2018 (4) TMI 274 - Tri - Insolvency and Bankruptcy

Tribunal upholds Respondent's lien rights, emphasizes compliance with Customs Act.

Bharati Defence and Infrastructure Ltd. Versus Mannu Carrier Corporation

Bharati Defence and Infrastructure Ltd. Versus Mannu Carrier Corporation - TMI Issues Involved:1. Transfer of goods from Respondent's warehouse to Applicant's warehouse.2. Payment of outstanding dues by the Applicant.3. Applicability of Insolvency & Bankruptcy Code (IBC) provisions.4. Respondent's right of lien under the Indian Contract Act.5. Compliance with the Customs Act.6. Jurisdiction of the Tribunal under IBC.Issue-wise Detailed Analysis:1. Transfer of goods from Respondent's warehouse to Applicant's warehouse:The applicant, Bharti Defence & Infrastructure Ltd., through its Resolution Professional, sought the transfer of goods worth approximately Rs. 13 crores from the Respondent’s warehouse to the Applicant’s warehouse, citing the need to utilize the materials for constructing shipping vessels for the Ministry of Defence. The Resolution Professional argued that under the moratorium order dated 6.6.2017, he was in the process of taking control of the applicant’s assets and operations, which included the materials stored in the Respondent’s warehouse.2. Payment of outstanding dues by the Applicant:The Respondent claimed that the Applicant owed Rs. 14,85,24,824 towards various charges including crane hiring, transport, warehouse rent, and labor charges. The Respondent had filed a Company Petition 948/2015 before the Hon'ble High Court of Bombay for recovery of these dues, which was still pending. The Respondent argued that it had a preferential right of set-off by virtue of its lien over the goods lying in its warehouse.3. Applicability of Insolvency & Bankruptcy Code (IBC) provisions:The Resolution Professional contended that under Sections 18(f), 23(2), and 25(2)(a) of the IBC, he was required to take control and custody of the Corporate Debtor’s assets, including those not in the possession of the Corporate Debtor. He argued that the Respondent should deliver the goods to him as per the IBC provisions. However, the Tribunal noted that Section 14 of the IBC, which deals with the moratorium, does not grant the Corporate Debtor a right to proceed against others to obtain possession or recovery of assets.4. Respondent's right of lien under the Indian Contract Act:The Respondent argued that it had a right of lien over the goods under Section 171 of the Indian Contract Act, as well as rights under Sections 148 and 170, which pertain to the relationship of bailer and bailee. The Respondent also cited Section 15 of the Carriage by Road Act, which allows retention of goods until dues are cleared. The Tribunal found merit in the Respondent’s argument, noting that the Respondent’s lien and bailment rights could not be overridden by the IBC.5. Compliance with the Customs Act:The Tribunal emphasized that the goods in question were under the custody of the Customs Authority in a bonded warehouse, and the Applicant had not obtained the necessary permissions from the Customs Commissioner to move the goods. The Tribunal highlighted various provisions of the Customs Act, including Sections 59, 65, and 71, which mandate compliance with customs regulations before any movement or transfer of goods from a bonded warehouse. The Tribunal concluded that the Corporate Debtor could not exercise ownership rights over the goods without complying with the Customs Act.6. Jurisdiction of the Tribunal under IBC:The Tribunal observed that it did not have the jurisdiction to override the provisions of the Customs Act. The Tribunal noted that the IBC’s non obstante clause applies within its operational field and does not extend to areas governed by other statutes, such as the Customs Act. The Tribunal cited precedents where the Supreme Court emphasized the need for harmonious construction of laws to protect rights under different enactments. The Tribunal concluded that the Corporate Debtor could not bypass the customs regulations and that the IBC did not grant the Tribunal the authority to order the release of goods from customs custody.Conclusion:The Tribunal dismissed the application, holding that the Applicant did not have the right under the IBC to obtain delivery of the goods from the Respondent’s warehouse without complying with the Customs Act and other relevant laws. The Tribunal emphasized that the Respondent’s lien and bailment rights, as well as the customs regulations, could not be overridden by the IBC provisions.