TaxTMI 
TaxTMI 
2022 (8) TMI 476
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..... Sudhir Sharma, Mr.AshimSood, Mr.Naman Singh Bagga, Mr. Akhil Anand, Ms. SenuNizarand Mr. Rishi Raj, Advocates For the Respondent No.3 / : Mr. Raunak Dhillon, Ms. Ananya Dhar Resolution Professional Choudhury,Ms. Niharika Shukla,Advocates For the Intervenor : Mr. Deepak Khosla, for SREI Multiple Asset Investment Trust For Appellant : Dr.A.M. Singhvi, Senior Advocate, Mr. Sudhir Sharma, Mr.AshimSood, Mr. Naman Singh Bagga, Mr. Akhil Anand, Ms. SenuNizar and Mr. Rishi Raj, Advocates For Respondent No.1 : Mr. Kapil Sibal, Senior Advocate with Mr. Abhishek Shah, Ms. VatsalaRai, Mr. Sandeep Singhi, Mr. Gaurav Mathur, Ms. AnushreeKapadia, Mr. AditPujari, Ms. SoyaobaniBasu and Ms.Vanya Chhabra Advocates For Respondent No.2 : Mr. Neeraj Krishan Kaul and Mr. Ritin Rai, Senior Advocates, with Ms. Ruby Singh Ahuja, Mr. Vishal Gehrana, Mr. Ashutosh P. Shukla and Ms. Aakriti Vohra, Advocates For Respondent No.3 / : Mr. RaunakDhillon, Ms. Ananya Dhar Resolution Professional Choudhury, Ms.Niharika Shukla, Advocates For Intervenor : Mr. Deepak Khosla, for SREI Multiple Asset Investment Trust ORDER (Virtual Mode) Justice M. Venugopal, Member (Judicial) : I.A. No. 6....
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....ndent, being a Contested Party, cannot not and should not proceed till such completion of `CIRP' against the 1st Respondent. 6. The plea taken on behalf of the Applicant/Appellant is that the erstwhile Resolution Professional of `Essar Steel India Limited' had preferred a Civil Appeals No. 1015 - 1016 of 2021, before the Hon'ble Supreme Court of India and indeed, the said Civil Appeals assailed the issuance of Notice through an `Order' dated 04.12.2020, passed by the Appellate Tribunal in the present `Appeal'. 7. In this connection, a stand is taken on behalf of the Applicant/Appellant that the aforesaid two Civil Appeals raises similar substantial questions of law and points of determination that are projected in the present proceedings before the National Company Law Appellate Tribunal, including but not limited to: "(iv) Whether a determination of CIRP costs made by the resolution professional during the pendency of the CIRP can be challenged subsequently, under Section 60 (5) of the I & B Code or otherwise, after conclusion of the CIRP and after successful implementation of the resolution plan specially when there was no challenge during CIRP or on the basis of e....
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.... present `Appeal' / `ESIL RP' had challenged the `Order' dated 04.12.2020 in the present Appeal and also the `Order' dated 08.12.2020, passed in CA AT INS No. 1043 of 2020 filed by `AMNS' against the same impugned Judgment (`AMNS Appeal') by way of Civil Appeals No. 1015-1016 of 2021 (Resolution Professional's Appeals) before the Hon'ble Supreme Court of India. 11. In fact, in his `Appeal', `ESIL RP', had among other things sought directions for the `Tribunal' and the `Adjudicating Authority' to refrain from entertaining Applications / Petitions that attempt to raise frivolous claims qua the Resolution Plan approved for former `ESIL' by the `Adjudicating Authority', the `Appellate Tribunal' and the `Hon'ble Supreme Court of India' as well, on 06.04.2021, `Notice' was ordered by the Hon'ble Supreme Court of India, in the `Resolution Professional's Appeal'. 12. The Learned Counsel for the Applicant/Appellant brings it to the `Notice' of this `Tribunal' that the Hon'ble Supreme Court of India, through an `Order' dated 02.08.2021 had granted liberty to the Applicant/Appellant and `AMNS' to intervene in the Resolution Professional's Appeal and the interventions being IA No.95649 o....
