TaxTMI 
TaxTMI 
2026 (7) TMI 255
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsequent events for the purpose of invoking Order VII Rule 11(d) of the Code of Civil Procedure, 1908. He has referred to Sections 63 and 231 of the Insolvency and Bankruptcy Code, 2016. He has also referred to Sections 95 and 96 thereof. He has contended that, the proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 were initiated subsequent to the filing of the suit. 4. Learned Advocate appearing for the appellants has contended that, under Section 95 of the Insolvency and Bankruptcy Code, 2016, the appellants have the right to defend such proceedings only. He has pointed out that, the provisions of the Insolvency and Bankruptcy Code, 2016 do not permit the appellants to make any counter claim. Under Section 96 of the Insolvency and Bankruptcy Code, 2016, the moratorium for the period from the date of filing of the application under Section 95 till the admission thereto comes into operation. On the aspect of jurisdiction of the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 learned Advocate for the appellants has relied upon 2020 (13) SCC 308 (Embassy Property Developments Private Limited Vs. State of Karnataka and Other....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar Lal Chatrath & Anr Vs. Municipal Corporation of Delhi) and 2025 SCC OnLine SC 975 (P. Kumarakurubaran Vs. P. Narayanan and Ors.) in support of such contention. 10. Learned Advocate appearing for the respondent nos. 1 and 7 has contended that, the respondent no. 1 as the lead banker of Consortium of Banks, lent and advanced various credit facilities to a company. Appellants had issued personal guarantees for repayment of such credit facilities. 11. Learned Advocate appearing for the respondent nos. 1 and 7 has contended that, the respondent no. 1 issued a demand notice dated November 17, 2023 recalling the credit facilities. The appellants had assailed such demand notice before the Orissa High Court by way of a writ petition being WP(C) 41170 of 2023. He has referred to the order dated August 22, 2024 passed by the Orissa High Court in such writ petition. He has contended that, the suit was filed by the appellants subsequent thereto. 12. Learned Advocate appearing for the respondent nos. 1 and 7 has contended that, the claim of the appellants before the Civil Court was barred on the principles of res judicata. He has contended that the appellants are bound by the order d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt to the letter dated October 27, 2022 in this regard. He has also referred to the Minutes of the Meeting dated December 20, 2021. 18. Referring to the order dated January 7, 2025, learned Advocate appearing for the appellants has contended that, 8 out of 12 Members of the Consortium had released the personal guarantees of the appellants, and 4 members did not. 19. Appellants and Mr. Jitendra Mohan Gupta are sons of late Mr. Bhagatram Gupta who had expired on February 21, 2021. According to the appellants, Mr. Jitendra Mohan Gupta had looked after the affairs of respondent No. 13. 20. The respondent No. 13 had obtained credit facilities from the respondent Nos. 1 to 12. The respondent No. 1 is the lead consortium banker of such credit facilities that the respondent Nos. 1 to 12 had granted to the respondent No. 13. 21. According to the appellants, on the death of Mr. Bhagatram Gupta, the appellants had approached the consortium bankers for release of their personal guarantees. 8 out of the 12 consortium bankers had released the personal guarantees of the appellants. Mr. Jitendra Mohan Gupta had also agreed that, he would ensure that all the consortium bankers released ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n released; (b) Perpetual injunction restraining the defendant Nos. 1 to 12 from contending that the plaintiffs are guarantors to any of them in respect of financial assistance transactions between them and the defendant no. 13, in any manner whatsoever; (c) Perpetual injunction restraining the defendant Nos. 1 to 12 from giving any effect to and/or acting in furtherance to of any of the Deeds of Guarantee executed by the plaintiffs; (d) Receiver; (e) Injunction; (f) Costs; (g) Such further and/or other relief or reliefs." 29. In the suit, appellants had filed an application for injunction. Learned Commercial Court had refused to grant ex-parte ad interim injunction on the ground that there would be a probability of Securitization and Reconstruction of Financial Assets and Security Interest Act, 2002 (SARFAESI) proceeding being initiated against the appellants. Appellants had carried an appeal directed against such order of refusal being FMAT 504 of 2024 which was disposed of by an order dated January 7, 2025 without interference. 30. Respondent no. 1 had filed two proceedings under Section 95 of the Insolvency and Bankrup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lication and shall cease to have effect on the date of admission of such application. It provides that, during interim moratorium period, any legal action or proceeding pending in respect of any debt shall be deemed to be stayed and that, creditor of the debtor shall not initiate any legal action or proceeding in respect of any debt. Sub Sections (2) and (3) of Section 95 of the Insolvency and Bankruptcy Code, 2016 are not relevant in the facts and circumstances of the present case. 35. For Section 96 of Insolvency and Bankruptcy Code, 2016 to come into operation, there must be a pending application under Section 94 or 95 thereof. 36. Section 96 of Insolvency and Bankruptcy Code, 2016 provides for interim moratorium for specific period of time and in specified circumstances. So far as the period of interim moratorium is concerned, it pegs the commencement date to be the date on which the application under Section 94 or 95 of the Section 96 of the Insolvency and Bankruptcy Code, 2016 was filed. The terminus of the interim moratorium is pegged at the date of admission for such application. In the facts of the present case, moratorium commenced on January 15, 2025 and terminated....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition either under Section 94 or 95 of the Insolvency and Bankruptcy Code, 2016. In the facts and circumstances of the present case, a petition under Section 95 of the Insolvency and Bankruptcy Code, 2016 was filed on January 15, 2025 which is subsequent to the suit which was filed on November 6, 2024. 42. Since, Section 95 proceedings was filed subsequent to the suit, then, the scenario envisaged under Section 96(1)(b)(i) would apply till the date of admission that is, February 4, 2025. Section 96(1)(b)(i) directs stay of any pending proceeding in respect of the debt which is the subject matter of a petition under Section 95 of the Insolvency and Bankruptcy Code, 2016. 