TaxTMI 
TaxTMI 
2026 (2) TMI 477
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....onfirmed in service on 24 January 2007. According to the Plaintiff, Respondent No. 1 was irregular in payment of salaries. Plaintiff resigned from services of Respondent No. 1 with effect from 10 October 2014 alleging irregularities in payment of salaries. By his letter dated 9 October 2014, he requested release of his full gratuity. He was paid lump sum amount of Rs. 5,00,000/- towards gratuity. According to the Plaintiff, there are dues in respect of salaries and other allowances from Respondent No. 1. According to Petitioner-Plaintiff, Respondent No. 1 never disputed the liability to pay salaries but cited the reason of financial crunch. Plaintiff has filed Summary Suit No. 1398 of 2017 on 4 October 2017 under Order XXXVII, Rule 2 of the Code of Civil Procedure, 1908 (Code) before the City Civil Court for recovery of principal sum of Rs.76,85,981/-. 3. Despite service of summons, Respondent No. 1 failed to appear or to apply for leave to defend within the prescribed time limit. Accordingly, order has been passed on 22 June 2018 directing that the Suit would proceed ex parte against Respondent No. 1. 4. Petitioner-Plaintiff claims that he became aware about filing of Compan....
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....nt of Delhi High Court in Elecon Engineering Company Limited vs. Energo Engineering Projects Limited and others 2022 SCC OnLine Del 2860 in support of the contention that Section 63 of the IBC does not apply to suits which are already pending before commencement of liquidation proceedings. He also relies on the judgment of this Court in Urban Infrastructure Trustees Ltd. vs. Bhavik Bhimjiyani and others 2018 SCC OnLine Bom 20447 in support of his contention that Official Liquidator can be impleaded as party to the Suit. He however clarifies that the judgment of this Court is subject matter of challenge before the Supreme Court in which initially proceedings before this Court were stayed and subsequently the matter was compromised before the Apex Court leaving open the question of law. He relies on judgment of Division Bench of this Court in Cipla Limited vs. Competent Authority and the District Deputy Registrar, Cooperative Society and others 2021 SCC OnLine Bom 622 in support of his contention that the ratio of judgment of this Court in Urban Infrastructure Trustees Ltd. (supra) does not get diluted merely on account of leaving of question of law open by the Apex Court while dispo....
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....mits that the jurisdiction of the Civil Court is expressly barred. He would pray for dismissal of the Petition. 9. Rival contentions of the parties now fall for my consideration. 10. Petitioner's Application for impleadment of second Respondent-Liquidator has been rejected by the learned Trial Judge by the impugned order. The reasons recorded by the learned Judge for rejection of the Application are to be found in paragraphs 3 and 4 of the Order, which read thus: "3. Heard the Learned Advocate for plaintiff. The Advocate for plaintiff relied upon Rajesh Kumar Aggarwal and Ors. Vs. K.K. Modi and Ors., reported (2006) 4 Supreme Court Cases 385. The said citation is in respect of the amendment. It has been observed that at the time of deciding the application for amendment the correctness of the amendment should not be considered. 4. After going through the submission raised by the plaintiff and the reply of the official liquidator /respondents, it seems that the plaintiff filed the present suit for recovery of the amount against the defendant. Admittedly, the defendant Company has gone into liquidation and an official liquidator has been appointed by the NCLT ....
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....ar of jurisdiction under Section 63 of IBC is not really relevant. I have referred to provisions of Section 63 of IBC only because the learned Trial Judge has relied upon the same in the impugned order. However, though findings are recorded that the Court does not have the jurisdiction to try the Suit, the Suit has not been dismissed as yet. The said finding is recorded only in relation to the ratio of impleadment of the Liquidator to the Suit. While deciding that issue, the Court ought not to have gone into issue of maintainability of the Suit in view of provisions of Section 63 of IBC. The Court was dealing with application for amendment of the Plaint and ought to have restricted the consideration only to the aspect of permissibility to amend the Plaint and implead the Liquidator. The approach of the Court in touching upon the issue of maintainability of the Suit while deciding the application for amendment is not appreciated. Reliance by Mr. Savant on judgment of the Supreme Court in Rajesh Kumar Aggarwal (supra) is apposite in which it is held thus: 19. While considering whether an application for amendment should or should not be allowed, the court should not go into the co....
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....liquidate the corporate debtor, any time after its constitution under sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time before the preparation of the information memorandum. (3) Where the resolution plan approved by the Adjudicating Authority under section 31 or under sub-section (1) of section 54-L, is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other l....
