Tribunal upholds order under Section 66 of IBC during moratorium

The Tribunal upheld the Adjudicating Authority's decision to pass an order under Section 66 of the IBC during the moratorium period. The order required the respondents to contribute funds to the corporate debtor's assets and initiate criminal proceedings for fraudulent activities. The Tribunal found the order legal, dismissing the appeal and confirming the Authority's decision without costs.

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Issues Involved:
1. Legality of the order passed under Section 66 of IBC during the moratorium under Section 14 of IBC.
2. Competence of the Adjudicating Authority to pass orders against the resolution professional and related parties during the insolvency resolution process.

Detailed Analysis:

1. Legality of the Order Passed During Moratorium:
The appellant contended that the Adjudicating Authority committed a serious error by issuing directions during the moratorium imposed under Section 14 of IBC. Section 14 (1) (a) of IBC prohibits the institution or continuation of suits or proceedings against the corporate debtor, including the execution of any judgment, decree, or order in any court, tribunal, arbitration panel, or other authority. However, the Tribunal clarified that this prohibition does not extend to the passing of orders by the Adjudicating Authority during the insolvency resolution process or liquidation process against resolution professionals, suspended directors, or related parties. The Tribunal emphasized that Section 66 of IBC empowers the Adjudicating Authority to pass appropriate orders when fraudulent transactions are identified, regardless of the moratorium under Section 14.

2. Competence of the Adjudicating Authority:
The Tribunal examined whether the Adjudicating Authority was competent to pass the impugned order under Section 66 of IBC during the moratorium. Section 66 allows the Adjudicating Authority to hold individuals liable for fraudulent trading or wrongful trading during the insolvency resolution process or liquidation process. The Tribunal noted that Section 14 and Section 66 serve different purposes and must be read independently to achieve the objectives of the IBC. Section 14 aims to prevent fictitious claims by third parties, while Section 66 aims to prevent fraudulent trading or business by the corporate debtor through its resolution professional or suspended directors. The Tribunal concluded that there is no inconsistency or repugnancy between these sections, and they must be construed harmoniously to make the statute effective and workable.

Conclusion:
The Tribunal held that the Adjudicating Authority was within its rights to pass the impugned order under Section 66 of IBC during the moratorium period. The order directed the respondents to contribute Rs. 2687.27 lacs to the assets of the corporate debtor and to institute criminal prosecution against the respondents for fraudulent activities. The Tribunal found no illegality in the order and dismissed the appeal, confirming the Adjudicating Authority's decision. The appeal was deemed devoid of merit, and the order was upheld without costs.

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