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Issues: (i) Whether, during the currency of the corporate insolvency resolution process, proceedings for recovery of pre-CIRP dues, eviction or recovery of possession, and action under notices issued before commencement of insolvency could continue against the corporate debtor. (ii) Whether consequential penal action under section 74(2) of the Insolvency and Bankruptcy Code, 2016 could be directed against the respondent.
Issue (i): Whether, during the currency of the corporate insolvency resolution process, proceedings for recovery of pre-CIRP dues, eviction or recovery of possession, and action under notices issued before commencement of insolvency could continue against the corporate debtor.
Analysis: Section 238 of the Insolvency and Bankruptcy Code, 2016 gives the Code overriding effect. Section 14 bars institution or continuation of proceedings against the corporate debtor and prohibits recovery of property by an owner or lessor where such property is in the possession of the corporate debtor. The dues covered by the notices related to a period preceding commencement of CIRP and were treated as claims to be dealt with within the insolvency framework. The pendency of prior notices did not permit coercive or recovery action during moratorium.
Conclusion: The moratorium barred continuation of the recovery, eviction, and allied proceedings. This issue is decided in favour of the assessee.
Issue (ii): Whether consequential penal action under section 74(2) of the Insolvency and Bankruptcy Code, 2016 could be directed against the respondent.
Analysis: Section 74(2) provides for penal consequences for wilful contravention of the moratorium. On the facts, the respondent had already lodged its claim in the CIRP and the proceedings complained of were held to be covered by the moratorium. The Tribunal declined to impose penal consequences in the circumstances.
Conclusion: No order under section 74(2) was warranted. This issue is decided against the assessee.
Final Conclusion: Relief was granted against continuation of the impugned proceedings during CIRP, but the request for penal action was rejected, resulting in only partial success for the applicant.
Ratio Decidendi: Once CIRP commences, section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits continuation of pre-CIRP recovery and possession proceedings against the corporate debtor, and such claims must be pursued within the insolvency process rather than through coercive action outside it.
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