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....e continuation of the present proceedings against the 1st Respondent or any other `Order' passed in by this `Tribunal' during the `Moratorium' shall be in negation to the ingredients of Section 14 of the Code, also is a non est and nullity. Applicant's / Appellant's Decision: 16. The Learned Counsel for the Applicant/Appellant refers to the Judgment of the Hon'ble Supreme Court of India dated 23.10.2017 in Alchemist Asset Reconstruction Company Ltd. V M/s. Hotel Gaudavan Private Limited and Ors., (vide Civil Appeal No. 16929 of 2017 - arising out of S.L.P. (C) No. 18195 of 2017), wherein in paragraphs 4 to 8, it is observed as under: 4. "A First Appeal was filed before the District Judge, Jaisalmer, Rajasthan under Section 37 of the Arbitration and Conciliation Act, 1996 and by the impugned order dated 06.07.2017, the appeal was asked to be registered and notice was issued awaiting a reply. 5. The mandate of the new Insolvency Code is that the moment an insolvency petition is admitted, the moratorium that comes into effect under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against Corporate Debtors. ....
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....ry, and the disjunctive "or'' before the word "proceedings'' would make it clear that proceedings against the corporate debtor would be a separate category. What throws light on the width of the expression "proceedings'' is the expression any "judgment, decree or order'' and "any court of law, tribunal, arbitration panel or other authority''. Since criminal proceedings under the Code of Criminal Procedure, 1973 ["CrPC''] are conducted before the courts mentioned in Section 6, CrPC, it is clear that a Section 138 proceeding being conducted before a Magistrate would certainly be a proceeding in a court of law in respect of a transaction which relates to a debt owed by the corporate debtor. Let us now see as to whether the expression "proceedings'' can be cut down to mean civil proceedings strictosensuby the use of rules of interpretation such as ejusdem generis and noscitur a sociis. APPLICATION OF THE NOSCITUR A SOCIIS RULE OF INTERPRETATION 15. Shri Aman Lekhi, learned Additional Solicitor General, relied upon the judgment in State of Assam v. Ranga Mahammad, (1967) 1 SCR 454. The Court was concerned with the meaning of the expression "posting'' which occurs in Ar....
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....efinite import. It was suggested that these words should be read in a restricted sense having regard to the included items on the principle of "noscitur a sociis''. The suggestion was rejected in the following language: (Hospital Mazdoor Sabha case [(1960) 2 SCR 866: AIR 1960 SC 610] , SCR p. 874) "It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service. (AIR p. 614, para 9) (emphasis in original) 79. We do not read this passage as excluding the application of the principle of noscitur a sociis to the present case sin....
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....ing the general words, the rule of ejusdem generis will have no application. 27. In Siddeshwari Cotton Mills (P) Ltd. v. Union of India [(1989) 2 SCC 458 : 1989 SCC (Tax) 297] M.N. Venkatachaliah, J., as His Lordship then was, examined the rationale underlying ejusdem generis as a rule of construction and observed: (SCC p. 463, para 14) "14. The principle underlying this approach to statutory construction is that the subsequent general words were only intended to guard against some accidental omission in the objects of the kind mentioned earlier and were not intended to extend to objects of a wholly different kind. This is a presumption and operates unless there is some contrary indication. But the preceding words or expressions of restricted meaning must be susceptible of the import that they represent a class. If no class can be found, ejusdem generis rule is not attracted and such broad construction as the subsequent words may admit will be favoured. As a learned author puts it: `... if a class can be found, but the specific words exhaust the class, then rejection of the rule may be favoured because its adoption would make the general words unnecessary....
