DELHI HIGH COURT REFUSES TO ENTERTAIN WRIT PETITION FOR RECOVERY OF DUES AS ISSUE WAS PENDING FOR CONSIDERATION BEFORE NCLT DELHI

In a recent case of Rainbow Digital Services Pvt Ltd Through Director & Anr. Vs Union of India Through Secretary Ministry of Communications and Ors., LPA 717/2023, a two Judge Bench of the Hon’ble Delhi High Court comprising of Hon’ble Chief Justice and Hon’ble Justice Sanjeev Narula passed a Judgment dated 07-11-2023 and held that it was not open for the Petitioner to invoke the jurisdiction of the High Court under Article 226 of the Constitution for recovery of outstanding dues, as the proceedings in respect of the same were already pending consideration before the Hon’ble National Company Law Tribunal, Delhi (‘NCLT’).

Facts

(i) In the present case, one, Growthways Trading Private Limited (‘Corporate Debtor’) was admitted into Corporate Insolvency Resolution Process (‘CIRP’) by NCLT Delhi on 17-12-2019 in P.(IB)./1443/ND/2019. The Interim Resolution Professional (‘IRP’) found that the orders / consignments sent by the Corporate Debtor to various customers through Department of Posts were neither delivered to customers nor returned to its origin. Further, few orders which had been delivered, cash on delivery was collected thereof by the Postal Department. As a result, in respect of such orders / consignments, an amount of Rs. 57,80,065.00 was found to be pending from the Department of Post.

(ii) However, despite numerous communications sent to the Postal Department seeking remittance of the outstanding dues, the latter failed to respond to the IRP. Eventually, the Air Mail Sorting Division, New Delhi, i.e. the Respondent No. 4 informed the IRP in December 2020, “that all eligible postal articles stood paid and compensated, as the case may be, to GTPL”.

(iii) Aggrieved, the IRP issued a Legal Notice dated 27-03-2021 to the Respondent No. 4, demanding payment of the aforesaid dues. However, when the Respondent did not respond, the IRP filed Interim Application A./4848/2021 in C.P.(IB)./1443/ND/2019 before the NCLT under Section 60 of the Insolvency and Bankruptcy Code 2016 (‘IBC’) (Adjudicating Authority for corporate persons) seeking directions from NCLT for recovery of outstanding dues from the Respondent No. 4.

(iv) In the meantime, the Corporate Debtor went into Liquidation and the IRP was appointed as the Liquidator. Accordingly, the Liquidator issues notice to Respondent No. 4, vide Order dated 20-12-2021.

(v) Thereafter, a meeting was convened amongst the stakeholders of the Corporate Debtor on 28-06-2022, whereby, it was resolved to assign the outstanding dues from the Department of Posts through auction, in accordance with Regulation 37A[1] of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Assignment of not readily realisable assets).

(vi) In the said auction, one, Mr. Jatin Nagpal emerged as the highest bidder and a Deed of Assignment dated 05-08-2022 was executed by the Liquidator in respect of Mr. Nagpal. However, Mr. Nagpal was unable to realise such dues himself, hence, he further assigned the dues and other not readily realisable assets (‘NRRA’) to Appellant No.1- Company, i.e. Rainbow Digital Services Pvt. Ltd. acting through its Director / Authorised Signatory, i.e. Appellant No.2, vide Deed of Assignment dated 07-02-2023.

(vii) But despite several communications sent by the Appellants to the Department of Posts, the Respondent No. 4 failed to provide any effective response.

(viii) Thus, the Appellants filed a Writ Petition being P.(C) 10042/2023 before the Ld. Single Judge of the Delhi High Court seeking remittance of the outstanding dues owed to the Corporate Debtor and issue of directions against the Department of Posts for violation of Section 37 of the Indian Post Office Act, 1898 (‘Act’) (Power to make rules as to disposal of undelivered postal articles).

(ix) The Ld. Single Judge of the Delhi High Court, vide Order dated 07-08-2023, refused to entertain the said Writ Petition on the ground that the issue raised therein was already pending for consideration before the NCLT under the Interim Applications filed by the IRP and Mr. Nagpal under Section 60 of IBC.

Delhi High Court (Division Bench) Findings

Aggrieved by the Order dated 07-08-2023 passed by the Ld. Single Judge of the Delhi High Court, the Appellants filed a Letters Patents Appeal bearing LPA 717/2023. The Division Bench of High Court passed an Order dated 07-11-2023 and observed as follows:

1) That a similar issue regarding remittance of outstanding dues from the Postal Department is currently pending before the NCLT.

2) Further, the NCLT has already issued a notice to the concerned Postal Department, vide Order dated 20-12-2021.

3) Hence, the Division Bench held that the Appellants may plead the said issues and contentions before the NCLT itself and further observed as follows:

“We find no reason for this Court to exercise its extraordinary writ jurisdiction at this stage to parallelly consider the question of realisation of the NRRA in-question. That apart, the issue of remittance of outstanding dues by the Department of Posts is interconnected to the allegations of violation of Section 37(3) of the Act. Given the former is yet to be decided by NCLT, we are not inclined to delve into the allegations of violation of the Act.”

Conclusion

Thus, based on the aforesaid observations, the Division Bench of the High Court dismissed the Appeal filed by the Appellants on the ground that they may pursue the matter before the NCLT itself.

Harini Daliparthy

Senior Associate

The Indian Lawyer

 

[1] Regulation 37A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016: Assignment of not readily realisable assets.

(1) A liquidator may assign or transfer a not readily realisable asset through a transparent process, in consultation with the stakeholders’ consultation committee in accordance with regulation 31A, for a consideration to any person, who is eligible to submit a resolution plan for insolvency resolution of the corporate debtor.

Explanation. — For the purposes of this sub-regulation, “not readily realisable asset” means any asset included in the liquidation estate which could not be sold through available options and includes contingent or disputed assets and assets underlying proceedings for preferential, undervalued, extortionate credit and fraudulent transactions referred to in sections 43 to 51 and section 66 of the Code.