The Bombay High Court has dismissed an interim application, holding that as the Company stands dissolved by the order of the NCLT, no proceeding can be initiated against the company. The Court further held that allegations of fraud or misuse of the insolvency process fall exclusively within the jurisdiction of the NCLT/NCLAT.
The case arose out of execution proceedings in respect of an arbitral award dated July 16, 2016, for payment of approximately Rs.15.14 crores by the award debtor company, Ogene Systems (India) Pvt. Ltd. During execution, the applicant sought to implead the former directors of the award debtor and the resolution professional, alleging that the CIRP initiated in September 2022 and the subsequent dissolution order dated April 13, 2023 passed by the NCLT, Hyderabad, were fraudulently orchestrated to defeat the arbitral award.
The applicant contended that no proper notice was issued to it during the CIRP, that the financial creditor had fraudulently initiated insolvency proceedings, and that the directors and the resolution professional had siphoned off assets in violation of an earlier injunction order dated February 11, 2020, passed by the High Court in execution proceedings. On this basis, it was argued that the corporate veil should be lifted and personal liability fastened on the proposed respondents.
Justice Abhay Ahuja noted that the NCLT’s dissolution order dated April 13, 2023 had attained finality, as it was never challenged by the applicant. The Court held that once a company stands dissolved, it ceases to exist in law, and no execution proceedings can be initiated or continued against a non-existent entity. The Court further observed that allegations of fraud, misrepresentation, or malicious initiation of CIRP involve disputed questions of fact and are squarely covered by Sections 60, 63, 65 and 231 of the IBC, which vest exclusive jurisdiction in the NCLT/NCLAT and expressly bar civil court interference.
The Court further held that the residuary jurisdiction under Section 60(5)(c) of the IBC is wide enough to address allegations of fraudulent insolvency proceedings, and such issues cannot be examined in execution proceedings. The Court also reiterated the settled principle that an executing court cannot go behind the decree or question the validity of subsequent statutory orders, including an order of dissolution passed by the NCLT.
Accordingly, the High Court held that it lacked jurisdiction to entertain the execution application or the impleadment request, and dismissed both the Commercial Execution Application and the Interim Application, vacating all interim orders.
Appearance:
For the Applicant – Advocate Amir Arsiwalla, with Riya Pichaya
For the Respondents – Advocate Karl Tamboly, with Ranjeev Carvalho, Zehan Setalwad, Nishtha Mohanty, Anuj Jhaveri, Aakanksha Nehra, and Mihir Modi
