Court Dismisses Petition Against Public Auction Notice, Directs Petitioners to NCLT
In a significant ruling, the Karnataka High Court has reinforced the supremacy of the Insolvency and Bankruptcy Code (IBC), 2016 over the Real Estate (Regulation and Development) Act (RERA), 2016 in cases of conflicting jurisdiction, emphasizing that the National Company Law Tribunal (NCLT) is the appropriate forum for addressing grievances related to insolvency proceedings. The decision was rendered in the case of M. Govind Reddy v. State of Karnataka, where petitioners sought to quash a public auction notice issued under RERA for recovery proceedings against a corporate debtor undergoing the Corporate Insolvency Resolution Process (CIRP).
The court, presided by Justice Suraj Govindaraj, dismissed the writ petition filed by Mr. M. Govind Reddy and another, thereby upholding the public auction notice dated 06.06.2026. The petitioners contended that the auction notice was issued in violation of the insolvency proceedings against respondent No.5, who was under CIRP as per the IBC. They argued that the auction would interfere with the insolvency process supervised by the NCLT.
The court noted that the IBC's Section 238 provides an overriding effect over other laws, including RERA, when there is inconsistency. The judgment emphasized that once CIRP commences, actions affecting the corporate debtor's assets should be supervised by the NCLT. The petitioners, who are landowners and parties to a Joint Development Agreement with the corporate debtor, were considered co-promoters under RERA and hence liable under its provisions.
Justice Govindaraj observed that the petitioners had not challenged the validity of the Recovery Certificate under RERA, nor had they obtained any stay from the NCLT. The court stressed that the auction was merely a step in executing an enforceable Recovery Certificate and could not be interdicted solely on the grounds of CIRP pendency.
The ruling highlighted that issues concerning the scope of the moratorium, insolvency estate, and the effect of a Recovery Certificate on insolvency proceedings fall within the NCLT's jurisdiction. The High Court refrained from intervening, directing the petitioners to seek relief from the NCLT, which is competent to address such matters.
This judgment underscores the IBC's primacy in insolvency-related disputes, reaffirming that the NCLT is the appropriate forum for resolving conflicts arising from overlapping jurisdictions of different statutes.
Bottom Line :
Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC) has overriding effect over other laws, including the Real Estate (Regulation and Development) Act, 2016 (RERA). Execution of a Recovery Certificate under RERA cannot bypass the jurisdiction of the National Company Law Tribunal (NCLT) if it affects the assets of the corporate debtor under CIRP.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 (Sections 14, 238), Real Estate (Regulation and Development) Act, 2016 (Section 41), Constitution of India, 1950 (Articles 226, 227)
M. Govind Reddy v. State of Karnataka, (Karnataka) : Law Finder Doc id # 2963254
