Himachal Pradesh High Court
Ex. Petition No. 19/2016 vs Icici Bank And Another on 14 May, 2018
Author: Tarlok Singh Chauhan
Bench: Tarlok Singh Chauhan
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
Ex. Petition No. 19/2016
.
Reserved on: 23.4.2018
Decided on: 14. 5. 2018
______________________________________________________________
M/s Apple Valley Developers and ors. .....Decree holders
Versus
M/s Coastal Projects Ltd. and ors. ....Judgment debtors
Coram
_______________________________________________________________
The Hon'ble Mr. Justice Tarlok Singh Chauhan, Judge.
Whether approved for reporting?1 Yes
For the decree holders: Mr. R.L. Sood, Senior Advocate
with Mr. Arjun Lall, Advocate.
For the judgment debtors: Ms. Jyotsna Rewal Dua, Senior
Advocate with Mr. Tijender Singh,
Advocate.
Tarlok Singh Chauhan, J.
Even though various applications like the one filed by the decree holders under Order 21 Rule 37 read with Se ction 151 CPC (OMP No.354/2016), another application filed by them under Section 21 Rule 41 read with Section 151 CPC (OMP No.355/2016), and an application (OMP No.21/2017) filed by the judgment debtors to withdraw earlier replies filed in 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 2OMP Nos. 354/2016 and 355/2016 are pending adjudication, but the judgment debtors would insist that all these applications cannot now be heard in view of two applications .
moved by them being OMP No.230/2017 whereby permission has been sought to bring on record subsequent events and another application (OMP No.34/2018 ) for placing on record the order passed by the National Law Company Tribunal (in short, the "NLCT") whereby not only the petition has been admitted, but even a moratorium has been declared. Support in regard to the contention is sought to be derived from the various provisions of the Insolvency and Bankruptcy Code, 2016 (in short, the "IBC, 2016"), more particularly , Section 14(1)(a) thereof, which reads thus:
14. (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 .
2 Prayer/submission made by the learned senior counsel for the judgment debtors is vehemently opposed by the learned senior counsel for the decree holders and it is ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 3 contended that the applications moved by the decree holders under Order 21 Rule 37 read with Section 151 CPC (OMP No.354/2016) and under Section 21 Rule 41 read with Section .
151 CPC (OMP No.355/2016), can only be adjudicated by this Court and mere pendency of the proceedings before the NLCT would not come in way of this court while adjudicating the same, especially when the same are directed not against the corporate debtors but the relief sought therein is against the Directors of judgment debtor No.1-company.
3 For completion of facts and proper understanding of case, it needs to be mentioned that civil suit No.44/2015 as filed by the decree holders was decreed against all the defendants/judgment debtors and they were held entitled for a sum of Rs.42,90,292.36 along with interest at the rate of 18% per annum from the date of filing of the suit till re covery of the decretal amount . Even though the judgment debtors have filed an appeal being OSA No.3/2017, but the same is only directed against the award of interest while the decretal amount has not been disputed. The disputed amount in fact has already been ordered to be released by this court in favour of the decree holders.
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 44 I have heard learned counsel for the parties and have also gone through the records of the case including the records of civil suit No. 44/2015, out of which present .
execution petition arises.
5 In order to appreciate the respective contentions of the parties, it would be first necessary to determine the status of the judgment debtors. As per the averments made in para 2 of the plaint, judgment debtor No.1 alone is a company incorporated under the Companies Act having its registered office at Bhubaneshwar, Orissa, whereas all the other judgment debtors are only branch offices of judgment debtor No.1 including judgment debtors No. 5 and 6.
6 Bearing in mind the status of judgme nt debtor No.1 vis-à-vis judgment debtors, provisions of the IBC, 2016 now need to be referred to.
7 Section 2 of the IBC, 2016 deals with application thereof and vide amendment carried out by way of the Insolvency and Bankruptcy Code (Amendment) Act, 2017 (8 of 2018),the same applies apart from others to the personal guarantors to corporate debtors , individuals and other persons referred to in clause 2(e).
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 58 In addition to above, it would be necessary to refer to some of the provisions as given in Section 3 of the IBC, 2016, which are as under:
.
3. In this Code, unless the context otherwise requires,--
(6) "claim" means--
(a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured;
(b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;
(7) "corporate person" means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; (8) "corporate debtor" means a corporate person who owes a debt to any person;
(10) "creditor" means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree holder;
(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 69 Here, it would also be necessary to refer to sub-
section (1) of Section 5 of the IBC, 2016, which reads thus:-
5. In this Part, unless the context otherwise requires,--
.
(1) "Adjudicating Authority", for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013.
10. Section 60 of Chapter VI of the IBC, 2016 states about the adjudicating authority for corporate persons and the same reads as follows:
"60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located.
(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or bankruptcy of a personal guarantor of such corporate debtor shall be filed before such National Company Law Tribunal. (3) An insolvency resolution process or bankruptcy proceeding of a personal guarantor of the corporate debtor pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 7 resolution process or liquidation proceeding of such corporate debtor.
