National Company Law Appellate Tribunal
Arcelormittal India Pvt Limited vs Srei Infrastructure Finance Ltd & Ors on 2 August, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT NEW DELHI
APPELLATE JURISDICTION
I.A. No. 682 of 2022 in
Company Appeal (AT) (INS) No. 1038 of 2020
In the matter of:
ArcelorMittal India Private Limited
Having its Office at
Smartworks Corporate Park, Corporate Twin
Towers, Tower A, 4th Floor,
Sector 125, Plot No. 1 & 2,
NOIDA - 201301
UTTAR Pradesh ..... Applicant/
Appellant
V
SREI Infrastructure Finance Limited
Having its Registered Office at
``Vishwakarma'', 86C, Topsia Road,
Kolkata - 700046 ..... Respondent No. 1
ArcelorMittal Nippon Steel India
Limited (formerly Essar Steel India
Limited), having its Office at
27 KM,Surat-Hazira Road, Hazira,
Surat, GUJARAT - 394270 ..... Respondent No. 2
Mr. Satish Kumar Gupta,
Resolution Professional of
Essar Steel India Limited
Having his address at
C/o. Alvarez & Marsal India Pvt. Ltd.
7th Floor, 703-704, Tower A,
Peninsula Corporate Park,
Ganpatrao Kadam Marg,
Lower Parel (West)
Mumbai - 400013 ..... Respondent No. 3
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020
I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020
Page 1 of 59
Present:
For Appellant : 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.1: Mr. Kapil Sibal, Senior Advocate with
Mr. Abhishek Shah, Ms. Vatsala Rai,
Mr. Sandeep Singhi, Mr. Gaurav Mathur,
Ms. Anushree Kapadia, Mr. Adit Pujari,
Ms. SoyaobaniBasu and Ms.Vanya Chhabra
Advocates
For Respondent No.2: Dr.A.M. Singhvi, Senior Advocate,
Mr. Sudhir Sharma, Mr.AshimSood,
Mr.Naman Singh Bagga, Mr. Akhil Anand,
Ms. SenuNizarand Mr. Rishi Raj,
Advocates
For Respondent No.3 / : Mr. Raunak Dhillon, Ms. Ananya Dhar
Resolution Professional Choudhury,Ms.Niharika Shukla,Advocates
For Intervenor : Mr. Deepak Khosla, for SREI Multiple
Asset Investment Trust
WITH
I.A. No. 673 of 2022 in
Company Appeal (AT) (INS) No. 1043 of 2020
In the matter of:
ArcelorMittal Nippon Steel India
Limited (formerly Essar Steel India
Limited), having its Office at
27 KM,Surat-Hazira Road, Hazira,
Surat,GUJARAT - 394270 ..... Applicant/
Appellant
V
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020
I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020
Page 2 of 59
SREI Infrastructure Finance Limited
Having its Registered Office at
``Vishwakarma'', 86C, Topsia Road,
Kolkata - 700046 ..... Respondent No. 1
ArcelorMittal India Private Limited
Having its Office at
Smartworks Corporate Park, Corporate Twin
Towers, Tower A, 4th Floor,
Sector 125, Plot No. 1 & 2,
NOIDA - 201301
UTTAR Pradesh ..... Respondent No. 2
Mr. Satish Kumar Gupta,
Resolution Professional of
Essar Steel India Limited
Having his address at
C/o. Alvarez & Marsal India Pvt. Ltd.
7th Floor, 703-704, Tower A,
Peninsula Corporate Park,
Ganpatrao Kadam Marg,
Lower Parel (West)
Mumbai - 400013..... Respondent No. 3
Present:
For Appellant : Dr.A.M. Singhvi, Senior Advocate,
Mr. Sudhir Sharma, Mr.AshimSood,
Mr. Naman Singh Bagga, Mr. Akhil Anand,
Ms. SenuNizarand 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
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020
I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020
Page 3 of 59
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. 682 of 2022 (in Company Appeal (AT) (INS) No. 1038 of 2020):
The Applicant / Appellant (ArcelorMittal India Private Limited) in I.A. No. 682 of 2022 has filed the present `Application' seeking `stayof the Proceedings' in main Comp. App (AT) INS No. 1038 of 2020, arising out of the `Common Order' dated 10.11.2020, passed by the `Adjudicating Authority', (`National Company Law Tribunal', Court - I, Ahmedabad Bench) in I.A.Nos. 245, 284, 285, 348 and 349 of 2020 in CP (IB)/39 & 40 of 2017.
