NCLT Cannot Entertain Challenge To Statutory Development Authority Orders Under IBC: NCLAT New Delhi

The New Delhi National Company Law Appellate Tribunal (NCLAT), on 6 April, held that orders passed by statutory authorities in exercise of statutory powers cannot be challenged before the NCLT under the Insolvency and Bankruptcy Code, 2016.

A Bench comprising Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey observed:

“The Tribunal held that sanction of Plan, which is in exercise of Statutory jurisdiction of Lucknow Development Authority under Uttar Pradesh Urban Planning and Development Act, 1973 cannot be made subject matter of challenge before the NCLT. ….The said decision in exercise of Statutory jurisdiction of Lucknow Development Authority can be subjected to challenge only in accordance with the provisions of Uttar Pradesh Urban Planning and Development Act, 1973.”

Sunil Kumar Rastogi & Ors., the appellants, are allottees in a real estate project, challenged proceedings arising from a CIRP initiated in 2019. The resolution plan received approval in 2021. During the CIRP, the successful resolution applicant approached the Lucknow Development Authority for sanction of the building plan.

They objected to the sanctioned plan and approached the Allahabad High Court, which directed the Authority to decide the matter expeditiously. The Authority thereafter passed its order. The appellants then approached the Adjudicating Authority seeking cancellation of the sanctioned map, but the NCLT dismissed the application as not maintainable.

The respondent argued that the NCLT could not examine the order passed by the Development Authority. The appellants contended that the sanctioned plan violated the resolution plan and relied on Gujarat Urja Vikas Nigam Limited v. Amit Gupta and Ors.

The Tribunal rejected the contention. It distinguished Gujarat Urja, holding that the Supreme Court dealt with termination of a power purchase agreement arising from insolvency proceedings, which brought the dispute within the IBC framework. In contrast, the present case involved an order passed under the Uttar Pradesh Urban Planning and Development Act, 1973, which falls outside the jurisdiction of the NCLT.

The Tribunal further noted that the statute provides a revision remedy before the State Government against orders of the Lucknow Development Authority.

Accordingly, the NCLAT dismissed the appeal.