High Court
Case Details
Neutral Citation No. - 2025:AHC:30948-DB Chief Justice's Court Case :- SPECIAL APPEAL No. - 87 of 2025 Appellant :- Atma Ram Khatri and another Respondent :- Indian Bank earlier Allahabad Bank and 9 others Counsel for Appellant :- Rahul Agarwal,Vipin Kumar Kushwaha Counsel for Respondent :- Akhilesh Kumar Dwivedi Hon'ble Arun Bhansali,Chief Justice Hon'ble Kshitij Shailendra,J. 1. This special appeal is directed against order dated 23.01.2025 passed by learned Single Judge in Writ C No. 42936 of 2024 whereby the writ petition filed by the appellants seeking quashing of the proceedings before National Company Law Tribunal (in short, 'NCLT'), Allahabad Bench, Allahabad under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 (in short, 'the IBC, 2016') has been dismissed. 2. The writ petition was filed by the appellants raising several grounds questioning the continuance of the proceedings before the NCLT under the IBC, 2016.
Legal Reasoning
3. Learned Single Judge, after hearing the parties observed that as the appellant no. 1 had earlier approached the Court through Writ
Decision
C No. 44032 of 2023 which was disposed of on 02.05.2024 giving liberty to file a fresh writ petition in case any adverse order is passed or any adverse action is taken against him and that there was no adverse order which was under challenge before the Court in the writ petition and that it appeared to the Court that the same was filed to linger on the matter which is pending before the NCLT preferred by the bank and consequently dismissed the writ petition as misconceived. 4. Learned counsel for the appellants made submissions that Writ C No. 44032 of 2023 was filed by the appellant no. 1 at the stage when the notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 was issued to the appellant by the Bank. At that stage, the Court was of the opinion that there was no adverse order against the appellant and while giving liberty to file fresh writ petition in case any adverse order was passed or any adverse action was taken against the appellant, the petition was disposed of. 5. It is submitted that initiation of proceedings before the NCLT under Section 95 of the Act, for initiating insolvency resolution process, is an adverse action, which has been initiated against the appellants and, therefore, in terms of the liberty granted in the previous writ petition, filing of the writ petition was justified. 6. Various submissions were sought to be made pertaining to the merit of the writ petition. It was submitted that the consequences of filing of application are serious qua a running concern and in the present case, the action has been initiated against the appellants, invoking the personal guarantees and, therefore, it cannot be said that there has not been any adverse action against the appellants so as not to seek indulgence of the Court. It was prayed that the order impugned be set aside and the matter may be remanded back to the learned Single Judge for adjudicating the petition. 7. Learned counsel for the respondent-Bank supported the order impugned. 8. Submissions have been made that the filing of the petition before the NCLT has been questioned and no specific order is under challenge and, therefore, it is apparent that there is no adverse order against the appellants and, therefore, the learned Single Judge was justified in dismissing the writ petition. 9. We have considered the submissions made by learned counsel for the parties and have perused the material available on record. 10. When the appellant no. 1 was issued a notice under Rule 7 of the Rules, 2019, he approached this Court by filing Writ C No. 44032 of 2023. In the said writ petition, the following order was passed: "1. Shri Udai Chandani, Advocate appearing for the petitioner, after making submissions at some length, admits that as a consequence of impugned demand notice dated 24.11.2023, no adverse consequence has ensued so far. The petitioner has already replied to the notice but the Bank has not taken any further action in the matter. He, therefore, prays for withdrawal of the writ petition with liberty to the petitioner to file fresh petition as and when any adverse order is passed or any adverse action is taken. 2. Accordingly the petition is disposed of with aforesaid liberty to the petitioner. 3. The order has been passed in the presence of Shri Akhilesh Kumar Dwivedi, counsel for the respondent-Bank. " 11. A perusal of the above order would reveal that as the demand notice dated 24.11.2023 did not by itself result in any adverse consequence, prayer was made for withdrawal of the writ petition with liberty to file a fresh writ petition as and when any 'adverse order' or 'adverse action' is taken. 12. Whereafter, an application under Section 95 of IBC, 2016 has been filed by the Bank against the appellants seeking initiation of insolvency resolution process. The consequence of filing of an application under Section 95 of IBC, 2016, is an immediate 'interim moratorium' under Section 96 being imposed on the debtor essentially freezing its liability to make payments or dispose of assets until the resolution process is initiated and a resolution professional is appointed to manage the affairs of the debtor. 13. The moratorium, under Section 96 can disrupt a company's day to day operation as it may not be able to make payments and the business can come to a standstill. In view of the consequence of filing of an application under Section 95 of the IBC, 2016, it cannot be said that the said filing of the petition was not an 'adverse action' against the appellants so as to be prohibited from seeking indulgence before this Court on account of passing of the order dated 02.05.2024 in Writ C No. 44032 of 2023 and therefore, the order impugned passed by learned Single Judge observing that there has not been any adverse order against the appellants cannot be sustained, as the adverse order may not have been passed but an adverse action has been initiated. 14. Consequently, the appeal is allowed. The order dated 23.01.2025 passed by learned Single Judge is set aside. The matter is remanded back to the learned Single Judge for consideration of the writ petition on merits. 15. Before parting, we make it clear that we have not adjudicated any aspect pertaining to the contentions raised on merits of the writ petition. Order Date :- 4.3.2025 Sandeep (Kshitij Shailendra, J) (Arun Bhansali, CJ) Digitally signed by :- SANDEEP KUMAR High Court of Judicature at Allahabad