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 4 of 59 Applicant/Appellant's Contentions (in I.A. No. 682 of 2022 in Comp. App (AT) (INS) No. 1038 of 2020):
2. The Learned Senior Counsel for the Applicant/Appellant submits that on04.10.2021 during the pendency of the present proceedings, the Reserve Bank of India, in exercise of its power under Section 45-IE of the Reserve Bank of India, Act, 1934, as had superseded the Board of Directors of the 1st Respondent / SREI Infrastructure Finance Limited and appointed Mr. Rajneesh Sharma, as an Administrator of the 1st Respondent.Furthermore, according to the Applicant/Appellant, the Three Member Advisory Committee was constituted to assist the Administrator of the 1st Respondent, in discharge of its duties.
3. According to the Applicant/Appellant, the `Adjudicating Authority', Kolkata, through an `Order' dated 08.10.2021 in CP (IB)/295/KB/2021 had admitted the Petition filed by the Reserve Bank of India for initiation of the `Corporate Insolvency Resolution Process' against the 1st Respondent/SREI Infrastructure Finance Limited and imposed the Moratorium as per Section 14 of the I & B Code, 2016 and that it was directed that during the period of `CIRP', the management of the 1st Respondent shall vest in the Administrator Mr. Rajneesh Sharma.
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4. It is the contention of the Learned Counsel for the Applicant/Appellant that once a `Moratorium' is in place, continuation of any Suit or Proceeding in any Court/Tribunal/Forum/Authority against the Corporate Debtor shall be stopped until the completion of `CIRP' and as such, the present `Interlocutory Application' No. 682 of 2022 in Comp. App. AT INS. No. 1038 of 2020, because of the fact that the continuation of the proceedings will be in violation of Section 14 of the I & B Code, 2016.
5. It is represented on behalf of the Applicant/Appellant that the present proceedings filed by the Applicant/Appellant against the 1st Respondent, 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'.
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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 events arising after closure of CIRP...?
8. The Learned Counsel for the Applicant/Appellant contends that in view of the fact that the `Civil Appeals' raises similar questions of law and hence, the `Adjudication' thereof will have a direct bearing on the present proceedings. Moreover, it is the stance of the Applicant/Appellant that since the Hon'ble Supreme Court of India is already seized of these issues (including whether the Resolution Plan, which was finally approved by the Hon'ble Supreme Court of India and later implemented, can be unsettled by entertaining Petitions, filed by a Third Party), it is necessary and in the interests of justice that the present proceedings may be kept in abeyance until the `Adjudication' of the present `Appeals' by I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 7 of 59 the Hon'ble Supreme Court of India. Added further, if the present proceedings are not stayed, any adjudication of the present proceedings will not only render the Civil Appeals pending before the Hon'ble Supreme Court of India as an infructuous one, but also adversely affect the Applicant/Appellant's interests.
9. The Learned Counsel for the Applicant/Appellant points out that the Hon'ble Supreme Court of India on 15.11.2019 had approved the `Resolution Plan' for the erstwhile Essar Steel India Limited (`ESIL') now ArcellorMittal Nippon Steel India Limited (`AMNS') and further that on an `Application' filed by the 1st Respondent, the `Adjudicating Authority' (NCLT, Ahmedabad Bench), passed the `impugned judgment' declaring the Appellant (the Successful Resolution Applicant) and `AMNS' (former `ESIL') were liable to pay the RTU Charges to Odisha Slurry Pipeline Infrastructure Limited (`OSPIL'). That apart, the Appellant, AMNS and the Resolution Professional of the former ESIL (`ESIL RP') preferred Applications questioning the maintainability of the Applications filed by the 1st Respondent. Besides these, the `ESIL RP' had sought his deletion from the `Memo of Parties' and these `Applications' came to be disposed of by the `impugned judgment' I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 8 of 59 (although no specific order was passed onthe Prayer made by `ESIL RP').
10. The Learned Counsel for the Applicant/Appellant proceeds to point out that on 04.12.2020this `Tribunal' was pleased to issue `Notice' in the present Appeal filed by the Appellant and granted an `Ad-interim Stay' of the operation of the `impugned judgment'. Also that, the 3 rd Respondent in the 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 9 of 59 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 of 2021 (Appellant / AMIPL), IA No.709 of 2022 and IA No.100703 of 2021 (`AMNS') were filed and pending before the Hon'ble Supreme Court of India.
