2023 (2) TMI 238 - AT - Insolvency and Bankruptcy

Appeal success: Central Bank's application during interim moratorium ruled unsustainable, RP appointment set aside.

The appeal centered on the appointment of a Resolution Professional (RP) and the implications of an interim moratorium. The Tribunal ruled that the ... Parallel proceedings - whether when an application is filed against the Personal Guarantor whether another Lender of same transaction can proceed against the Personal Guarantor by filing another application under Section 95 of the I&B Code? - HELD THAT:- The interim moratorium under Section 96 (1)(b)(ii) creates a prohibition on the creditors of the debtor from initiating any legal action in respect of any debt. The use of expression ‘any debt’ also clearly indicate that debt on basis of which moratorium has commenced is not contemplated by the expression ‘any debt’. With regard to all debts of debtor i.e. Personal Guarantor in the present case, no proceeding can be initiated by virtue of Section 96(1)(b). The application filed by the Central Bank of India on 12.10.2021, thus, was clearly hit by Section 96(1)(b)(ii) and the Adjudicating Authority could not have proceeded with the said application and appointed the Resolution Professional. The order dated 13.06.2022 impugned in this Appeal is clearly unsustainable. The creditors of the Personal Guarantors who are unable to file an application due to enforcement of moratorium under Section 96 can very well avail the benefit of period during which moratorium continues, hence, due to interim moratorium enforced by Section 96, the creditors like Central Bank of India and other creditors are in no manner prejudiced. If they have not filed any application during moratorium period, they have every right to file application and for computation of the period of limitation, period during which moratorium is in place is to be excluded - Section 179 of the Code deals with individuals and partnership firms where similar provision has been made under Section 179 Sub-Section (3) giving benefit in computing the limitation for a suit or application in which period during which moratorium is in place is to be excluded. In view of the commencement of interim moratorium as per order dated 21.06.2021, as noticed above, the application filed by the Central Bank of India under Section 95 on 12.10.2021 could not have been proceeded with by passing the order dated 13.06.2022 - Appeal allowed. Issues Involved:1. Appointment of Resolution Professional.2. Interim moratorium and its implications.3. Multiple applications under Section 95 of the I&B Code.4. Applicability of Section 60 and Section 179 of the I&B Code on Personal Guarantors.5. Computation of limitation period during moratorium.Detailed Analysis:1. Appointment of Resolution Professional:The primary issue in the appeal was the appointment of a Resolution Professional (RP) by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad) on 13.06.2022. The Appellant contended that since a Resolution Professional had already been appointed in a prior application by the State Bank of India (SBI) on 21.06.2021, no new RP could be appointed. The Respondent (Central Bank of India) clarified that the same RP, Mr. Sunil Kumar Agrawal, was directed to submit the report, not a new RP.2. Interim Moratorium and Its Implications:The Appellant argued that the interim moratorium, which commenced with the order dated 21.06.2021, should have stayed any further applications, including the one filed by the Central Bank of India on 12.10.2021. The Tribunal noted that Section 96 of the I&B Code provides for an interim moratorium that stays any legal action or proceedings in respect of any debt and prohibits creditors from initiating any legal action during this period. Therefore, the application filed by the Central Bank of India was in violation of this interim moratorium.3. Multiple Applications Under Section 95 of the I&B Code:The Tribunal examined whether multiple creditors could file separate applications under Section 95 against the same Personal Guarantor. It was concluded that the scheme of the I&B Code under Chapter-III does not contemplate multiple applications against the same Personal Guarantor by different lenders. Once an insolvency resolution process commences, claims of all creditors are addressed within the same proceedings.4. Applicability of Section 60 and Section 179 of the I&B Code on Personal Guarantors:The Respondent argued that there was no provision extending the benefit of limitation during moratorium periods to Personal Guarantors, unlike Corporate Debtors and individuals/partnership firms. The Tribunal disagreed, stating that Section 60(6) of the I&B Code, which excludes the moratorium period from the limitation period, applies to Personal Guarantors as well. This interpretation ensures that creditors are not prejudiced by the interim moratorium.5. Computation of Limitation Period During Moratorium:The Tribunal clarified that creditors of Personal Guarantors could benefit from the exclusion of the moratorium period when computing the limitation period for filing applications. This ensures that creditors like the Central Bank of India are not disadvantaged by the interim moratorium and can file their applications once the moratorium is lifted.Conclusion:The Tribunal concluded that the application filed by the Central Bank of India on 12.10.2021 was unsustainable due to the interim moratorium that commenced on 21.06.2021. The order dated 13.06.2022 was set aside, and the appeal was allowed. However, the Central Bank of India was granted liberty to proceed with the application if the occasion arises.