Tribunal upholds moratorium under Insolvency & Bankruptcy Code, halting High Court suits against corporate debtors

The Tribunal clarified that the impugned order declaring a moratorium under the Insolvency & Bankruptcy Code stood, emphasizing that suits before High Courts involving money recovery against the corporate debtor could not proceed post-moratorium declaration. The Tribunal noted that the moratorium did not exclude any court, including the High Courts or Supreme Court, from its application, except for cases under specific constitutional provisions. The appeal was disposed of with the clarification that the moratorium's scope encompassed all courts for actions against the corporate debtor, as outlined in Section 14 of the I&B Code.

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Issues:
Challenge to impugned order dated 19th July 2017 passed by the Adjudicating Authority regarding the declaration of moratorium under section 7 of the Insolvency & Bankruptcy Code, 2016. Interpretation of Section 14 of the I&B Code concerning the scope of moratorium and its impact on pending suits or proceedings against a corporate debtor, including the exclusion of certain courts from the moratorium.

Analysis:
The Appellant, a financial creditor, challenged the order passed by the Adjudicating Authority declaring a moratorium under the I&B Code. The issue revolved around the exclusion of certain courts from the moratorium for the purpose of recovery of amounts or execution of judgments. The Adjudicating Authority had prohibited various actions, including the institution of suits or continuation of pending suits against the corporate debtor, transferring assets, enforcing security interests, and recovering property. The Appellant argued that no court should be excluded from the moratorium's purview for recovery or execution purposes.

Upon examining the provisions of the I&B Code, specifically Section 14 related to Moratorium, the Tribunal analyzed the scope of the moratorium. Section 14(1) outlines the actions prohibited during the moratorium, including suits against the corporate debtor and asset transfers. The Tribunal noted that the provision did not exclude any court, including the High Courts or Supreme Court of India, from the moratorium's application.

The Tribunal clarified that while the moratorium would not affect cases pending before the Supreme Court under Article 32 or where orders are passed under Article 136 of the Constitution, it would impact suits filed before High Courts under original jurisdiction involving money recovery against the corporate debtor. The Tribunal emphasized that the moratorium would not impede the powers of the Supreme Court under Article 32 or the High Courts under Article 226.

In light of the legal provisions and the interpretation of the scope of moratorium, the Tribunal clarified that the impugned order by the Tribunal regarding the moratorium stood clarified. The appeal was disposed of with the above observations, emphasizing that suits before High Courts involving money recovery against the corporate debtor could not proceed post the declaration of moratorium under Section 14 of the I&B Code.

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