13. The Learned Counsel for the Applicant/Appellant comes out with a plea that the substantive legal and factual issues raised in the Resolution Professional's Appeal before the Hon'ble Supreme Court of India also arise in the instant proceedings as depicted in the Tabular Form which runs as under:
RP Appeal Present Proceedings
Question of Law
(iv) Whether a determination of L. Whether, In the absence of any CIRP costs made by the resolution challenge to the determination of professional during the pendency the CIRP Costs by the RP during I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 10 of 59 of the CIRP can be challenged the course of the entire CIRP, the subsequently, under Section 60 (5) Adjudicating Authority could have of the I & B Code or otherwise, held a particular claim to be CIRP after conclusion of the CIRP and Costs much after the closure of the after successful implementation of process?
the resolution plan specially when there was no challenge during CIRP or on the basis of events arising after closure of CIRP...?
Grounds The AA Order upsets the finality Grounds A-I accorded to the CIRP by the Final Supreme Court Order, owing to which the resolution plan stood implemented (Grounds A-E) The maintainability of the IA No. Grounds P-PP 245 of 2020 filed by SREI Infrastructure Finance Limited (``SREI'') before Adjudicating Authority, Ahmedabad, despite no objections being raised while the ESIL CIRP was ongoing.
(Ground I) and hence prays for Staying the instant proceedings and await the outcome of the Resolution Professional's Appeal.
14. The Learned Counsel for the Applicant/Appellant submits that a mere perusal of the prayers in the Resolution Professional's Appeal makes it clear that the `ESIL RP' has sought directions from the Hon'ble Supreme Court of India which were squarely under the purview of the instant Appeal. In fact, the request of the Applicant/Appellant before this I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 11 of 59 `Tribunal' for stay of the proceedings is only to ensure that `Judicial Propriety' is maintained because of the fact that the Hon'ble Supreme Court of India is considering the same issue, as seen from the Tabular Form filed by `AMNS' before this `Tribunal' on 11.03.2022.
15. The Learned Counsel for the Applicant/Appellant contends that the 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.
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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.
6. This being the case, we are surprised that an arbitration proceeding has been purported to be started after the imposition of the said moratorium and appeals under Section 37 of the Arbitration Act are being entertained. Therefore, we set aside the order of the District Judge dated 06.07.2017 and further state that the effect of Section 14(1)(a) is that the arbitration that has been instituted after the aforesaid moratorium is non est in law.
7. Mr. Jayant Bhushan, learned Senior Counsel, also informs us that criminal proceeding being F.I.R. No. 0605 dated 06.08.2017 has been taken in a desperate attempt to see that the IRP does not continue with the proceedings under the Insolvency Code which are strictly time bound. We quash this proceeding.
8. As a result, the appeal is allowed and the steps that have to be taken under the Insolvency Code will continue unimpeded by any order of any other Court.''
17. The Learned Counsel for the Applicant/Appellant relies on the decision of the Hon'ble Supreme Court of India in P Mohanraj&Ors. V Shaw Brothers Ispat Private Limited reported in (2021) 6 SCC - Page 258, wherein at Paragraphs 14-15, 19-20. 29-32, 35, 36 and 74, it is observed as under:
14. ``We now come to the language of Section 14(1)(a). It will be noticed that the expression ``or'' occurs twice in the first part of Section 14(1)(a) first, between the expressions ``institution of suits'' and ``continuation of pending suits'' and second, between the expressions ``continuation of pending suits'' and ``proceedings against the corporate debtor...''. The sweep of the provision is very wide indeed as it includes institution, continuation, judgment and I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 13 of 59 execution of suits and proceedings. It is important to note that an award of an arbitration panel or an order of an authority is also included. This being the case, it would be incongruous to hold that the expression ``the institution of suits or continuation of pending suits'' must be read disjunctively as otherwise, the institution of arbitral proceedings and proceedings before authorities cannot be subsumed within the expression institution of ``suits'' which are proceedings in civil courts instituted by a plaint (see Section 26 of the Code of Civil Procedure, 1908). Therefore, it is clear that the expression ``institution of suits'' or ``continuation of pending suits'' is to be read as one category, 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 Article 233 of the Constitution, qua District Judges in a State. Applying the doctrine of noscitur a sociis, this Court held that given the fact that the expression ``posting'' comes in between ``appointment'' and I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 14 of 59 ``promotion'' of District Judges, it is clear that a narrower meaning has to be assigned to it, namely, that of assigning someone to a post which would not include ``transfer''. