Erattupetta Municipality's attempt to invoke Article 227 against NCLT's ex parte order fails; directed to exhaust statutory remedies under IBC.
In a significant ruling, the Kerala High Court dismissed the original petition filed by Erattupetta Municipality challenging orders passed by the National Company Law Tribunal (NCLT) related to a financial liability dispute involving a COVID-19 hospital agreement. The High Court emphasized the limited jurisdiction under Article 227 of the Constitution of India, reinforcing that it cannot be used to substitute appellate remedies provided under specific statutes like the Insolvency and Bankruptcy Code (IBC).
The dispute originated when Union Bank of India filed a company petition to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Raihan Healthcare Private Limited, the corporate debtor. During the pandemic, an agreement was executed between Erattupetta Municipality and the corporate debtor for the temporary takeover of a hospital for COVID-19 treatment. However, the venture faltered, leading to financial liabilities that the petitioner Municipality sought to avoid, claiming the hospital management agency was responsible.
Despite being notified, the Municipality failed to appear before the NCLT, resulting in an ex parte order on March 30, 2022, directing the petitioner to pay over Rs. 19 lakh with interest to the Liquidator. Subsequent applications by the Municipality to set aside the ex parte order were dismissed by the NCLT.
The Municipality's petition in the High Court sought to challenge the NCLT's orders, invoking Article 227. However, the Kerala High Court, presided by Justice T.R. Ravi, reiterated that the High Court's supervisory jurisdiction cannot override statutory appellate mechanisms, highlighting the necessity to exhaust remedies under the IBC before seeking judicial review.
The Court underscored several Supreme Court judgments affirming the non-appellate nature of Article 227 jurisdiction, which is reserved for supervisory purposes to correct jurisdictional errors, rather than to reassess facts or decisions of statutory bodies like the NCLT.
Despite dismissing the petition, the High Court acknowledged the statutory limitation concerns, allowing the Municipality to deduct the time spent in High Court proceedings from the limitation period for filing an appeal with the National Company Law Appellate Tribunal (NCLAT).
This judgment reinforces the procedural rigor within the IBC framework and the limited scope of Article 227, echoing a broader judicial philosophy that respects statutory processes and jurisdictional boundaries.
Bottom line:-
Jurisdiction of High Court under Article 227 of the Constitution of India cannot be invoked to act as an appellate forum over orders passed by the National Company Law Tribunal (NCLT). Remedies under specific statutes such as the Insolvency and Bankruptcy Code (IBC) must be exhausted before approaching the High Court.
Statutory provision(s): Constitution of India Article 227, Insolvency and Bankruptcy Code, 2016 Sections 60, 61, 63, 231, NCLT Rules, Rule 49.
Erattupetta Municipality v. National Company Law Tribunal, (Kerala) : Law Finder Doc id # 2941394