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....ss you can find a category, said Farwell L.J. (Tillmanns and Co. v. S.S. Knutsford Ltd. [(1908) 2 KB 385 (CA)] ), `there is no room for the application of the ejusdem generis doctrine', and where the words are clearly wide in their meaning they ought not to be qualified on the ground of their association with other words. For instance, where a local Act required that `theatres and other places of public entertainment' should be licensed, the question arose whether a `fun-fair' for which no fee was charged for admission was within the Act. It was held to be so, and that the ejusdem generis rule did not apply to confine the words `other places' to places of the same kind as theatres. So the insertion of such words as `or things of whatever description' would exclude the rule. (Attorney General v. Leicester Corpn. [(1910) 2 Ch 359 : (1908-10) All ER Rep Ext 1002]) In National Assn. of Local Govt. Officers v. Bolton Corpn. [1943 AC 166 : (1942) 2 All ER 425 (HL)] Lord Simon L.C. referred to a definition of `workman' as any person who has entered into a works under a contract with an employer whether the contract be by way of manual labour, clerical work `or otherwise' and said: The use....
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....l guarantees are given by Directors who are in management of the companies. The object of the Code is not to allow such guarantors to escape from an independent and co-extensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them. However, insofar as firms and individuals are concerned, guarantees are given in respect of individual debts by persons who have unlimited liability to pay them. And such guarantors may be complete strangers to the debtor _ often it could be a personal friend. It is for this reason that the moratorium mentioned in Section 101 would cover such persons, as such moratorium is in relation to the debt and not the debtor. These observations, when viewed in context, are correct. However, this case is distinguishable in that the difference between these provisions and Section 14 was not examined qua moratorium provisions as a whole in relation to corporate debtors vis-à-vis individuals/firms. THE INTERPLAY BETWEEN SECTION 14 AND SECTION 32A OF THE IBC 30. Shri Mehta, however, strongly relied upon Section 32A(1) of the IBC, which was introduced by the Insolvency and Bankruptcy Code (Amendment....
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....rate debtor for the conduct of its business or associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of such offence as per the report submitted or complaint filed by the investigating authority, shall continue to be liable to be prosecuted and punished for such an offence committed by the corporate debtor notwithstanding that the corporate debtor's liability has ceased under this sub-section. xxx xxxxxx 31. The raison d'être for the enactment of Section 32A has been stated by the Report of the Insolvency Law Committee of February, 2020, which is as follows: 17. LIABILITY OF CORPORATE DEBTOR FOR OFFENCES COMMITTED PRIOR TO INITIATION OF CIRP 17.1. Section 17 of the Code provides that on commencement of the CIRP, the powers of management of the corporate debtor vest with the interim resolution professional. Further, the powers of the Board of Directors or partners of the corporate debtor stand suspended, and are to be exercised by the interim resolution professional. Thereafter, Section 29A, read with Section 35(1)(f), places restrictions on related parties of the corporate debto....
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.... 17.4. This could have substantially hampered the Codes goal of value maximisation, and lowered recoveries to creditors, including financial institutions who take recourse to the Code for resolution of the NPAs on their balance sheet. At the same time, the Committee was also conscious that authorities are duty bound to penalise the commission of any offence, especially in cases involving substantial public interest. Thus, two competing concerns need to be balanced. xxx xxx xxx 17.6. Given this, the Committee felt that a distinction must be drawn between the corporate debtor which may have committed offences under the control of its previous management, prior to the CIRP, and the corporate debtor that is resolved, and taken over by an unconnected resolution applicant. While the corporate debtor's actions prior to the commencement of the CIRP must be investigated and penalised, the liability must be affixed only upon those who were responsible for the corporate debtor's actions in this period. However, the new management of the corporate debtor, which has nothing to do with such past offences, should not be penalised for the actions of the erstwhile management of ....
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....he impugned provision is part of an economic measure. The reverence courts justifiably hold such laws in cannot but be applicable in the instant case as well. The provision deals with reference to offences committed prior to the commencement of the CIRP. With the admission of the application the management of the corporate debtor passes into the hands of the Interim Resolution Professional and thereafter into the hands of the Resolution Professional subject undoubtedly to the control by the Committee of Creditors. As far as protection afforded to the property is concerned there is clearly a rationale behind it. Having regard to the object of the statute we hardly see any manifest arbitrariness in the provision.'' 35. This brings us to the nature of proceedings under Chapter XVII of the Negotiable Instruments Act. Sections 138 to 142 of the Negotiable Instruments Act were added by Chapter XVII by an Amendment Act of 1988. Section 138 reads as follows: "138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from ou....