(4) The National Company Law Tribunal shall be vested with all the powers of the Debt Recovery Tribunal as .
contemplated under Part III of this Code for the purpose of sub-section (2).
(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of
(a) any application or proceeding by or against the corporate debtor or corporate person;
(b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. (6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded."
11 Apart from above , provisions contained in Sections 7,10, 12, 13, 14, 15 and 74 are also relevant and the same are reproduced as such.
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 87. Initiation of corporate insolvency resolution process by financial creditor -
(1) A financial creditor either by itself or jointly with other financial creditors may file an ap plication for initiating .
corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.
Explanation.--For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed.
(3) The financial creditor shall, along with the application furnish--
(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;
(b) the name of the resolution professional proposed to act as an interim resolution professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). (5) Where the Adjudicating Authority is satisfied that--
(a) a default has occurred and the application under sub- section (2) is complete, and there is no disciplinary ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 9 proceedings pending against the proposed resolution professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub- section (2) is incomplete or any disciplinary proceeding is .
pending against the proposed resolution professional, it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).
(7) The Adjudicating Authority shall communicate--
(a) the order under clause (a) of sub-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.
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.
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 10(3) The corporate applicant shall, along with the application furnish the information relating to--
(a) its books of account and such other documents relating to such period as may be specified; and .
(b) the resolution professional proposed to be appointed as an interim resolution professional.
(4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order--
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority.
(5) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this section.
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 professional shall file an application to the Adjudicating Auth ority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 11 creditors by a vote of seventy-five per cent. of the voting shares.
(3) On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that the subject matter .
of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days:
Provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once.
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 sub-section (1) shall be made immediately after the appointment of the interim resolution professional.
14. Moratorium-
(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 12 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 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.
(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 13 (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.
.
15. Public announcement of corporate insolvency resolution process-
(1) The public announcement of the corporate insolvency resolution process under the order referred to in section 13 shall contain the following information, namely:--
(a) name and address of the corporate debtor under the corporate insolvency resolution process;
(b) name of the authority with which the corporate debtor is incorporated or registered;
(c) the last date for submission of claims;
(d) details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims;
(e) penalties for false or misleading claims; and
(f) the date on which the corporate insolvency resolution process shall close, which shall be the one hundred and eightieth day from the date of the admission of the application under sections 7, 9 or section 10, as the case may be.
(2) The public announcement under this section shall be made in such manner as may be specified.
74. Punishment for contravention of moratorium or the resolution plan-
(1) Where the corporate debtor or any of its officer violates the provisions of section 14, any such officer who knowingly or wilfully committed or authorised or permitted such contravention shall be punishable with ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 14 imprisonment for a term which shall not be less than three years, but may extend to five years or with fine which shall not be less than one lakh rupees, but may extend to three lakh rupees, or with both.
.
(2) Where any creditor violates the provisions of section 14, any person who knowingly and wilfully authorised or permitted such contravention by a creditor shall be punishable with imprisonment for a term which shall not be less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both. (3) Where the corporate debtor, any of its officers or creditors or any person on whom the approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of the terms of such resolution plan or abets such contravention, such corporate debtor, officer, creditor or person shall be punishable with imprisonment of not less than one year, but may extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or with both.
12 As per Section 231 of the IBC 2016, no civil court shall have jurisdiction in respect of any matter in which the Adjudicating Authority is empowered by, or under, this Code to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any order passed by such Adjudicating Authority under this Code.
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 1513. As per Section 238, the provisions of the IBC, 2016 shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force .
or any instrument having effect by virtue of any such law.
14. It is not in dispute that the initiation of corporate insolvency resolution process under Section 7 of the IBC, 2016 was resorted to by the State Bank of India by moving an application before the NCLT, wherein the judgment debtors were found to have defaulted in payment of Rs.975,27,33, 040.53 (Nine Hundred Seventy Five Crores Twenty Seven Lakh Thirty Three Thousand Forty and Fifty Three Paisa) and on the basis of this admitted liability, the petition filed by the financial creditor was admitted for initiation of corporate insolvency resolution process and moratorium was declared for the purposes referred to in Section 14(supra) and the Interim Resolution Professional (in short, the "IRP") was directed to announce the corporate insolvency resolution process and call for submission of claims under Section 15. The order of moratorium was directed to operate till the completion of corporate insolvency resolution process provided that where at any time during the corporate insolvency resolution process period, if the adjudicating authority would approve the ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 16 resolution plan in sub section 1 of Section 31 or pass an order for initiation of liquidation of corporate debtor under Section 33, the moratorium would cease to have effect from the date of .
such approval or liquidation order, as the case may be.
15 In this background, the moot question is whether the applications filed by the decree holders being OMP No.354/2016 and OMP No.355/2016), can still be adjudicated by this Court even after, moratorium having been declared by the Company Law Board (in short, the "CLB") which prohibits, apart from other, the continuation of various kinds of proceedings including execution of any judgment, decree or order in any court of law.
