The Hon’ble High Court of Delhi recently held in Roseland Buildtech v. Vihaan 43 Realty¹ that the National Company Law Tribunal (NCLT) can adjudicate complex disputes involving fraud, forgery, the existence of debt, and the validity of assignment agreements under the Insolvency and Bankruptcy Code, 2016 (IBC) as per Sections 63 and 231 read with Sections 60(5)(c), 65 and 75, and the NCLT Rules 2016; cracking down on “luxury litigations” and “anti-tribunal suits” designed to bypass the IBC.

Brief Facts
The Plaintiff/ Corporate Debtor, Roseland Buildtech, challenged a petition under Section 7 of the IBC initiated by Defendant No. 1/ Financial Creditor, Vihaan 43 Realty, being C.P. (IB) No. 389 (PB)/2024, for the initiation of the corporate insolvency resolution process (CIRP), alleging that the debt relied upon by the said defendant had been discharged and the purported Business Transfer Agreement (BTA) dated 6th March 2020 assigning the loan was void, fraudulent and forged. The Plaintiff sought declarations of discharge, findings on the BTA being void ab initio, injunctions preventing enforcement, and a reconciliation of accounts. The Section 7 petition before the NCLT and related interlocutory proceedings ran in parallel with the civil suit filed before the High Court of Delhi.

Issue
The primary issue before the High Court was whether a civil suit seeking declaratory and injunctive reliefs that effectively challenges the existence of debt, validity of assignment, and authenticity of documents relied upon in a Section 7 petition, is maintainable before a civil court or whether such questions fall within the exclusive jurisdiction of the NCLT under the IBC, attracting the ouster provisions of the said code, notably Sections 63 and 231, and related powers under Sections 60(5)(c), 65 and 75.

Decision
The High Court held that the jurisdiction of the civil suit was barred by the provisions of the IBC. Applying a cumulative reading of Sections 63 and 231 with Sections 60(5)(c), 65 and 75, and having regard to the NCLT Rules 2016, the Court concluded that the issues raised in the suit, being fraud, validity of assignment, and existence of debt, fall squarely within the adjudicatory machinery of the NCLT. Further, the Court also held that the claim of the Plaintiff that the defendants have initiated the CIRP in collusion with each other and the question of whether the BTA is fabricated/ forged are also capable of adjudication under IBC.

The Court noted that the civil suit, while couching itself in declaratory overtones, in essence, was truly aimed at getting an anti-tribunal injunction. The Court also highlighted the need for civil courts to practice caution against the new breed of “anti-tribunal suits,” fundamentally premised upon taking away from the powers of a tribunal established under specialised statutes, and directed that if upon scrutiny, a civil court learns that a suit attempts to interdict, stall, or pre-empt proceedings before a statutory tribunal, or to secure a determination on an issue which squarely falls within the jurisdiction of such tribunal, the civil court must decline to entertain the action at the threshold, as permitting otherwise would be to allow litigants to achieve indirectly what they are barred from doing directly, thereby rendering the legislative intent behind the creation of specialised fora otiose.

Therefore, the Court allowed the Defendant’s application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC) rejecting the plaint as being barred by the provisions of the IBC, and disposed of the Plaintiff’s interlocutory application under Order XXXIX as infructuous. The Court encouraging the use costs as a means to filter out luxury or superfluous litigation, imposed costs of Rs. 2,00,000 on the Plaintiff, to be paid to Delhi State Legal Services Authority (DSLSA).

Conclusion
Therefore, the Court held that the present suit is a textbook example of a proceeding which, though clothed as a civil declaratory action, is in reality an impermissible collateral attack on the jurisdiction and functioning of the NCLT under the IBC, and entertaining such a suit would amount to judicially endorsing forum shopping and procedural circumvention. The Court, in response to a submission that the present issue is res integra, observed that the present issue has not been directly touched by judicial opinion because it is not an issue to begin with, as the law is absolutely clear and all authorities, inter alia, Swiss Ribbons² and Embassy Property,³ are fully aligned with the scheme of the IBC.

By - Gurdev Singh Tung and Fiza Abbas