- Case
- SAURABHKUMAR S PATEL AND ANR v. BABURAY PUNDALIK SALUNKE AND ANR (Bombay High Court, 02-01-2025)
- Law
- Insolvency and Bankruptcy Code.
Facts: The Plaintiff filed a civil suit seeking specific performance of an agreement dated 25.10.2002 against Defendant No. 1 (Lok Housing and Construction Limited) regarding a flat purchase. The Plaintiff also sought a declaration that the agreement was binding. Subsequently, Defendant No. 1 sold the same flat to Defendant Nos. 2 and 3. The Plaintiff then impleaded Defendant Nos. 2 and 3 and challenged the registered agreement dated 01.12.2007 between Defendant No. 1 and Defendant Nos. 2 and 3, seeking its cancellation. Defendant No. 1 filed an application seeking a stay of the suit proceedings, citing that the NCLT had initiated Corporate Insolvency Resolution Process (CIRP) against them.
Procedural Posture: Defendant Nos. 2 and 3 filed a Writ Petition before the Bombay High Court challenging the Trial Court's order dated 02.12.2023, which stayed the suit proceedings.
Issue: Whether the Trial Court's order staying the suit proceedings against Defendant Nos. 2 and 3 is justified, considering the CIRP initiated against Defendant No. 1 and the applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, even though Defendant Nos. 2 and 3 are not parties before the NCLT.
Holding: The Bombay High Court upheld the Trial Court's order, dismissing the Writ Petition. The Court found no fault with the Trial Court's reasoning.
Reasoning: The Court reasoned that Defendant Nos. 2 and 3 stepped into the shoes of Defendant No. 1 by acquiring the suit property. The suit filed by the Plaintiff and the NCLT order both pertain to the same property. Allowing the suit to proceed against Defendant Nos. 2 and 3 would frustrate the purpose of the moratorium granted under Section 14 of the Insolvency and Bankruptcy Code, 2016, as it would affect the properties in dispute. The Trial Court correctly observed that protecting the suit properties is essential, and the prohibition order is applicable to Defendant Nos. 2 and 3 because they acquired the property from Defendant No. 1 during the subsistence of the agreement with the Plaintiff.
