High Courts Cannot Bypass Statutory Remedy Through Writ Jurisdiction: NCLAT Chennai

The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) on 30 April held that High Courts should not ordinarily exercise writ jurisdiction under Article 226 when a statutory appellate remedy exists under the Companies Act framework.

A Bench of Judicial Member Justice Sharad Kumar Sharma and Technical Member Jatindranath Swain also held that litigants cannot seek exclusion of time under Section 14 of the Limitation Act, 1963 when they approach the wrong forum without acting in good faith. It held:

“The jurisdiction of the Hon'ble High Court under Article 226 of the Constitution of India would be deemed to be ousted until or unless there is an apparent breach of any of the fundamental rights protected by Constitution of India, which are conferred and covered by Article 226 of the Constitution of India, as contained under Part 3 of the Constitution of India.”

The appeal was filed by Rajeev Vidhyadharan, Managing Director of Guruchandrika Builders & Property (P) Ltd. (also known as Rajeev Anchal), along with the company itself. The respondents comprised several individuals and entities, most of whom were represented by P J Mathews as their Power of Attorney holder.

The appellant first approached the Kerala High Court by filing a writ petition against NCLT orders. It filed the petition beyond limitation and later amended it to include the impugned order. The High Court dismissed the writ petition after holding that an alternative statutory remedy existed. It also dismissed a subsequent writ appeal but granted liberty to approach the NCLAT within 15 days.

Despite this liberty, the appellant filed a review petition, which the High Court dismissed. It thereafter approached the NCLAT with a delay of 163 days along with additional delay in refiling.

The Tribunal noted that High Courts, while dealing with limitation issues, sometimes effectively pre-decide aspects of appeals by directing litigants to the NCLAT after condoning delay. While analysing Article 226, it held:

“Because the decision taken by a Tribunal would not fall to be under a supervisory jurisdiction, even if it is covered by any breach of fundamental right even then too this aspect could always be scrutinised by a superior appellate forum, which has been created under the statute and that aspect in itself will not let it open for the aggrieved party to the proceedings before the NCLT, to resort to jurisdiction under Article 226 of the Constitution of India for redressal of the grievances as against the impugned orders or Judgments passed by the Tribunal by invoking the inherent jurisdiction of the Hon'ble High Courts of the different states by alleging that there was a breach of any of the covenants contained under Part 3 of the Constitution of India.”

The Bench further held that High Courts cannot invoke Article 226 when the statutory appellate mechanism provides an effective remedy. It observed:

“We are of the view that since the Judgments passed by the NCLT do not fall under any of the exceptions contained under Part 3 of the Constitution of India, they will not be falling under the domain of Article 226 of the Constitution of India, which could enable the proceedings to be maintainable before the writ courts, so to be abused by the parties to create as a breach to not to approach the NCLAT or after resorting to the proceedings before the Hon'ble High Courts.”

The Bench rejected the appellant's plea under Section 14 of the Limitation Act and held that the appellant failed to act bona fide while pursuing proceedings before an incorrect forum. It held that Article 227 supervisory jurisdiction does not permit substitution of statutory appellate remedies. It observed:

“The Appellant was not acting bonafide, which could at all enable him to embark upon and now at a belated stage to take a shelter under Section 14 of the Limitation Act, 1963, for disproportionately getting an extension of limitation, which happens to be contrary to the very spirit and purpose of the I & B Code, where the time plays an important role, and is the essence of the provisions of law.”

It reiterated that Section 14 applies only when a party acts with due diligence and in good faith before a forum lacking jurisdiction, which the appellant failed to establish.

Accordingly, the NCLAT dismissed the company appeal as barred by limitation and declined to condone the delay.

For Appellants: Advocate NP Vijayakumar

For Respondents: Advocates Bijoy P Pulipra and Shankar P Panicker