CIRP Proceedings Were Centered Outside Delhi-HC Declines Writ Petition The Update Delhi High Court rejected a writ petition which was seeking time-bound disposal of proceedings against a Resolution Professional by stating that the major and substantial cause of action was not in Delhi and the petitioner has got to move the appropriate jurisdictional High Court. The Impact This decision is a further step to enforce the rules of territorial jurisdiction and forum conveniens, mainly for insolvency cases where the NCLT proceedings are held outside Delhi.
Through this latest ruling, the Delhi High Court has emphasized once again a major rule governing the location of jurisdiction in insolvency cases. The Court has refused a writ petition seeking the Court's directions to have the disciplinary proceedings against the Resolution Professional (RP) completed without any delay. The reason is that the dispute is fundamentally tied up with the Corporate Insolvency Resolution Process (CIRP) proceedings before the NCLT Bengaluru.
Key Takeaways
- CIRP Proceedings Were Centered Outside Delhi-HC Declines Writ Petition The Update Delhi High Court rejected a writ petition which was seeking time-bound disposal of proceedings against a Resolution Professional by stating that the major and substantial cause of action was not in Delhi and the petitioner has got to move the appropriate jurisdictional High Court.
- The Impact This decision is a further step to enforce the rules of territorial jurisdiction and forum conveniens, mainly for insolvency cases where the NCLT proceedings are held outside Delhi.
- The petitioner before the Delhi High Court did not raise the issue of the CIRP proceedings as such.
- Because of this, the petitioner has filed a petition before the Delhi High Court seeking a writ of mandamus ordering the concerned authorities to complete the proceedings within a stipulated time.
- As the petitioner was unhappy with the step taken by the Resolution Professional in the CIRP proceedings before the NCLT Bengaluru, the Court said that the biggest reason of action was outside Delhi.
CIRP Proceedings Were Centered Outside Delhi-HC Declines Writ Petition
The Update
Delhi High Court rejected a writ petition which was seeking time-bound disposal of proceedings against a Resolution Professional by stating that the major and substantial cause of action was not in Delhi and the petitioner has got to move the appropriate jurisdictional High Court.
The Impact
This decision is a further step to enforce the rules of territorial jurisdiction and forum conveniens, mainly for insolvency cases where the NCLT proceedings are held outside Delhi.
The Action
Parties who are involved in insolvency cases have got to be very careful in deciding where the substantial cause of action is before they file a writ petition under Article 226 before a High Court
Background of the Dispute
The person who filed this case is Farooq Ali Khan, a suspended director of Associate Decor Limited, a company which is going through Corporate Insolvency Resolution Process before the National Company Law Tribunal, Bengaluru. In CIRP, a Insolvency Professional was appointed as the Resolution Professional for handling the corporate debtor's work. The petitioner claimed that the Resolution Professional committed a number of irregularities while performing the duties of the insolvency process.
Taking these charges into account, the petitioner lodged a complaint before the Insolvency and Bankruptcy Board of India on the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017. The complaint was against the Resolution Professional for the alleged misconduct.
Later on, the complainant got a letter from the party who has taken up the complaint indicating that they recognize that the complaint may contain some merit and are So taking appropriate steps against the Resolution Professional. The show cause notice was issued and the Resolution Professional has submitted his reply to the allegations made against him.
Why the Writ Petition Was Filed?
The petitioner before the Delhi High Court did not raise the issue of the CIRP proceedings as such. The petitioner relied upon in reality disciplinary proceedings were initiated and that the Resolution Professional replied, yet the matter was pending with no major development for a long time. Because of this, the petitioner has filed a petition before the Delhi High Court seeking a writ of mandamus ordering the concerned authorities to complete the proceedings within a stipulated time. The petitioner mainly argued that the respondent authorities including the Insolvency and Bankruptcy Board of India, were situated at New Delhi. So, based on the petitioner, the cause of action arose within the territorial jurisdiction of the Delhi High Court.
