NEW DELHI: The Supreme Court on Tuesday ruled that attachment orders passed under the Prohibition of Benami Property Transactions Act can be challenged only before the authorities prescribed under that statute and not before forums constituted under the Insolvency and Bankruptcy Code (IBC).
A bench comprising Justices P.S. Narasimha and Atul Chandurkar dismissed appeals filed against a decision of the National Company Law Appellate Tribunal (NCLAT), which had declined to interfere with an order of the National Company Law Tribunal (NCLT) on the issue of jurisdiction. The apex court also imposed costs of Rs 5 lakh each on the appellants, observing that the litigation amounted to an abuse of process.
The court made it clear that statutory remedies available under the Benami Act cannot be bypassed by invoking provisions of the IBC before the NCLT. “We are of the opinion that the appellants could not have challenged the attachment order passed under the Benami Act before the statutory authorities under the Insolvency and Bankruptcy Code. We have no doubt in our mind that such invocation is not bona fide and is actually intended to circumvent and interdict the procedures contemplated under the Benami Act,” the bench observed.
The matter arose from provisional attachment orders issued by authorities under the Benami Act. Liquidators had approached the NCLT seeking to challenge these attachments, contending that the properties formed part of the liquidation estate under the IBC framework. However, the NCLT held that it lacked jurisdiction to adjudicate challenges to attachment orders issued under a separate statutory regime.
The decision was subsequently upheld by the Chennai bench of the NCLAT, which ruled that attachment proceedings under the Benami Act must be contested before the authorities designated under that Act, and not before insolvency tribunals.
Unconvinced, the appellants approached the Supreme Court, arguing that the insolvency framework conferred jurisdiction on the NCLT to decide all questions relating to the assets of a corporate debtor. The apex court, however, rejected this contention and affirmed the NCLAT’s reasoning.
The bench was particularly critical of the attempt to invoke IBC forums despite clear statutory remedies being available under the Benami Act. It noted that filing an appeal before the NCLAT—even after the NCLT had clarified that it lacked jurisdiction—demonstrated a deliberate attempt to sidestep the prescribed legal mechanism.
“Filing of appeal before NCLAT, despite the finding that the appropriate forum is not NCLT, but the statutory authorities under the Benami Act, leaves no doubt that it is a complete abuse of the process,” the court said.
The judges further remarked that the appellants had consumed “precious time” of the NCLT, the NCLAT, and the Supreme Court, even though the legal position was “amply clear” and there was no ambiguity regarding the availability of remedies under the Benami Act.
As a deterrent against such forum shopping, the bench imposed costs of Rs 5 lakh each on the appellants. The court directed that the amount be deposited with the Supreme Court Advocates-on-Record Association within four weeks.
The ruling reinforces the principle that when a special statute provides a dedicated adjudicatory framework, parties must exhaust remedies within that mechanism rather than seeking alternative forums. It also underscores judicial intolerance towards attempts to misuse insolvency proceedings to override or delay actions initiated under other statutory regimes.