16 As per provisions contained under Section 60 of the IBC, 2016, the Adjudicating Authority in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof is the NCLT.
17 Reading of the provisions of the IBC, 2016 makes it clear that the said Code is a comprehensive Code, dealing with the matters, relating to re -organisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 17 availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency .
and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.
18 The Hon'ble Supreme Court in Innoventive Industries Limited vs. ICICI Bank and another, 2018(1) SCC 407 while dealing with repugnancy in the IBC, 2016 and Maharashtra Relief Undertaking (Special Provisions) Act, 1958 regarding moratorium held as under:-
27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non payment of a debt once it becomes due and payable, which includes non-
payment of even part thereof or an installment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 18 is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial .
debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5 (21) means a claim in respect of provision of goods or services.
28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 19 of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial .
creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under subsection (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.
29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in subsection (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 20 suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the .
clutches of the Code.
30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.
31. The rest of the insolvency resolution process is also very important. The entire process is to be completed within a period of 180 days from the date of admission of the application under Section 12 and can only be extended beyond 180 days for a further period of not exceeding 90 days if the committee of creditors by a voting of 75% of voting shares so decides. It can be seen that time is of essence in seeing whether the corporate body can be put back on its feet, so as to stave off liquidation.
32. As soon as the application is admitted, a moratorium in terms of Section 14 of the Code is to be declared by the adjudicating authority and a public announcement is made stating, inter alia, the last ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 21 date for submission of claims and the details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims. Under Section 17, .
the erstwhile management of the corporate debtor is vested in an interim resolution professional who is a trained person registered under Chapter IV of the Code. This interim resolution professional is now to manage the operations of the corporate debtor as a going concern under the directions of a committee of creditors appointed under Section 21 of the Act. Decisions by this committee are to be taken by a vote of not less than 75% of the voting share of the financial creditors. Under Section 28, a resolution professional, who is none other than an interim resolution professional who is appointed to carry out the resolution process, is then given wide powers to raise finances, create security interests, etc. subject to prior approval of the committee of creditors.
33. Under Section 30, any person who is interested in putting the corporate body back on its feet may submit a resolution plan to the resolution professional, which is prepared on the basis of an information memorandum. This plan must provide for payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the plan, and implementation and supervision of the plan. It is only when such plan is approved by a vote of not less than 75% of the voting share of the financial creditors and the adjudicating authority is satisfied that the plan, as approved, meets the statutory requirements mentioned ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 22 in Section 30, that it ultimately approves such plan, which is then binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders. Importantly, and this is a major .
departure from previous legislation on the subject, the moment the adjudicating authority approves the resolution plan, the moratorium order passed by the authority under Section 14 shall cease to have effect. The scheme of the Code, therefore, is to make an attempt, by divesting the erstwhile management of its powers and vesting it in a professional agency, to continue the business of the corporate body as a going concern until a resolution plan is drawn up, in which event the management is handed over under the plan so that the corporate body is able to pay back its debts and get back on its feet.
All this is to be done within a period of 6 months with a maximum extension of another 90 days or else the chopper comes down and the liquidation process begins.
19 Not only this, the Hon'ble Supreme Court after analyzing the scheme of the IBC, 2016 along with its relevant provisions held in para 59 as under:-
"59. 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 ::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 23 professional is appointed under Section 16 to manage the affairs of corporate debtors under Section 17."
20 As already observed above, a moratorium has .
already been declared by NCLT by exercise of its power under Section 14 of the IBC, 2016 and vide its order dated 5.1.2018 has prohibited 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;
transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property .
21 In this background, can it be held that the judgment debtors other than judgment debtor No.1 are not the corporate debtors as defined under Section 3(8) of the IBC, 2016 as vehemently canvassed by learned senior counsel for the decree holders.
22 I am afraid that it would be too farfetched to hold only the judgment debtor No.1 to be the corporate debtor, more particularly , in light of the averments made in the plaint and the decree passed by this Court.
::: Downloaded on - 16/05/2018 23:06:11 :::HCHP 2423 As per the plaint, specific averment was made by the decree holder/plaintiff to the effect that the judgment debtor No.1 alone was the company incorporated under the .
Companies Act having its registered office at Bhubaneshwar, Orissa, whereas all the other judgment debtors are only branch offices of judgment debtor No.1 including judgment debtors No. 5 and 6. This being the factual position, then obviously in terms of the order passed by the NCLT declaring moratorium, the proceedings in this case are prohibited.
24 Accordingly, the petition is adjourned, initially at this stage, upto 17.7.2018 with liberty reserved to either of the parties to make request for taking up the proceedings at an earlier date , in case so warranted or necessitated by the order of NCLT.
May 14, 2018 (Tarlok Singh Chauhan)
(pankaj) Judge
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