Glukrich Capital Pvt. Ltd. VS. The State Of West Bengal & Ors (Case Summary)

The Supreme Court in Glukrich Capital Pvt. Ltd. Vs. The State of West Bengal & Ors (Interlocutory Application No.  102537 of  2023)  has held  that Section 66 (1) of the Insolvency and Bankruptcy Code, 2016 does not confer power  on NCLT to pass any orders against organizations/legal entities other than corporate debtors.

BRIEF FACTS

Glukrich Capital was unsecured financial creditor of Leading Hotels Ltd. (Corporate Debtor) , which was undergoing insolvency proceedings. Glukrich Capital filed SLP before the Supreme Court challenging extension of the transit anticipatory bail to the suspended directors of the Corporate Debtor. The application was dismissed on the ground that the Glukrick has no locus as it was neither a party not informant in the instant matter.

Glukrich again approached before the Supreme Court vide an Interim Application for clarification. It was also submitted that it has been erroneously held in Smt. Sudipa Nath Vs. Union of India by Tripura High Court that Section 66 IBC can not be invoked against other persons, entities or orgnisations with which there was any business transaction by the Corporate Debtor, but only the persons who were responsible for the conduct of business of the Corporate Debtor can be proceeded against.

It is pertinent to mention that Section 66 (1) of the Insolvency and Bankruptcy Code, 2016 confers power on the Adjudicating Authority to pass directions against any persons to make contribution to the assets of the Corporate Debtor if such person have been knowingly parties to carrying on business of the Corporate Debtor with intent to defraud creditors or for any fraudulent purpose.

USHA ANANTSUBRAMANIAN VS. UNION OF INDIA

The Supreme Court in this matter as well as Tripura High Court in Sudipa Nath (Supra) has relied on judgment of the Supreme Court in Usha Ananthasubramanian vs. Union of  India ((2020) 4 SCC 122 which was in context of Section 339 of the Companies Act which is pari materia with Section 66 (1) of Insolvency and Bankruptcy Code, 2016.   The Supreme Court in the said case has held  that Section 339 refers to any business of the company which has been carried on with intent to defraud creditors of that company.  Section 339  refers to any business of the company which has been carried on with intent to defraud creditors of that company. Obviously, the persons referred to in Section 339 (1) as persons who are other than the parties “to the carrying on of the business in the manner aforesaid” which again refers to the business of the company which is being mismanaged and not to the business of another company or other persons. Powers under these sections cannot possibly be utilized in order that a person who may be the head of some other organization be roped in, and his or her assets be attached.

FINDINGS OF THE SUPREME COURT

The Supreme Court approved the view taken by the High Court of Tripura in Sudipa Nath Vs. Union of India (WP(C) (PIL) No. 04 of 2023) wherein the High Court has held that remedy under Section 66 of the Code is not available against third parties.

The Supreme Court has also held that remedy against third parties are not available under Section 66 of Insolvency and Bankruptcy Code, 2016 and Resolution Professional has to pursue civil remedies independent of Section 66 of the Insolvency and Bankruptcy Code, 2016.

________________________________________________________