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of <h1>High Court Upholds Moratorium under Insolvency Code</h1> <h3>Principal Commissioner of Income Tax Versus Monnet Ispat & Energy Ltd.</h3> The High Court affirmed the applicability of the Insolvency and Bankruptcy Code, 2016, particularly Section 14, which imposes a moratorium on legal ... Maintainability of petition - initiation of CIRP - institution of suits or continuation of pending suits or proceedings - HELD THAT:- The provisions of the Insolvency and Bankruptcy Code, 2016 ('Code') and in particular, s. 14 thereof have been perused. It appears to the Court that s. 238 of the Code is categorical that the Code will apply, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Sec. 14(1)(a) of the Code states, inter alia, that on the 'insolvency commencement date', the adjudicating authority shall by order declare moratorium for prohibiting 'the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any Court of law, Tribunal, arbitration panel or other authority' - That the Code will prevail over all other statutes inconsistent therewith has been explained in the recent decision in Innoventive Industries Ltd. vs. ICICI Bank [2017 (9) TMI 58 - SUPREME COURT]. In the instant case, the National Company Law Tribunal (NCLT) (which by virtue of s. 5(1) of the Code is the adjudicating authority] has by its order dt. 18th July 2017 admitted the petition under s. 7 of the Code filed by the SBI against the respondent-assessee and prohibited, inter alia, 'the institution of suits or continuation of pending suits or proceedings' against the respondent. This would include the present appeal by the IT Department ('Department') against the order of the Income-tax Appellate Tribunal in respect of the tax liability of the respondent-assessee. The appeals are disposed of with liberty to the appellant-Department to revive them subject to the further orders of the NCLT. Issues:1. Applicability of the Insolvency and Bankruptcy Code, 2016 (the 'Code') and Section 14 thereof.2. Effect of the moratorium declared by the National Company Law Tribunal (NCLT) on pending suits or proceedings.3. Requirement for seeking permission from NCLT for continuation of pending proceedings against the corporate debtor in other fora.Analysis:1. The High Court examined the provisions of the Insolvency and Bankruptcy Code, 2016 ('Code') in light of Section 14, which declares a moratorium on legal actions against a corporate debtor. The Court noted that Section 238 of the Code mandates its application, overriding any inconsistent provisions in other laws. Specifically, Section 14(1)(a) of the Code prohibits the institution or continuation of suits or proceedings against the corporate debtor upon the 'insolvency commencement date'. The Court referenced a Supreme Court decision to emphasize the Code's supremacy over conflicting statutes.2. The NCLT, as the adjudicating authority under the Code, had admitted a petition filed by the State Bank of India against the respondent and imposed a moratorium on legal actions, including the appeal by the Income-tax Department concerning the tax liability of the respondent. The Court observed that the moratorium would remain in effect until the completion of the corporate insolvency resolution process or until specific orders are issued by the Bench, allowing the appellant-Department to revive the appeals subject to NCLT's further directives.3. The Court addressed the absence of a requirement in the Code for seeking permission from the NCLT to continue pending proceedings against the corporate debtor in other forums. The order of the NCLT explicitly stated that the moratorium would persist until the resolution process is completed or until specific actions are taken by the Bench. Consequently, the Court disposed of the appeals while granting the appellant-Department the liberty to reinstate them based on future directions from the NCLT, highlighting the procedural nuances under the Code regarding the continuation of legal actions during insolvency proceedings.
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