- Case
- Vanya Jain v. DRT 1 Mumbai Bench (Bombay High Court, 10-12-2025)
- Law
- Insolvency and Bankruptcy Code, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
Facts: Kotak Mahindra Bank Ltd and Anbit Finvest Pvt Ltd, among others, filed writ petitions challenging proceedings initiated by respondents before the Debt Recovery Tribunal (DRT) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioners argued that insolvency proceedings initiated by the respondents should be transferred to the National Company Law Tribunal (NCLT) in light of the Supreme Court's decision in Lalit Kumar Jain Vs Union of India.
Procedural Posture: The case came before the Bombay High Court in its Civil Appellate Jurisdiction as a batch of writ petitions. The court was asked to determine whether the DRT had jurisdiction to entertain the applications filed by the respondents, given the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), and the pendency of CIRP against the corporate debtor.
Issue: Does the DRT have jurisdiction to entertain applications related to insolvency proceedings against personal guarantors of a corporate debtor when a corporate insolvency resolution process (CIRP) is pending against the corporate debtor before the NCLT? Should such proceedings be transferred to the NCLT?
Holding: No, the DRT does not have jurisdiction. The High Court held that the applications filed by the respondents before the DRT were not maintainable. The DRT should have either dismissed the applications for want of jurisdiction or transferred them to the NCLT. The order made by the DRT was set aside.
Reasoning: The Court relied on the Supreme Court's decision in Lalit Kumar Jain Vs Union of India, which clarified the interplay between the jurisdictions of the NCLT and the DRT under the IBC. Section 60 of the IBC mandates that where a CIRP is pending against a corporate debtor before the NCLT, any application relating to the insolvency resolution or liquidation of a personal guarantor of that corporate debtor must be filed before the same NCLT. The Court also noted that an application under Section 9 of the IBC had already been filed by an operational creditor against the principal borrower and admitted by the NCLT, resulting in a moratorium. Therefore, Section 60(2) of the IBC became operational, rendering the DRT proceedings incompetent. The court directed the DRT to transfer the pending proceedings to the NCLT within four weeks.
