TaxTMI 
TaxTMI 
2017 (9) TMI 1963
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.... Code (hereinafter referred to as the 'said Code') has no manner of application in the present case. He submits that according to the provisions of Section 14 of the said Code where moratorium has been declared, at the highest, the execution of the proceeding can be stayed. He submits that Section 14(1) (d) of the said Code is relevant for the present purpose which says that only recovery of any property by an owner or lessor where the property is occupied by or in the possession of the corporate debtor, is prohibited. Therefore, according to him, there can be no order staying further proceeding of the present suit. He further submits that Section 18 (1) (f) of the said Code which relates to the duties of interim resolution professional, specifies that the interim resolution professional shall perform duties amongst other to take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance-sheet of the corporate debtor. Section 18(1) (f) is set out below : "18. Duties of interim resolution professional. - (1) The interim resolution professional shall perform the following duties, namely:- ... (f) take control and custody o....
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.... in view of the provisions made under Section 238 of the Insolvency Code such right can obviously be suspended inasmuch as provisions of the Code shall have effect notwithstanding anything consistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. In that view of the matter it will not be unreasonable to hold that provisions of the Code will have overriding effect on the provisions of rent legislation. In paragraph 66 of the said judgment it has been further held - "it is clear that the later non-obstante clause of the Parliamentary enactment will also prevail over the limited non-obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code." Mr. Ritabrata Mitra, learned Advocate appearing for the defendant/petitioner, submits that the object of the Code is to promote investments as well as resolution of insolvency of corporate persons, firms and individuals in a time-bound manner. He submits that the Code provides for designating the National Company Law T....
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....e it is the duty of the Court to restrain the party from proceeding with the suit or proceeding, as the case may be, and he relies upon a decision in the case of M/s. Innoventive Industries Ltd. - Vs. - ICICI Bank & Anr., reported in AIR 2017 SC 1025. He draws the attention of this Court to paragraph 63 to 66 which are set out below : "63. There can be no doubt, therefore, that the Code is a Parliamentary law that is an exhaustive code on the subject matter of insolvency in relation to corporate entities, and is made under Entry 9, List III in the 7th Schedule which reads as under : "9. Bankruptcy and insolvency" 64. On reading its provisions, the moment initiation of the corporate insolvency resolution process takes place, a moratorium is announced by the adjudicating authority vide Sections 13 and 14 of the Code, by which institution of suits and pending proceedings etc. cannot be proceeded with. This continues until the approval of a resolution plan under Section 31 of the said Code. In the interim, an interim resolution professional is appointed under Section 16 to manage the affairs of corporate debtors under Section 17. 65. It is clear, therefore, that the earlier ....
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....sons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code." I have heard the parties at length. The moot question whether the present suit should be allowed to continue or not. Before discussing further, provisions of Section 14 are required to be taken into consideration first and those are set out below : "14. Moratorium. - (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:- a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; c) 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 Securitization and Reconstruction of Financia....
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....ess report has been directed to be submitted within 15 days from the date of the said order. Section 13 of the said Code deals with declaration of moratorium and public announcement which is set out below : "13. Declaration of moratorium and public announcement. - (1) The Adjudicating Authority, after admission of the application under section 7 or section 9 or section 10, shall, by an order- (a) declare a moratorium for the purposes referred to in section 14; (b) cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15; and (c) appoint an interim resolution professional in the manner as laid down in section 16. (2) The public announcement referred to in clause (b) of subsection (1) shall be made immediately after the appointment of the interim resolution professional." The said provision shows that adjudicating authority, after admission of application under Section 7 or Section 9 or Section 10, shall, by order, declare moratorium for the purposes referred to in Section 14. Section 7 deals with initiation of corporate insolvency resolution process by financial creditor. Section 7....
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....-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be." Provisions of Section 7 appear to be not applicable in the present case because the process is to be initiated by the financial creditor not by the corporate debtor. Section 9 deals with application for initiation of corporate insolvency resolution process by operational creditor. The said provision is also not applicable in the present case. Section 10 deals with initiation of corporate insolvency resolution process by corporate applicant. Section 10 is set out below : "10. Initiation of corporate insolvency resolution process by corporate applicant. - (1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority. (2) The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed. (3) The corporate applicant sha....
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....hould not be allowed to continue. However, it has been clearly submitted by the learned counsel appearing for the plaintiff/respondent that this Court can proceed with the trial of the suit but at best the plaintiff can be restrained from proceeding with the execution. Such submission may be considered to be fair but cannot be accepted, inasmuch as, before a suit is tried it cannot be presumed whether the suit will be decreed or dismissed. Such a question can arise only after the suit is decreed but this Court has not yet reached such stage and if admittedly a decree cannot be executed there is no reason to allow the suit to proceed which may lead to multiplicity of proceedings. Those apart, this Court is not oblivious of the provisions of Section 12 of the said Code which fixes up time limit for completion of insolvency resolution process. Section 12 is set out below : "12. Time-limit for completion of insolvency resolution process. - (1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process. (2) The resolution professiona....
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....f rent not covered by such category of proceedings leasehold interest in the premises in occupation of the company as the statutory tenant also not property and eviction proceeding resulting in deprivation of such interest not covered by the proceedings contemplated under Section 22(1) of the aforesaid Act of 1985. It has been further held that such an interpretation is in consonance with the object and purpose of the Act. However, the Hon'ble Supreme Court while arriving at such a decision has held that it cannot agree with the contention of the learned counsel for the appellant company that the leasehold interest of the appellant company in premises leased out to it is property for the purpose of Section 22(1) of the said Act and the appeal was dismissed. The fact situation involved in the aforesaid decision is quite different from the case which we are dealing now. In the case at hand the corporate debtor is somehow in a different situation than the appellant company in the aforesaid decision in Re: Chamundi (supra). Therefore, the said decision being distinguishable on fact has no bearing on the fact situation of the present case. That apart, Sick Industrial Companies (Special ....