NCLT seeks clarification on its jurisdiction to try Era Infra which has winding-up petitions
Union Bank of India, the lead bank in the consortium of lenders, which took Delhi-based Era Infra Engineering to the National Company Law Tribunal (NCLT), is likely to face legal hurdles.
The NCLT has sought a clarification from the bank on how an insolvency petition against Era Infra Engineering could be filed at the Tribunal when there are several winding up petitions against the company pending in the Delhi High Court. The application of the banks for insolvency was not admitted in NCLT.
The case was adjourned on Tuesday and the next hearing is slated for July 25. Era Infra Engineering is the second company that has raised legal angle in the Reserve Bank of India circular which selected 12 large non-performing assets to be filed for resolution under the new Insolvency and Bankruptcy Code 2016.
Essar Steel has already taken RBI to the Gujarat High Court, questioning the regulator's decision to select it for insolvency.
On a plea of Essar Steel, the Gujarat High Court had on July 4 sought RBI's reply as to why only certain cases including that of Essar Steel should be accorded priority by NCLT.
Era Infra Engineering has a debt of Rs 10,000 crore, which the banks were planning to resolve under NCLT.
The issue here is that there are several winding-up petitions filed by third parties pending in the Delhi High Court against the company.
The issue before NCLT, according to advocates, is that whether a lower court can admit a case which is already proceeding in the higher court.
Another legal angle that needs to be examined is if an insolvency proceeding can simultaneously take place in a lower court when a winding-up petition is already under process in a higher court.
Manoj K Singh, founding partner for Singh & Associates and counsel for the company told DNA Money, "The NCLT is under the jurisdiction of the High Court of Delhi under the Article 227 of the Constitution of India. Thus, there can be possibly an issue of judicial discipline as the lower judiciary should respect the order passed by the superior courts and should also refrain from passing an order which amounts to interfering with the jurisdiction of the superior courts."
The other point is if a higher court passes some judgments on the case then whether there exists a case for an application for insolvency proceeding in NCLT. "Under the process of winding-up petitions that are filed in the high court, an official liquidator will be appointed in view of Section 450 of the Companies Act, 1956. The Companies Act, 1956 has no such provision for initiating corporate insolvency resolution process," said Singh.
...& ANALYSIS
- Era Infra raised legal angle in RBI circular which selected 12 NPAs for IBC resolution
- Essar Steel has moved court, questioning its selection for insolvency
- Era Infra has debt of Rs 10,000 crore, which banks were seeking to resolve under NCLT
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