieved by the order of the Adjudicating Authority under that part may prefer an appeal to the National Company Law Appellate Tribunal. Sub-Section (3) of Section W.A. No. 537/2022 : 12 : 61 would be relevant in order to arrive at a logical conclusion with respect to the contentions advanced by the appellants, which reads thus: “3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:— - (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. 16. Therefore, on an analysis of the provision, it is clear that the appellate Tribunal is empowered to identify as to whether the approved resolution plan is in contravention of the provisions of any law for the time being in force and as to whether there has been any material W.A. No. 537/2022 : 13 : irregularity in exercising the powers by the resolution professional during the corporate insolvency resolution period. 17. Yet another aspect that has come to our mind is that from the order of the Tribunal, it is clear that the secured creditor Bank has relinquished its security interest to the litigation estate and received proceeds from the sale of the estates by the liquidator in the manner specified in Section 53 of the Code, 2016. It is an admitted fact that the appellants have offered a guarantee to the loan availed by the Corporate Debtor from the first respondent Bank. It is under the above circumstances the Company Law Tribunal has arrived at its conclusions in its impugned order. 18. Since the order was passed by the Tribunal after providing an opportunity of hearing to the appellants and other interested persons and taking into account the legal questions raised by the appellants, we are of the clear opinion that the learned single Judge was right in holding that there is no arbitrariness or illegality to be interfered with by exercising the power of judicial review under Article 226 of the Constitution of India. 19. On going through the records, we find that the appellants could not establish any jurisdictional error or other legal infirmities justifying our interference in an intra court appeal filed under Section 5 of the Kerala High Court Act, 1958. W.A. No. 537/2022 : 14 : 20. Needless to say, appeal fails and accordingly, it is dismissed. 21. However we make it clear that we have not decided the issues raised on its merit and all questions raised by the appellants in the writ petition and the appeal are left open to be considered by the appellate authority. 22. The learned counsel for the appellant has also pointed out that as per proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016, only 30 days’ time is provided for preferring the appeal and unless and until the period during which the matter was pending before this Court is directed to be excluded, the appeal may not be entertained by the Appellate Tribunal. 23. In that view of the matter, it is observed that the Tribunal shall take note of the period during which the writ petition and appeal was pending before this Court, if and when the appeal is filed along with any delay condonation petition. 24. In fact, when the appeal was admitted to the files of this Court on 29.04.2022 an interim order was granted by a Division Bench of this Court to the effect that the liquidator shall not take any coercive proceedings pursuant to the impugned Ext. P14 order of the Tribunal till the date of next hearing, which was extended by this Court on 08.06.2022. In view of the request made by the learned counsel for the W.A. No. 537/2022 : 15 : appellants to continue the said interim order; after hearing the respective counsel appearing for the respondents, we are inclined to extend the said interim order for a period of two weeks from today enabling the appellant to prefer the appeal before the appellate Tribunal. sd/- **S. MANIKUMAR, CHIEF JUSTICE.** sd/- **SHAJI P. CHALY, JUDGE.** _Rv_