2019 (3) TMI 451 - AT - Insolvency and Bankruptcy

Ownership dispute during insolvency moratorium period: Adjudicating Authority lacks jurisdiction. Seek resolution post-moratorium.

The appeals were dismissed, affirming the Resolution Professional's determination that the materials belonged to the Corporate Debtor. The Adjudicating ... Jurisdiction of Adjudicating Authority to decide the claim or counter claim - Initiation of Corporate Insolvency Resolution Process - Material belonging to the Corporate Debtor - direction to Corporate Debtor to hand over custody of the Materials - restraining Insolvency Resolution Professional from alienating and/or creating any third-party interest in the Materials - Held that:- Sub-section (5) of Section 60 empowers the National Company Law Tribunal (Adjudicating Authority) to entertain or dispose of any application or proceeding by or against the Corporate Debtor or Corporate Person; any claim made by or against the Corporate Debtor or Corporate Person including claims by or against any of its subsidiaries situated in India; apart from any question of priority or any question of law and facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor or corporate person under the code - From sub-section (6) of Section 60 it is clear that after period of moratorium, a suit or application can be filed against the Corporate Debtor for which an order of moratorium has been made under the Part II and in such case, the period during which such moratorium is in place shall be excluded for the purpose of counting the limitation. In the present case the dispute relating to claim and counter claim as made by one or other parties, is brought to our notice by the Resolution Professional. The Resolution Professional while held that the material belongs to the Corporate Debtor, apart from the Appellants, other parties have also made claim that the same very material belongs to them. As the claim is not against the Corporate Debtor or its subsidiaries but includes inter-se claim for the same very material, such dispute cannot be decided by the Adjudicating Authority under Sub-section (5) of Section 60 of the I&B Code. It is only after completion of the period of moratorium and it is finally decided that the material belongs to the Corporate Debtor and order is accordingly passed, it is open to the persons to file a suit before appropriate forum claiming right and title over the material in question and for filing such suit claiming right over the material the moratorium period has to be excluded for the purpose of counting the period of limitation. The Adjudicating Authority has no jurisdiction to decide the claim or counter claim with regard to the parties - Appeal dismissed. Issues Involved:1. Ownership of materials supplied to the Corporate Debtor.2. Authority of the Resolution Professional to release materials.3. Jurisdiction of the Adjudicating Authority to decide claims and counterclaims during the moratorium period.Detailed Analysis:1. Ownership of Materials Supplied to the Corporate Debtor:The main contention from 'M/s Dynepro Pvt. Ltd.' was that the materials sent to the Corporate Debtor, 'M/s Cethar Ltd.', for job work belonged to them and not to the Corporate Debtor. They argued that these materials were sent for specific job work and thus should not be considered as assets of the Corporate Debtor. They provided evidence including an Inward Inspection Certificate dated 5th May 2017, which listed the vendor's name as 'M/s DPL/G.B. Engineering', to establish ownership. The Resolution Professional, however, contended that the materials were part of the Corporate Debtor's inventory and thus belonged to the Corporate Debtor.2. Authority of the Resolution Professional to Release Materials:The Resolution Professional, during the Corporate Insolvency Resolution Process (CIRP), claimed that the materials in question were part of the Corporate Debtor's assets. The Resolution Professional's duty, as per Section 18 of the Insolvency and Bankruptcy Code (IBC), includes taking control and custody of any asset over which the Corporate Debtor has ownership rights. The Resolution Professional determined that the materials did not belong to 'M/s Dynepro Pvt. Ltd.' or 'M/s IU International Holdings PTE Ltd.', but to the Corporate Debtor. The Adjudicating Authority supported this view and rejected the claims for the release of materials during the resolution process.3. Jurisdiction of the Adjudicating Authority to Decide Claims and Counterclaims:The judgment emphasized that the Corporate Insolvency Resolution Process (CIRP) is not a forum for deciding money claims or disputes over material ownership. As per Section 60(5) of the IBC, the National Company Law Tribunal (NCLT) can entertain applications or proceedings by or against the Corporate Debtor, but it cannot decide inter-se claims regarding ownership of materials during the moratorium period. The Adjudicating Authority correctly refrained from making a decision on the claims and counterclaims regarding material ownership, as such disputes should be resolved post-moratorium through appropriate legal channels. The judgment clarified that any party claiming ownership of the materials could file a suit after the moratorium period, and the moratorium period would be excluded from the limitation period for such suits.Conclusion:The appeals were dismissed, upholding the Resolution Professional's determination that the materials belonged to the Corporate Debtor and affirming that the Adjudicating Authority had no jurisdiction to decide the ownership disputes during the moratorium period. The parties were advised to seek resolution of their claims through appropriate legal forums after the completion of the moratorium period. The judgment emphasized the limitations of the Adjudicating Authority's powers during the CIRP and reinforced the procedural framework established under the IBC.