IBC moratorium overrides inconsistent attachment proceedings, enabling the Resolution Professional to take possession of the debtor's assets and records

The insolvency moratorium under the Insolvency and Bankruptcy Code, 2016, read with its overriding effect, is stated to prevail over inconsistent attachment and recovery action under the SEBI Act and the Income-tax Act during the corporate insolvency resolution process. On that basis, the Resolution Professional must be enabled to take possession of the corporate debtor's assets, title deeds and records to carry out the process effectively and within time. Where attachments under the SEBI Act subsist, de-attachment and handover of possession are directed, while released income-tax attachments require handover of title deeds.

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Issues: Whether the Insolvency and Bankruptcy Code, 2016 overrides attachments and recovery action under the SEBI Act and the Income-tax Act so as to require de-attachment of the corporate debtor's properties and handing over of title deeds and possession to the Resolution Professional.

Analysis: The application was filed after admission of the insolvency petition and commencement of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. The attached properties had been subjected to proceedings under Section 11 and Section 11B of the SEBI Act read with Regulation 65 of the Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999, while the Income-tax Department had attached certain properties under the Second Schedule of the Income-tax Act, 1961, though it later reported de-attachment of those properties. Relying on the overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016, and the principle that inconsistent proceedings under other enactments must yield during the corporate insolvency resolution process, the Court held that the Resolution Professional must be enabled to take possession of the corporate debtor's assets and records to carry out the process effectively and within time.

Conclusion: The issue was answered in favour of the Resolution Professional. SEBI was directed to de-attach the corporate debtor's properties and hand over possession and records, and the Income-tax attachment having been released, the title deeds were also directed to be handed over.

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