Karnataka High Court Rules Against Petitions on Partnership Firms in NCLT

Karnataka High Court deems petitions against partnership firms or Directors invalid under Insolvency and Bankruptcy Code Section 95 for NCLT. Petitioners' filing declared illegal, NCLT proceedings quashed.

The Karnataka High Court ruled that petitions against partnership firms or their Directors aren't valid under Section 95 of the Insolvency and Bankruptcy Code, 2016, for the National Company Law Tribunal (NCLT).

"The Court questioned the jurisdiction of the Tribunal to accept such petitions," stated Justice M Nagaprasanna. "It's perplexing why petitioners have to contest jurisdiction before the Tribunal."

Senior Counsels Om Prakash, CK Nandakumar, and Counsel Vishwas N represented the petitioner. Respondents, led by DSGI H Shanthi Bhushan, argued for dismissal.

The dispute arose from a Joint Development Agreement, leading to arbitration. The company invoked Section 95 of the IBC, but the firm contested NCLT's jurisdiction over non-corporate debtors. The Court questioned if such petitions fell under NCLT's purview.

The Court noted, "Filing a petition triggers Section 96, imposing an interim moratorium and appointing a Resolution Professional." Consequently, the petitioners' filing was deemed illegal, and NCLT proceedings were quashed.