NCLAT held that the Registrar of NCLT could not adjudicate the maintainability of a Section 95 petition at the filing stage, as the role was limited to ministerial functions.
The Karnataka High Court Division Bench, comprising Chief Justice N.V. Anjaria and Justice K.V. Aravind, addressed a writ appeal and held that the Registrar of the NCLT, while scrutinizing a petition under Section 95 of the IBC, performs purely ministerial functions and cannot adjudicate its maintainability or merits, as such powers vest solely with the adjudicating authority after submission of the resolution professional’s report under Section 99. The Bench further observed that the statutory moratorium under Section 96 operates automatically upon filing and does not empower the Registrar to examine jurisdictional defects at the filing stage.
The High Court addressed significant issues regarding the maintainability of petitions under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC), specifically focusing on the powers of the Registrar of the National Company Law Tribunal (NCLT) at the filing stage. The matter stemmed from an appeal under Section 4 of the Karnataka High Court Act, 1961, against a Single Judge’s decision, which declared the e-filing of a Section 95 petition as non est and illegal, setting aside all connected proceedings. The petitioner, M/s. Manyata Realty challenged the maintainability of the petition filed by M/s. Buoyant Technology Constellation Pvt. Ltd., contended that Section 95 did not apply to partnership firms and argued that the interim moratorium under Section 96 was invoked to delay ongoing arbitration proceedings.
The Single Judge observed that the Registrar of NCLT could scrutinize petitions at the filing stage and reject those suffering from jurisdictional defects. Emphasizing that petitions de hors jurisdiction must be "nipped in the bud" to prevent undue consequences like the automatic interim moratorium under Section 96, the Judge held that adjudicatory powers under Part III of the IBC commence only after a petition is duly registered and processed. It was further ruled that the notification of Sections 94 to 187 of the IBC applies exclusively to personal guarantors of corporate debtors, not partnership firms, thereby rendering the NCLT's acceptance of the petition contrary to law.
On appeal, the appellant contended that the Registrar’s role was purely ministerial, limited to receiving and registering petitions, and argued that adjudication occurs only after the resolution professional’s report under Section 99 is submitted. Relying on Dilip B. Jiwrajka v. Union of India and Others, REEDLAW 2023 SC 11575, it was emphasized that the resolution professional’s role is recommendatory and facilitatory, not adjudicatory and that the statutory moratorium under Section 96 operates automatically upon filing. In contrast, the respondents defended the Single Judge's order, asserting that the Registrar was justified in scrutinizing maintainability and highlighting that partnership firms do not fall within the purview of personal guarantors under the Code, supported by Lalit Kumar Jain v. Union of India and Others, REEDLAW 2021 SC 05510.
The Court analyzed the distinction between ministerial and adjudicatory functions, reiterating the principle from Jamal Uddin Ahmad v. Abu Saleh Najmuddin [(2003) 4 SCC 257] that scrutiny of petitions is ministerial, involving no judicial discretion. Referring to the statutory scheme under Sections 99 and 100 of the IBC, the Court clarified that adjudication begins only after the resolution professional submits a report, with the NCLT deciding on admission or rejection of the application. The Registrar, therefore, cannot delve into merits or maintainability at the filing stage, as such powers are vested solely in the adjudicatory authority.
The High Court further rejected the argument that the automatic moratorium under Section 96 empowers the Registrar to adjudicate maintainability, holding that the moratorium is a statutory consequence of filing and does not confer judicial powers. It also noted that the writ petition seeking to prevent filing and registration amounted to an anti-suit injunction, impermissible under Article 226 of the Constitution. Conclusively, the Court held that the Registrar's role at the filing stage is administrative and procedural, devoid of adjudicatory functions, and refrained from expressing any opinion on the merits of the petition, leaving such issues to the NCLT after receiving the resolution professional’s report.
Mr. S. Basavaraj, Senior Advocate and Mr. M.S. Sham Sundar, Senior Advocate A/W Mr. Anish Acharya, Advocate represented the Appellant.
Mr. Om Prakash, Senior Advocate A/W Mr. S. Kiran Kumar, Advocate appeared for Respondent No. 1.
Mr. Kumar M.N. CGC appeared for Respondent No. 3.
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