Kerala High Court Says NCLT Delhi Orders Cannot Be Challenged In Kerala Merely Because Loan Was Availed There

The Kerala High Court has ruled that an order passed by the National Company Law Tribunal (NCLT), Delhi, under the Insolvency and Bankruptcy Code (IBC) cannot be challenged before the Kerala High Court merely because the underlying credit facility was obtained in Kerala. The Court held that such a circumstance does not create a sufficient cause of action within the State for invoking writ jurisdiction under Article 226 of the Constitution.

The case involved a personal guarantor who challenged insolvency proceedings initiated by a bank under Section 95 of the IBC. The proceedings were filed before the NCLT, Delhi, against a company that had availed credit facilities from the bank. The petitioner approached the Kerala High Court after the NCLT permitted corrections in the insolvency application and allowed proceedings to continue against him as the personal guarantor.

Justice Harisankar V. Menon examined whether the Kerala High Court had territorial jurisdiction to entertain the writ petition. The petitioner argued that part of the cause of action arose in Kerala because the loan transaction originated within the State.

Rejecting this contention, the Court noted that under the IBC, insolvency proceedings must be initiated before the NCLT having jurisdiction over the place where the corporate debtor’s registered office is located. In the present case, the company’s registered office was situated in New Delhi, making NCLT Delhi the appropriate forum.

The Court observed that the mere fact that a credit facility was sanctioned or availed in Kerala does not give rise to a cause of action concerning insolvency proceedings under the IBC. Since the relevant proceedings were lawfully instituted in Delhi, the Kerala High Court held that it lacked territorial jurisdiction and dismissed the writ petition.