Supreme Court Dismisses Appeals by Liquidators Challenging Benami Act Attachment Orders, Upholds NCLAT Ruling that IBC Authorities Lack Jurisdiction to Entertain Challenges to Benami Act Orders During Insolvency Proceedings

Nature of Litigation: Civil appeals challenging orders of the National Company Law Appellate Tribunal (NCLAT) regarding jurisdiction to entertain challenges to provisional attachment orders under the Prohibition of Benami Property Transactions Act, 1988 during insolvency proceedings

Remedy Sought

Appellants (liquidators) sought to challenge provisional attachment orders issued under the Benami Act and enable liquidation process to continue by claiming attached properties formed part of liquidation estate

Filing Reason

Liquidators filed applications before NCLT seeking stay on attachment orders under Benami Act, which were dismissed on jurisdictional grounds, leading to appeals before NCLAT and Supreme Court

Previous Decisions

NCLT held applications challenging Benami Act attachment orders not maintainable under IBC (orders dated 25.04.2022 and 29.03.2022) -- NCLAT dismissed appeals under Section 61 of IBC (orders dated 18.08.2022 and 13.03.2023)

Issues

Whether the National Company Law Tribunal (NCLT) has jurisdiction to entertain challenges to provisional attachment orders passed under the Prohibition of Benami Property Transactions Act, 1988 during corporate insolvency resolution proceedings (CIRP) and liquidation under the Insolvency and Bankruptcy Code, 2016 Whether the remedy for challenging orders under the Benami Act lies exclusively before the statutory authorities constituted under that Act rather than before authorities under the IBC

Submissions/Arguments

Appellants argued that provisional attachment orders under Benami Act should be challenged before NCLT as they affected liquidation estate under IBC Respondents maintained that exclusive jurisdiction for Benami Act matters lies with authorities under that Act, not IBC tribunals

Ratio Decidendi

Orders passed under the Prohibition of Benami Property Transactions Act, 1988 cannot be questioned before authorities under the Insolvency and Bankruptcy Code, 2016 -- The National Company Law Tribunal lacks jurisdiction to entertain challenges to provisional attachment orders issued under the Benami Act -- The exclusive remedy for challenging Benami Act orders lies before the statutory authorities constituted under that Act -- Jurisdictional boundaries between the Benami Act and IBC regimes must be respected, with each statutory framework having its own designated forums for adjudication

Judgment Excerpts

Accepting the concurrent findings of NCLT and NCLAT, we have held that orders passed under Benami Act cannot be questioned before authorities under the Insolvency and Bankruptcy Code, 2016 (IBC) NCLT held that the challenge to the order of attachment under the Benami Act must be before the statutory authorities under that Act and not before the authorities under the IBC The NCLAT declined to interfere with the decision of the National Company Law Tribunal and refused to adjudicate the appellant-liquidators' applications challenging the provisional attachment orders passed by the authorities under the Prohibition of Benami Property Transactions Act, 1988

Procedural History

Corporate insolvency resolution proceedings (CIRP) commenced against corporate debtors -- NCLT admitted applications and moratorium commenced under Section 14 of IBC -- Provisional attachment orders issued under Section 24(3) of Benami Act on 01.11.2019 -- Corporate debtors ordered into liquidation (20.04.2021 for Padmaadevi Sugars Ltd., 14.02.2019 for Senthil Papers and Board Pvt. Ltd.) -- Liquidators filed applications before NCLT challenging attachment orders -- NCLT dismissed applications holding lack of jurisdiction (25.04.2022 and 29.03.2022) -- NCLAT dismissed appeals under Section 61 of IBC (18.08.2022 and 13.03.2023) -- Supreme Court heard batch of civil appeals and dismissed them