Moratorium and resolution professional control bar shareholder suit challenging a foreign decree during insolvency resolution.

During corporate insolvency resolution, Section 14 moratorium bars proceedings against the corporate debtor, so shareholders cannot institute a suit to impeach a foreign decree and thereby bypass the statutory restraint. The Court noted that any challenge affecting the corporate debtor's rights must be taken by the resolution professional acting for the debtor within the insolvency framework. It also held that Section 25(2)(b) requires the resolution professional to represent the corporate debtor in judicial proceedings for its benefit, with recourse lying before the NCLT under Section 60(5) where appropriate. The proposed suit was not a true derivative action and could not be maintained by the shareholders.

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Issues: (i) Whether the proposed suit was barred by the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 and could be instituted by shareholders during the corporate insolvency resolution process. (ii) Whether the challenge to the foreign decree could be pursued by the resolution professional, and whether the suit was maintainable as a derivative action.

Issue (i): Whether the proposed suit was barred by the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 and could be instituted by shareholders during the corporate insolvency resolution process.

Analysis: The moratorium under Section 14(1)(a) prohibits institution of proceedings against the corporate debtor during corporate insolvency resolution process. The proceedings sought to impeach a foreign decree that operated against the corporate debtor, and the Court held that, in substance, the action had to be taken by the resolution professional acting for the corporate debtor. The filing by the shareholders could not bypass the statutory bar.

Conclusion: The suit was barred during the subsistence of the moratorium and was not maintainable at the instance of the plaintiffs.

Issue (ii): Whether the challenge to the foreign decree could be pursued by the resolution professional, and whether the suit was maintainable as a derivative action.

Analysis: Section 25(2)(b) casts a duty on the resolution professional to represent and act on behalf of the corporate debtor in judicial proceedings for its benefit. The Court held that this statutory role, read with the Code as a complete code and the jurisdiction of the National Company Law Tribunal under Section 60(5), meant that the corporate debtor or the resolution professional must pursue any challenge in the appropriate forum. The Court also held that the proposed suit was not a true derivative action, as the plaintiffs constituted the entire shareholder body and the corporate debtor was under resolution professional control; the Foss v. Harbottle framework did not assist the plaintiffs.

Conclusion: The resolution professional was the proper statutory actor to decide and pursue such proceedings, subject to the insolvency regime, and the proposed suit could not be maintained as a derivative action by the plaintiffs.

Final Conclusion: The Court held that the proposed suit could not proceed in the Commercial Division during CIRP, while leaving open the corporate debtor's recourse before the National Company Law Tribunal and any lawful step by the resolution professional if permitted within the insolvency framework.

Ratio Decidendi: During corporate insolvency resolution process, a suit affecting the corporate debtor's rights in relation to a third party must be pursued only through the resolution professional within the insolvency framework, and shareholders cannot institute such proceedings to circumvent the statutory moratorium.

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