TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 1254
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....larly Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter 'IB Code' for brevity) is attracted. If the answer to this question is in the affirmative, institution of suit vide the proposed plaint in this Commercial Division is prohibited and therefore, this Commercial Division will not deal with the leave to sue application at all. 4. Leave to sue application i.e., A.No.7361 of 2018 can be taken up, dealt with on merits and orders on the same can be passed only if the answer to the aforementioned neat question regarding Section 14(1)(a) of the IB Code is in the negative. 5. Considering the nature of the question i.e., whether Section 14(1)(a) of IB Code is attracted it became necessary to hear both sides of the story. I therefore directed the plaintiff to serve on 'Resolution Professional' ('RP' for brevity) who according to the proposed plaint is representing the second defendant. To be noted, with regard to first defendant, which is a Bank, Mr.Keerthikiran, learned counsel was before this Commercial Division, when this matter was first placed before this Commercial Division and he was ready to make submissions. 6. In the aforesaid back....
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.... States of America (hereinafter 'USD' for brevity), second loan agreement is a Short-Term Banking Facility for a commodity loan of 10 Million USD, third loan agreement is a Business Term Loan of over 2 Million USD and the fourth loan agreement is again a Short-Term Banking Facility for commodity loan of 8 million USD. 14. It unfurls from the plaint averments and emerges from the submissions made before this Commercial Division that aforesaid monies advanced by Stanbic Bank were to be utilized by RIGL towards purchase of raw material, namely cashew nuts, which were to be processed and sold by RIGL. 15. In the interregnum i.e, interregnum qua four loan agreements, to be precise after the first and second loan agreements and before third and fourth loan agreements, RIPL executed a Guarantee and Indemnity Agreement dated 12.04.2012. It also unfurls from the averments in the proposed plaint that RIPL, in its capacity as guarantor, had made available its assets as security only to the tune of 10 million Ghanian cedies and assets of RIPL over and above the said amount would stand immuned from further action as far as the liability of its subsidiary RIPL is concerned. It is the s....
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....laint has been filed on the basis of such observations. A specific reference was made to Paragraphs 11 and 12 of the order of NCLAT, which read as follows: '11.The learned senior counsel appearing on behalf of the appellant submitted that the decree is an ex parte decree, but such issue can not be decided while entertaining an application under Section 7 or by the Adjudicating Authority or even by this Appellate Tribunal. The Adjudicating Authority has not been empowered to give such declaration. 12. The decree passed by High Court of Justice, Queens Bench Division, Commercial Court of England, can be challenged only before the Court of Competent jurisdiction. The same cannot be assailed before the Adjudicating Authority, till its existence is denied.' 20. It is also not in dispute that the aforesaid order of NCLAT was carried in appeal to the Hon'ble Supreme Court of India vide a statutory appeal under Section 62 of IB Code. This statutory appeal in the Supreme Court is Civil Appeal No.9980 of 2018 and the same came to be dismissed in and by order dated 12.10.2018 stating that the Supreme Court does not find any reason to interfere with the aforesaid order of NCL....
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....n decree. As I am not going into the merits of the proposed plaint/intended suit, I am of the view that this judgment is of no help to the plaintiffs at this juncture in these proceedings. 25. Countering the submissions made by learned senior counsel, learned counsel for defendants 1 and 2, as mentioned supra, drew my attention to Section 63 of the IB Code and submitted that no civil Court will have jurisdiction to entertain any suit in respect of a matter over which NCLT or NCLAT has jurisdiction under the IB Code. 26. By way of reply to Section 63 of IB Code argument, it was submitted on behalf of plaintiffs that NCLAT itself vide paragraphs 11 and 12 of its order (extracted supra) had made it clear that UK Court judgment in the instant case can be challenged only before a Court of competent jurisdiction. It was also pointed out that NCLAT has gone as far as saying that validity of the UK Court judgment cannot be assailed before the adjudicating Authority. 27. I have bestowed my best attention and carefully considered the submissions made before this Commercial Division. 28. With regard to Jyoti Structures case, made by a learned single Judge of the Delhi High Court, even whi....
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....cannot be found fault with, but the problem for the plaintiffs presents itself in a different form i.e., who will assail or who can assail the UK Court judgment /decree in the instant case when moratorium has been declared for RIPL by NCLT and when the same has been confirmed by NCLAT. A perusal of the orders of the NCLT and NCLAT reveal that there is a definite discussion about the validity of the UK Court judgment/decree. As alluded to supra, NCLAT was absolutely correct in not embarking upon the exercise of testing the validity of the UK Court judgment/decree and holding that the same has to be assailed only in a Court of competent jurisdiction, but as RP has been appointed by NCLT (To be noted, RP is before this Commercial Division representing RIPL), it is for the RP to initiate proceedings assailing the decree. 30. In the considered view of this Commercial Division, in the light of Section 14(1)(a) of IB Code and in the light of prohibition of institution of suits thereunder, against the corporate debtor, it is for the RP to refer to the order of the NCLAT and move the Court of competent jurisdiction. In this view of the matter, this Commercial Division is also of the consi....