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....nt of the cheque and the interest and costs thereupon, would show that it is really a hybrid provision to enforce payment under a bounced cheque if it is otherwise enforceable in civil law. Further, though the ingredients of the offence are contained in the first part of Section 138 when the cheque is returned by the bank unpaid for the reasons given in the Section, the proviso gives an opportunity to the drawer of the cheque, stating that the drawer must fail to make payment of the amount within 15 days of the receipt of a notice, again making it clear that the real object of the provision is not to penalise the wrongdoer for an offence that is already made out, but to compensate the victim. 74. "Shri Mehta then relied upon Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd., 2017 SCC OnLine Del 12189 : (2018) 246 DLT 485, in which the Delhi High Court held that a Section 34 application to set aside an award under the Arbitration and Conciliation Act, 1996 would not be covered by Section 14 of the IBC. This judgment does not state the law correctly as it is clear that a Section 34 proceeding is certainly a proceeding against the corporate debtor which may result....
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.... 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor." (emphasis supplied) 15. At this juncture, we must however clarify the right of the petitioners to move against the promoters of the first respondent Corporate Debtor, even though a moratorium has been declared under Section 14 of the IBC. In the judgment in P. Mohanraj v. Shah Bros. Ispat (P) Ltd.12, a three judge Bench of this Court held that proceedings under Section 138 and 141 of the Negotiable Instruments Act 1881 against the Corporate Debtor would be covered by the moratorium provision under Section 14 of the IBC. However, it clarified that the moratorium was only in relation to the Corporate Debtor (as highlighted above) and not in respect of the directors/man....
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....f India Ltd. Case, the Hon'ble High Court of Delhi specifically dealt with cases where counter claims could be allowed against the Corporate Debtor at the stage of Section 34 of the Arbitration and Conciliation Act, 1996, thereby causing dissipation of the Corporate Debtor's Assets. Further, the Hon'ble High Court had held that in such cases, the execution of the award under Section 36 would not be permitted. 20. The submission of the Learned Counsel for the Applicant/Appellant is that regardless of whether there is risk of dissipation of assets are not of a Corporate Debtor, the proceedings against the Corporate Debtor cannot proceed and in short, the ratio of the decision in P Mohan Raj case squarely applies to the facts of the present case. 21. The crystalline stand of the Applicant/Appellant is that it is settled law that pursuant to the `Moratorium' under Section 14 of the I & B Code, 2016, the present proceedings and any other proceedings by or against SREI cannot continue and as such, the Stay Application is to be allowed and the present proceedings be stayed, in view of the `Moratorium' imposed the `Adjudicating Authority', Kolkata vide the SREI insolvency `Admission ....
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....this time, thus maximising value for all stakeholders. The idea is that it facilitates the continued operation of the business of the corporate debtor to allow it breathing space to organise its affairs so that a new management may ultimately take over and bring the corporate debtor out of financial sickness, thus benefitting all stakeholders, which would include workmen of the corporate debtor. 32. ..... While Section 14 (1) (a) refers to monetary liabilities of the corporate debtor, Section 14 (1) (b) refers to the corporate debtor's assets, and together, these two clauses from a scheme which shields the corporate debtor from pecuniary attacks against it in the moratorium period so that the corporate debtor gets breathing space to continue as a going concern in order to ultimately rehabilitate itself. Any crack in this shield is bound to have adverse consequences, given the object of Section 14, and cannot, by any process of interpretation, be allowed to occur.'' (Emphasis Supplied) 26. The Learned Counsel for the 1st Respondent points out that the Section 14 of the I & B Code, 2016 has no application to the instant Appeals, in as much as the outcome of the p....
