Tribunal Upholds IBC Supremacy Over TNPID Act: Resolution Professional Empowered

The Tribunal held that the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) prevails over the Tamil Nadu Protection of Interest of Depositors Act, 1997 (TNPID Act), allowing the Resolution Professional to take over proceedings concerning the Corporate Debtor. The Tribunal set aside an ad-interim attachment order and directed the competent authorities to hand over all relevant records to the Resolution Professional. This decision reinforces the supremacy of IBC, 2016 in resolving corporate insolvency matters comprehensively.

---

---

Issues Involved:
1. Whether the proceedings pending under the Tamil Nadu Protection of Interest of Depositors Act, 1997 (TNPID Act) can be taken over by the Resolution Professional under the Provisions of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016).

Issue-wise Detailed Analysis:

1. Proceedings under TNPID Act vs. IBC, 2016:
The primary legal issue was whether the proceedings pending under the TNPID Act can be taken over by the Resolution Professional under the IBC, 2016. The Tribunal referenced Section 238 of IBC, 2016, which states, "The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." This provision implies that IBC, 2016, being a special legislation, overrides any other conflicting laws, including the TNPID Act. The Tribunal cited the Supreme Court's judgment in Innovative Industries Limited v. ICICI Bank and Anr., which upheld that the IBC, 2016, prevails over other laws due to its non-obstante clause.

2. Time-bound Insolvency Resolution Process:
The Tribunal emphasized that the IBC, 2016 prescribes a 180-day period for the Insolvency Resolution Process, extendable under certain conditions. If no resolution plan is accepted within this timeframe, liquidation proceedings must commence as per Section 33 of IBC, 2016. The Tribunal highlighted the comprehensive scheme provided under IBC, 2016, for resolving corporate insolvency, including the distribution of assets as per the waterfall mechanism in Section 53.

3. Overriding Effect of IBC, 2016:
The Tribunal reiterated that IBC, 2016, overrides the TNPID Act by virtue of Section 238. This position was supported by the Bombay High Court's ruling in M/S. Aryarup Tourism Club Resorts Private Limited (in Liquidation), which stated that the powers of the competent authority under the MPID Act do not supersede the powers of the Official Liquidator or Company Court under the Companies Act. Hence, the Tribunal concluded that the Resolution Professional could take over proceedings related to the Corporate Debtor under IBC, 2016.

4. Ad-interim Attachment Order:
The Tribunal noted that an ad-interim attachment order was passed during the moratorium period, violating Section 14(1)(a) of IBC, 2016. The order, which froze the chit security deposit amounting to Rs. 2.71 crores, was declared null and void. This decision was aligned with the NCLT Mumbai's ruling in SREI Infrastructure Finance Limited v. Sterling SEZ and Infrastructure Limited, which set aside similar orders passed during the moratorium.

5. Jurisdictional Limitations of TNPID Act:
The Tribunal observed that the TNPID Act's jurisdiction is limited to Tamil Nadu, whereas the Corporate Debtor had branches across multiple states. The IBC, 2016, being a central legislation, provides a comprehensive solution to such complex issues, further justifying the Resolution Professional's takeover of proceedings.

6. Directions to Hand Over Records:
The Tribunal directed the competent authorities and investigating officers under the TNPID Act, including the Deputy Superintendent of Police, Economic Offences Wing-II, to hand over all records of the Corporate Debtor, including books of accounts and chit security deposits amounting to Rs. 2.71 crores, to the Resolution Professional within two weeks. The Resolution Professional was instructed to obtain a certified copy of the order and ensure compliance.

Conclusion:
The Tribunal concluded that the IBC, 2016, overrides the TNPID Act, allowing the Resolution Professional to take over proceedings related to the Corporate Debtor. The ad-interim attachment order was set aside, and the competent authorities were directed to hand over all relevant records to the Resolution Professional for further action. The judgment reinforces the supremacy of IBC, 2016, in resolving corporate insolvency issues comprehensively.

---