43. In view of Section 96 of the Insolvency and Bankruptcy Code, 2016, therefore, interim moratorium had commenced on and from January 15, 2025 when Section 95 petition was filed before the NCLT. The suit being pending on the date of commencement of the moratorium, it could not have been dismissed under Section 96 of the Insolvency and Bankruptcy Code, 2016. 44. There is another moratorium in respect of applications under Sections 94 and 95 of the Insolvency and Bankruptcy Code, 2016 that is, under Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... authority in respect of any action taken or to be taken in pursuance of any order passed by such adjudicating authority or Board under the Insolvency and Bankruptcy Code, 2016. 50. There are two parts to Section 231. The first part oust the jurisdiction of Civil Court. The second part prohibits orders preventing implementation of the process under the Insolvency and Bankruptcy Code, 2016. The underlying mandatory requirement for any of the two parts of Section 231 to be validly attracted is the pendency of a proceeding under the Insolvency and Bankruptcy Code, 2016. 51. There are specific provisions in the Insolvency and Bankruptcy Code, 2016 for stay of proceeding and ouster of jurisdiction, such as Sections 96 and 101. They modulate the specific arena they address. They provide for stay of pending proceeding before a Civil Court while prohibiting fresh filing during a specific period of time. Stay and embargo recedes on the eventuality specified for their recession occurring. 52. When these specific provisions of stay and ouster of jurisdiction do not require dismissal of a pending proceeding. Section 231 of the Insolvency and Bankruptcy Code, 2016 should not be read to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he civil suit was filed subsequent to the initiation of the proceedings under the Insolvency and Bankruptcy Code, 2016 which is not the factual scenario here. We therefore refrain ourselves from pronouncing on such a scenario. 57. In the scenario of a pending civil proceedings instituted prior to the initiation of proceedings under the Insolvency and Bankruptcy Code, 2016 the civil court will not pass an order of injunction in respect of any action taken or to be taken in pursuance to any order passed by the NCLT under the Insolvency and Bankruptcy Code, 2016. 58. Again, nothing has been drawn to our attention to suggest that, the learned Trial Judge passed any order in respect of any action taken report to be taken in pursuance to any order passed by the NCLT under the Insolvency and Bankruptcy Code, 2016. 59. The issue as to whether the jurisdiction of a Civil Court under Section 9 of the Code of Civil Procedure, 1908 stands ousted by any special statute or not has received consideration of the Hon'ble Supreme Court a number of times. In VCK Share and Stock Broking Services Limited (supra) Hon'ble Supreme Court has considered the bar of jurisdiction of Civil Court under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncy of the corporate debtor. However, in doing so, NCLT and NCLAT have to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or related to the insolvency of the corporate debtor. 64. Rajendra Prasad Bansal (supra) has held that the NCLT is a statutory Tribunal and therefore its powers are circumscribed by the provisions of the statute which confers jurisdiction upon it. It has also held that unlike a civil court, the NCLT does not have general jurisdiction under Section 9 of the CPC. 65. Escorts Heart Institute and Research Centre Ltd. (supra) has considered the provisions of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 in the facts and circumstances of that case. It has held that, the proceedings initiated under the Act of 1971 was not maintainable in view of the suit filed in respect of the land for which notice for eviction was issued under the Act of 1971. 66. M/s Oriental Building and Furnishing Co. Ltd., New Delhi (supra) has considered the jurisdictional issue arising from the interplay between the Arbitration Act, 1940 and the Public Premises (E....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the ground of limitation under Order VII Rule 11 of the Code of Civil Procedure, 1908 had been set aside. 73. T. Arivandandam (supra) has found the suit filed by the plaintiff therein to be an abuse of process of court. The suit that has been filed by the appellants herein cannot be classified as an abuse of process of Court. 74. Urban Improvement Trust (supra) has noted that, the jurisdiction of civil courts to try suits of civil nature is expansive and that, the onus to prove the ouster of jurisdiction is on the party which has alleged the same. It has also held that, in cases where the jurisdiction of the Civil Court is barred by a statute, the test is to determine if the authority or tribunal constituted by the statute has the power to grant the reliefs that the Civil Courts would normally grant in suits filed before them. 75. Authorities noted above, in the context of an application under Order VII Rule 11 (d), have laid down that the court in seisin of such an application is required to: - (i) keep in consideration that the rejection of a plaint under Order VII Rule 11 is a drastic power conferred on the court to terminate a civil action at the threshold; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction by virtue of Sections 33(5) and 63 of the Insolvency and Bankruptcy Code, 2016, the authority of the civil court to pass any order goes to the root of the matter and lack of jurisdiction nullifies the order, if any. 80. Vysali Phamacueticals Limited (supra) has held that, it is the incumbent duty of the Court to suo moto verify whether the suit is maintainable before such court or not. In the facts and circumstances of that case, the Trial Court had failed to notice the pending liquidation proceeding before the NCLT which invoked Section 63 that barred the Civil Court jurisdiction to entertain any suit. 81. Mohato Industries Ltd (supra) has noticed that, the suit is liable for rejection under Order VII Rule 11 read with Section 151 of CPC, as the suit was filed after the moratorium came into effect. It has held that it is not necessary to only look into the pleadings in the plaint while considering the application under Order VII Rule 11, specifically when the Insolvency and Bankruptcy Code, 2016 is a special legislation which empowers NCLT to pass orders prohibiting parties to initiate proceedings while moratorium period is in effect. The fact situation in this appeal ....