HC accepts Writ petition although alternative remedy was available

Kolkata Municipal Corporation and another Vs Union of India and others (High Court Calcutta)

Conclusion: Writ petition was maintainable despite the availability of an alternative remedy as the nature of challenge thrown in the writ petition was on the ground of absence of jurisdiction of Resolution Professional and the NCLT in IBC matters and not ‘wrongful exercise of the available jurisdiction’, thus bringing it within the fold of Article 226 of the Constitution.

Held: In the present case, assessee had urged that the NCLT and the Resolution Professional had no jurisdiction to take control and custody of any asset except as subject to the determination of ownership by a court or authority. The KMC, which was a statutory authority, exercised its powers under Sections 217 to 220 of the 1980 Act to distraint the asset of the debtor and to attach the property, to be followed by sale in future. Such exercise of power, it was argued, was beyond the purview of the IBC and did not come within the ambit of the powers conferred on the Resolution Professional or the NCLT by the IBC. As such, the Resolution Professional and the NCLT acted de hors their statutory powers in seeking to take control and custody of the asset. The issue raised in the petition was whether the writ jurisdiction of this court under Article 226 of the Constitution of India could be invoked in the matter, despite the availability of an alternative remedy and whether the property-in-question, having been seized by the KMC in recovery of its statutory claims against the debtor, could be the subject- matter of a Corporate Resolution Process under the Insolvency and Bankruptcy Code, 2016.. It was held that the nature of challenge thrown in the writ petition was on the ground of absence of jurisdiction and not ‘wrongful exercise of the available jurisdiction’, thus bringing it within the fold of Article 226 of the Constitution. In such a scenario, the present writ petition was maintainable. Regarding the another issue KMC followed such procedure and took possession of the disputed property for non-payment of tax. Thus, there was no further scope for any “determination” of ownership of the property by the KMC. As such, there arose no question of the task of the interim resolution professional, in taking control and custody of the asset, being subject to the determination of ownership by any authority, as contemplated under Section 18(f)(vi) of the IBC. Rather, the claim of the KMC, in the absence of any successful challenge thereto, attained finality, fastening a liability upon the corporate debtor. Hence, the Resolution Professional had jurisdiction to take custody and control of the same. As the parameters of powers of the NCLT, as an Adjudicating Authority under Section 60 of the IBC, was defined and circumscribed by the scope of Section 18(f)(vi) of the IBC. Such exercise of power would fall within the ambit of the expression “arising out of or in relation to the insolvency resolution”, as envisaged in Section 60(5)(c) of the IBC. The proposition laid down in Pr. Commissioner of Income Tax vs. Monnet Ispat of Energy Ltd. [Special Leave to Appeal (C) No. (S) 6483 of 2018], that income tax dues, being in the nature of crown debts did not take precedence even over secured creditors, holds true in the present case as well. The claim of the KMC, being in the nature of crown debts, could not gain precedence over other secured creditors, as contemplated in the IBC. Thus, the finalized claim of the KMC could very well be the subject-matter of a Corporate Resolution Process under the IBC.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. The Kolkata Municipal Corporation (KMC), a statutory authority under the Kolkata Municipal Corporation Act, 1980 (hereinafter referred to as “1980 Act”), has filed the present writ petition challenging an Order dated December 17, 2019 passed by the National Company Law Tribunal (NCLT), acting as Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the IBC”) for handing over physical possession of the office premises at 127A, Sarat Bose Road, Kolkata – 700 026

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