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....exercised by RP and none else in the light of a conjoint and harmonious reading of Sections 14(1)(a) and 25(2)(b) of IB Code. It is open for RP to initiate suitable proceedings assailing the UK Judgment / decree in tune with the view of NCLAT. In the light of Section 14(1)(a) of IB Code, institution of this suit is prohibited until corporate insolvency resolution process under the IB Code is completed. 34. This Commercial Division now plunges and ploughs more into the aspect of whether the intended suit i.e., the proposed plaint can be entertained and there has to be clarity and specificity with regard to whether the intended suit/proposed plaint is a derivative action at all. To be noted, Paragraph 5 of the proposed plaint says that it is a derivative action being taken by the plaintiffs being shareholders of the second defendant and is being filed in the best interest of the second defendant company. 35. To be noted, it is not in dispute that two plaintiffs, who are natural persons, constitute the entire shareholders in the second defendant company. Therefore, it is not a case where minority shareholders have come before this Commercial Division making a complaint against the m....
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....t has to be decided one way or the other as to who will challenge the foreign decree of the UK Court, if at all. 43. As alluded to supra, in this order/judgment the problem presents itself in a form wherein the issue is not a foreign decree or the challenge to the same, but as to who would assail the foreign decree, if at all and if that be so. 44. Therefore, notwithstanding my conclusion that the intended suit is not a derivative action qua second defendant company, this Commercial Division proceeds with the discussion and deliberation in this regard. 45. This takes us to the stated position of RP. RP has filed a counter affidavit dated 27.10.2018. A perusal of the counter affidavit of RP reveals that it is pivoted on Section 28 of IB Code and Regulation 25 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as 'IB Code Regulations'). To be noted, IB Code Regulations are a set of regulations made by the Insolvency and Bankruptcy Board of India inter alia by exercise of its Regulation making power under IB Code. 46. This Commercial Division deems it appropriate to extract entire Section 28 ....
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....the foreign decree of the UK Court. 48. In the considered opinion of this Commercial Division, this is misplaced and is of no avail in the instant case as in the instant case what we are concerned with is, the duties of RP under Section 25 and not Section 28. A perusal of the scheme of IB Code would reveal that Sections 25 and 28 operate in different realms, though both provisions appear under the same chapter of IB Code i.e., Chapter II captioned 'Corporate Insolvency Resolution Process'. While Section 25 adumbrates the duties of the RP, Section 28 is an enumeration of certain actions of RP which requires prior approval of the committee of Creditors. In Section 25, more particularly sub-section (2) of Section 25 of IB Code, there is an enumeration of 11 duties of the RP and in Section 28, there is an enumeration of 13 actions of RP which requires prior approval of the creditors. In the instant case, we are concerned with one of the seven duties of the RP as contained in sub-clause (b) of sub-section (2) of Section 25. In other words, we are concerned with Section 25(2)(b). The duty of RP encapsulated in Section 25(2)(b) is not one of the actions enumerated in Section 28. ....
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....nd any reason to interfere with the order of NCLAT. This means, finding/observation made by NCLAT, particularly in Paragraphs 11 and 12 of its order dated 29.08.2018 remains. If at all, it has attained the status of an order, which has merged with that of the Supreme Court order. Therefore, this Commercial Division is unable to accept the argument that the order of NCLAT and particularly Paragraphs 11 and 12 does not operate any more. To be noted, Hon'ble Supreme Court has not set aside the order of NCLAT. On the contrary, Hon'ble Supreme Court has categorically held that it does not find any reason to interfere with the order NCLAT. 54. Now that this Commercial Division has held that the order of NCLAT, particularly Paragraph 11 and 12 operate, it takes us back to the question as to whether RP can initiate proceedings assailing the foreign decree of the UK Court under Section 25(2)(b) of the IB Code. To be noted, Section 25(2)(b) has already been extracted supra. A close and careful reading of the language in which it is couched reveals that it is the duty of RP to represent and act on behalf of the corporate debtor with third parties for the benefit of the corporate deb....
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....ue with a Nationalized Bank on behalf of a corporate debtor, the Nationalized Bank may take the position that it is under no obligation to interact with the RP or interact with the RP as RP does not have legislative backing to embark upon such an action though the RP may have been appointed by NCLT, which is a statutory body. Legislature in its wisdom has brought in the expression 'third parties' and built it into Section 25(2)(b) of IB Code as part of adoption of UNCITRAL legislative guide of insolvency, which is the bedrock on which IB Code has been built. 58. From the aforesaid discussion and deliberation it follows as a necessary corollary and inevitable sequitur that RP can act on behalf of corporate debtor against any one. When such an action on behalf of Corporate Debtor runs into the interest of the financial creditor, it necessarily is an issue which has to be looked into, dealt with and decided by NCLT by applying the IB Code. In this regard Section 63 of IB Code kicks in. In other words, the question as to whether RP should file a suit assailing the foreign decree has to be examined and answered by NCLT as it is against the financial creditors in the instant case. Once ....