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....ings. Section 5 (17) of the Code defines "liquidation commencement date" to mean the date on which proceedings for liquidation commence in accordance with Section 33 or Section 59, as the case may be. The liquidation commencement date is the date of Ext.P1, viz; 15.01.2018 and the date of filing the claim petition under the Minimum Wages Act, 1948 is 25.04.2012. The prohibition for continuation of pending suits or proceedings against the Corporate Debtor under Section 14(1)(a) was only for the period from 10.07.2017 to 15.01.2018. Thereafter, the prohibition is only in respect of institution of fresh suits or proceedings. There is no prohibition of continuation of pending suits or proceedings under Section 33(5) of the Code after 15.01.2018. The petitioner received summons from the Controlling Authority under the Minimum Wages Act, 1948 on 10.01.2019 and entered appearance and filed written statement. Ext.P3 order was passed on 18.07.2019. Since there is no prohibition of continuation of pending suits or proceedings under Section 33(5) of the Code, the Controlling Authority was well within its powers to pass Ext.P3 order during the liquidation process." 18. Thus, the Ke....
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....fficial Liquidator to be impleaded as a party to the present proceedings and for the Official Liquidator to prosecute this proceeding." 20. Thus, in Urban Infrastructure Trustees Ltd. (supra), this Court held that on conjoint reading of Section 33(5) read with Section 35(1) and more particularly 35(1)(k) of the IBC that there is no embargo on Official Liquidator to be impleaded as a party to Section 11 proceedings. In his usual fairness, Mr. Savant has invited attention of this Court to the fact that the judgment of this Court in Urban Infrastructure Trustees Ltd. (supra), which was challenged before the Supreme Court in Special Leave Petition (C) Nos.391-392 of 2019, in which initially stay was granted to the further proceedings by order dated 14 January 2019. However, the dispute was compromised before the Apex Court by which Respondent No.5 (Company in liquidation) was agreed to be dropped from arbitration proceedings and accordingly permission was granted for withdrawal of the SLP. However, while permitting withdrawal of SLP, the Apex Court left question of law raised in the Petition open to be considered in appropriate proceedings. It is well settled position that even if q....
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....ies cannot be set aside before the Hon'ble Supreme Court. The said order passed by the Hon'ble Supreme Court on 18th April 2018 was not passed on adjudication of any issue or after considering the arguments advanced by the parties and was passed without recording any reason by consent of parties. In our view, the principles of law laid down by this Court in the judgment in case of Paul Parambi, Chief Promoter, Springs CHS Ltd. (supra) does not cease to have effect as binding precedent. The view taken by the Division Bench of this Court in the case of Indian Cork Mills Private Limited v. The State of Maharashtra (supra) is adverting to the principle of law laid down by the Hon'ble Supreme Court in the case of Municipal Corporation of Delhi v. Gurnam Kaur (supra). 174. It has been held by the Hon'ble Supreme Court in the said judgment that when a direction or order is made by consent of the parties, the Court does not adjudicate upon the rights of the parties nor does it lay down any principle. Quotability as 'law' applies to the principle of a case, its ratio decidendi. The only thing in a Judge's decision binding as an authority upon a subsequent Judge ....
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....33 is a part of Chapter III which deals with "Liquidation Process". Chapter II of the IBC deals with the Resolution Process in respect of a 'corporate debtor', where the objective is to revive the corporate debtor by coming out with a resolution plan, which is to be approved by the committee of creditors and thereafter, by the Adjudicating Authority. Chapter III of the IBC deals with the liquidation process which comes into effect upon the failure to come out with a resolution plan within the prescribed time period or a resolution plan not being approved. The moratorium under Section 14 of the IBC comes into effect upon the Adjudicating Authority passing an order declaring a moratorium and continues till the completion of Corporate Insolvency Resolution Process. Upon the approval of the resolution plan by the Adjudicating Authority or upon passing of a liquidation order under Section 33 of the IBC, the moratorium shall cease to have effect. After the Adjudicating Authority (NCLT) passes a liquidation order under section 33(4) of the IBC, a fresh moratorium in terms of section 33(5) of the IBC comes into place. 18. The objective of the liquidation process is to derive the m....
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.... 33(5) of the IBC, which was to apply only in respect of fresh suits would also apply to pending suits. This cannot be the intention of the legislature. Therefore, I do not find any merit in the submission of the Liquidator that the present suit cannot proceed in view of Sections 63 or 231 of the IBC." 23. Considering the principles enunciated in the above judgment, I am of the view that there is no embargo on liquidator defending the Suit under Section 33(5) of the IBC. More importantly, Section 33(5) does not apply to pending Suits. In the present case, the Suit has been instituted well before liquidation of Respondent No. 1. Thus, bar under Section 63 of the IBC is not attracted to the present Suit, which is filed for recovery of unpaid salary, which issue cannot be adjudicated by NCLT or NCLAT. 24. Respondents have relied on provisions of Sections 38 to 42 of the IBC in support of the contention that there is complete mechanism for adjudication of claims before Liquidator and that therefore separate Suits would not be maintainable. I am unable to agree. It would only be an option open to a Claimant to raise a claim before the Liquidator which can be adjudicated under Sect....