High Court ruled that the NCLT’s order directing Respondent No. 3, to return the pledged share certificates to the Liquidator was valid and within the jurisdiction, finding no violation of natural justice.
Justice Sabyasachi Bhattacharya of Calcutta High Court ruled that the NCLT’s order directing Respondent No. 3 (Alliance Broadband Services Pvt. Ltd.) to return the pledged share certificates to the Liquidator was valid and within the jurisdiction, finding no violation of natural justice or prejudice to Petitioner’s position as a secured creditor, thus directing Petitioner to seek a remedy through an appeal to the NCLAT.
The Petitioner (Sony), filed a writ petition against an NCLT order from January 12, 2024, which mandated that Respondent No. 3 (Alliance Broadband Services Pvt. Ltd.), another secured creditor, return the share certificates of Manthan Broadband Services Pvt. Ltd. to the Liquidator. The NCLT issued this order because Alliance had failed to realize its security interest in these shares within the stipulated time frame, thus they were deemed part of the liquidation estate under Regulation 21-A of the IBBI (Liquidation Process) Regulations, 2016.
The petitioner argued that the NCLT should have first decided on the Liquidator’s application under Section 25 of the Insolvency and Bankruptcy Code (IBC), 2016, which pertains to the preservation and protection of the assets of the Corporate Debtor. They contended that the order indirectly recognized Alliance as a secured creditor without proper adjudication, potentially placing Alliance above Sony in the liquidation distribution hierarchy outlined in Section 53 of the IBC.
Further, the Petitioner claimed the NCLT lacked jurisdiction to direct Alliance to return the shares under Regulation 21-A and that the order was passed without consulting the Stakeholders’ Consultation Committee, violating Regulation 31-A. Sony was not a party to the NCLT proceedings and argued that the order was passed without their knowledge, impacting their rights and lacking sufficient reasoning, thus violating principles of natural justice.
Alliance and the Liquidator countered that the writ petition was not maintainable because an alternative remedy through an appeal to the National Company Law Appellate Tribunal (NCLAT) existed. They emphasized that the disputed shares were already included in the liquidation estate due to Alliance’s failure to realize its security interest, and thus the NCLT’s order only benefited secured creditors like Sony.
The High Court dismissed Sony's writ petition, noting that the NCLT's order did not prejudice Sony’s position as a secured creditor. The court found no arbitrariness or illegality in the NCLT’s decision and stated that the proper recourse for Sony was to file an appeal with the NCLAT. The court clarified that its observations would not influence the merits of any future appeal.
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