Delhi High Court's Findings
The Court did not find the petitioner's jurisdictional argument persuasive. It remarked that disciplinary proceedings against the Resolution Professional cannot be considered separately. In fact, the complaint itself was based on the conduct of the Resolution Professional during the CIRP proceedings before NCLT Bangalore. The Court further saw that disciplinary proceedings were deeply connected with the underlying insolvency proceedings. That means, the very major, main, and substantial part of the dispute was not in Delhi but was very much connected with the insolvency process that was going on in Bengaluru. The Court held that a regulatory authority being located in Delhi is not the only condition for territorial jurisdiction of Delhi High Court. As the Court, the proper approach to jurisdiction is to consider the nature and character of the dispute, the basic facts on which the litigation is based, the alleged legal injury, and the place where the main events took place. Just the location of the decision-making authority cannot be the only reason for invoking writ jurisdiction.
Importance of Forum Conveniens
In addition, the Court analysed the principle of forum conveniens, which is a critical factor in determining if the court should exercise jurisdiction even if only a very small part of the cause of action is located within its territory. The Court cited well-established legal standards to the effect that territorial jurisdiction cannot be ascertained merely by discovering a minor link with a certain forum.
Despite In reality only a tiny segment of the cause of action exists within a court's jurisdiction, the court may still refuse to hear the case if a different forum has a much closer connection to the dispute. In line with this reasoning, the Court held that the insolvency proceedings, the conduct of the Resolution Professional, and the surrounding circumstances basically occurred in Bengaluru.
Because of this, the High Court which had jurisdiction over those proceedings was a more suitable forum for the petitioner to raise their complaint. Yet, the Court made it clear that it was not commenting on the merits of the allegations against the Resolution Professional or on the alleged delay in the disciplinary proceedings. The Court reiterated that their decision to dismiss the matter was "purely on the ground that the matter is not within the territorial jurisdiction"
Why the Judgment Matters?
This decision will be of great help to various insolvency stakeholders, like suspended directors’, creditors’, insolvency professionals, and corporate debtors. Often, parties try to bring their cases under the jurisdiction of the courts where the regulatory authorities are present, mainly when the central regulators are operating from Delhi. This decision has stated that the courts will not only consider the location of the government bodies but will also ascertain the real nature of the dispute.
The ruling also goes a long way in upholding the principle that insolvency-related disputes should, as a rule, be brought before the courts which have the closest factual and legal connection with the underlying CIRP. By adopting this method, the parties would be discouraged from choosing a forum that is most favourable to them only to help the case, and at the same time, it would be ensured that the disputes are resolved by the courts that are most intimately connected with the relevant proceedings.
Conclusion
The decision of the Delhi High Court clearly indicates that the geographical jurisdiction of territorial courts is decided by the core of the dispute, and not by the mere location of the regulatory authority. As the petitioner was unhappy with the step taken by the Resolution Professional in the CIRP proceedings before the NCLT Bengaluru, the Court said that the biggest reason of action was outside Delhi.
Referring to the principles of territorial jurisdiction and forum conveniens, the Court refused to entertain the writ petition and ordered that the petitioner should file the case in the proper High Court. The decision highlights the significance of selecting the right forum for insolvency and bankruptcy petitions and is against the practice of mere reliance on the presence of regulatory authorities in Delhi.
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Delhi HC Declines Writ as CIRP Proceedings Were Centered Outside Delhi+
CIRP Proceedings Were Centered Outside Delhi-HC Declines Writ Petition The Update Delhi High Court rejected a writ petition which was seeking time-bound disposal of proceedings against a Resolution Professional by stating that the major and substantial cause of action was not in Delhi and the petitioner has got to move the appropriate jurisdictional High Court. The Impact This decision is a further step to enforce the rules of territorial jurisdiction and forum conveniens, mainly for insolvency cases where the NCLT proceedings are held outside Delhi.