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....y this `Tribunal' and issuing `Notice' to the `Resolution Professional of ESIL', and the main relief prayed for in the Resolution Professional's Appeal is; (a) To set aside the Impugned Judgment and Order dated 4.12.2020 and 8.12.2020 to the extent that they issue notice to the Appellant; and in the alternative, strike off the name of the Appellant from the array of parties in Company Appeal (AT) (Ins) No. 1038/2020 titled as "ArcelorMittal India Private Limited V SREI Infrastructure Finance Limited &Ors.'' and Company Appeal (AT) (INS) No. 1043/2020 titled as "ArcelorMittal Nippon Steel India Limited v. SREI Infrastructure Finance Limited &Ors.'', pending before the Hon'ble National Company Law Appellate Tribunal. New Delhi.'' (Emphasis Supplied) and therefore, the aforementioned prayer does not and cannot have any effect on the hearing of the instant `Appeals'. 31. As a matter of fact, in the Resolution Professional's Appeal, the Additional / Supplementary / General reliefs sought are: "(a)In directing the Hon'ble Adjudicating Authorities and the Hon'ble Appellate Tribunal to refrain from entertaining petitions/applications which have the effect o....
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....ion of the Hon'ble Supreme Court of India in the matter of Saraswati Industrial Syndicate Ltd. v. Commissioner of Income Tax, Haryana Rohtak, reported in 1999 (3) SCC at Page 141, wherein at para 12, it is observed as under: 12. ".....Learned counsel for the interveners submits that he is entitled to the same order as we have just passed. We cannot pass such an order in an intervention application, the only purpose of granting an intervention application is to entitle the intervenor to address arguments in support of one or the other side. Having heard the arguments, we have decided in the assessee's favour. The intervenors may take advantage of that order.'' and puts forward a plea whether the Applicant/Appellant (AM India) and the 2nd Respondent (AM Nippon) choose to argue in the Resolution Professional's Appeal as Respondents (or) Intervenors, the reliefs can only be in favour of the `Resolution Professional' and not in favour of the Applicant / Appellant (AM India) and the 2nd Respondent (AM Nippon). 37. The Learned Counsel for the 1st Respondent strenuously contends that the `Applicant/Appellant' (AM India) and the 2nd Respondent (AM Nippon) cannot indirectly co....
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....f a `Moratorium' the proceedings against the Corporate Debtor must not proceed, no matter what the consequences are_ i.e., irrespective of whether there is a risk of dissipation of Assets or not. 43. The Learned Counsel for the Applicant/Appellant by adverting to the Judgment of the Hon'ble Supreme Court of India in P Mohanraj and Ors. v Shah Brothers IspatPvt. Ltd. 2021 (6) SCC Page 258 submits that no proceedings, including the `Appellate Proceedings' against the `Corporate Debtor' can be continued during the `Moratorium' period. 44. The Learned Counsel for the Applicant/Appellant contends that as per Section 14 of the I & B Code, 2016, this `Tribunal' is prohibited in law from continuing the instant Appeal. 45. The Learned Counsel for the Applicant/Appellant points out that the Civil Appeal filed by the former Resolution Professional of `Essar Steel India Limited' (ArcelorMittal Nippon Steel India Ltd.) is pending before the Hon'ble Supreme Court of India (Civil Appeal No. 1015-1016 of 2021), wherein similar and overlapping questions of law and points of determination do arise, as that are arising in the instant proceedings before this `Tribunal'. 46. The Learned Cou....
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.... the Hon'ble High Court of Kolkata had granted `status quo' on 22.12.2016 on any further `alienation' / `transfer' of the Slurry Pipeline (vide Annexure A11 at Page 570 of Vol. III of the AMNS Appeal and as such, the `status quo order' as on the date of the order dated 22.12.2016 was to be maintained by `ESIL' and therefore, no RTU Charges were payable. 53. The Learned Counsel for the Applicant/Appellant brings it to the notice of this `Tribunal' that 1st Respondent/SREI had moved the Hon'ble High Court of Kolkata for a clarification that the `status quo' does not come in the way of payment of RTU Charges and that the Hon'ble High Court of Kolkata had refused to give any such clarification. Viswanathan Committee Report (2015): 54. The impetus behind the `Moratorium' of the `Insolvency and Bankruptcy Code' is `value maximisation' of `entity' to ensure continuation of operations, while its `viability' is being assessed. It make sure that there is no additional stress on business after the public announcement. It restrains not only `Debt Recovery Actions' against the Company, but also the `Continuation of Pending Proceedings' (Paragraph 5.3.1.1). Definition of Moratorium: ....
