TaxTMI 
TaxTMI 
2018 (1) TMI 1581
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....e Bank of India to extend full cooperation to the applicant. A further prayer has been made for passing of an order under Section 20 of the Code to permit him to manage and operate the affairs of the corporate debtor as a going concern. The RP has also requested to immediately defreeze and refund the entire interest, charges and penal interest levied by the financial creditor after the date of imposition of the moratorium In terms of Section 14 of the Code and to initiate the Insolvency proceedings against the aforesaid financial creditor. Brief facts of the case are that CP - 1236/2016 was admitted on 01.06.2017 and moratorium in terms of Section 14 was imposed. The IRP was appointed on 21.07.2017 and started functioning. He has later b....
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....e 3 it is claimed that Section 14(1) of the Code does not apply to the notification issued from time to time by the RBI for declaring an account as NPA and there is no bar on account of the provision of Section 14(3) of the Code. It has further been pointed out that once an account becomes NPA the power of the corporate debtor to withdraw any amount ceased on account of non availability of fund in accordance with the sanctioned limits. According to the stand taken in Para 5 the financial creditor has submitted that the application is nothing else but seeking directions to enforce refinancing / reconstructing of the corporate debtor regardless of the approval of the Committee of Creditors, which is contrary to Section 25 of the Code. The Sta....
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....nt therewith contained in any other law for the time being in force. Learned Counsel emphasised on the last sentence of Section 238 to argue that it include any instrument having effect by virtue of any such law. In other words the argument raised is that neither any statue nor any other statutory instrument or a piece of subordinate legislation can have effect, once the moratorium is in operation. However learned Counsel for the financial creditor has argued that there is no provision in the Code creating a bar for the application of the circular issued by the Reserve Bank of India. The emphasis has been laid on the master circular dated 01.07.2015 which deals with the declaration of an account as NPA. Ld. Counsel has also placed relian....
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....ade by Mr. Tiku banking on Section 238, further reinforces the stand taken by the RP as the aforesaid provision carves out a non obstante clause of widest amplitude. In the case of M/S Innovative Industries Ltd. Vs ICICI Bank (2018) I SCC 407 Hon 'ble The Supreme Court has interpreted Section 238 and in categorical term laid down that the provisions of the Code are to prevail over all other Acts and override anything to the contrary contained in any other statute. In that case Hon'ble Supreme Court was dealing with the issue of repugnancy in respect of the provision of the Maharashtra Relief undertakings (Special Provisions) Act, 1958 with that of the Code. It has been held that in view of non-obstante clause the provisions of state....
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.... the account of the 'Corporate Debtor, nor it can appropriate any amount towards its own dues". It is thus seen that once the moratorium is in force the financial creditor including the bank has to prefer its claim before the RP, which would be considered alongwith other claims as per law. We further find that there is direct violation of Section 14(I)(c) which creates a bar prohibiting any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation Act is also prohibited. Besides there is violations of order of moratorium passed by this Tribunal on 01.06.2017. As there is a direct statutory violation we find that it is a fit....