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....arimateria provisions in Order XXI of the Civil Procedure Code, held that making of deposit by the intending purchaser is mandatory as per decision, reported in C N Paramasivam& Another v. Sunrise Plaza &Ors. 2013 (9) SCC Page 460 and Pages 472-474. 63. Further in the decision of Hon'ble Supreme Court of India in Indo China Steam Navigation Co. v Jagat Singh, reported in AIR 1964 SC Pages 1140 and 115, it is held by the Constitution Bench that the words `Shall' be liable to `confiscation' are mandatory. English Decisions: 64. At this stage, this `Tribunal' aptly points out the illuminating golden words of Lord Brougham that `If the words are it shall and may so and so done by such and such Officer and body, then the word `may' is held in all soundness of `construction' to `confer' a `power', but the word `Shall' is held to make that `Power' or the `Exercise' of that `Power' is compulsory, as per decision Queen v. Allooparao (1847) 3 MIA 488 at Page 492. 65. In the Decisions in (i) A G v Lock (1744) 26 ER 897, 898 (ii) Davies v. Evans (1882) 9 QBD at Pages 238 and 243, it is observed that the word `Shall' and `May' are construed imperatively. Effect of Moratorium& its....
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....ain Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020, on the file of this `Appellate Tribunal', the Applicant/Appellant therein, has filed I.A. No. 682 of 2022 in Comp. App (AT) (INS) No. 1038 of 2020(ArcelorMittal India Private Limited) and I.A. No. 673 of 2022 in Comp. App (AT) (INS) No. 1043 of 2020 (ArcelorMittal Nippon Steel India Limited)praying for `staying the continuation of the present proceedings' in main `Appeals'. 72. According to the Learned Counsel for the Applicants/Appellants in I.A. No. 682 of 2022 in Comp. App (AT) (INS) No. 1038 of 2020 and I.A. No. 673 of 2022 in Comp. App (AT) (INS) No. 1043 of 2020, in the two instant Appeals Viz. Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020 common issues do arise and they are pending consideration before the Hon'ble Supreme Court of India. In this regard, it is pertinently pointed out on behalf of the Applicants/Appellants that as against the 1st Respondent/SREI Infrastructure and Finance Limited, the `Corporate Insolvency and Resolution Process' was initiated and a `Moratorium' on all proceedings against the said Respondent is presently inforce. 73. It ....
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.... Law Tribunal, Kolkata Bench) had admitted the Petition preferred by the Reserve Bank of India for the initiation of `Corporate Insolvency Resolution Process', against the 1st Respondent/SREI and a `Moratorium' was declared as per Section 14 of the I & B Code, 2016. 79. The Reserve Bank of India by exercising its powers as per Section 45-IE of the Reserve Bank of India Act, 1934, had superseded the Board of Directors of the 1st Respondent/SREI and appointed an `Administrator' for the 1st Respondent/SREI. 80. It is the contention of the Learned Counsel for the Applicant/Appellant in both the `Appeals' once the `Moratorium' is in place, the proceedings against the `Corporate Debtor' ought not to proceed, in respect of the fact whether there is risk of dissipation of `Assets' or `not'. To put it differently, the plea of the Applicant/Appellant is that no proceedings including that of the Appellate's proceedings can be continued against a `Corporate Debtor', during the `Moratorium' period. 81. Contending contra, it is projected on the side of the 1st Respondent/SREI that the ingredients of the Section 14 of the I & B Code, 2016, have no `applicability' to the instant two `Appe....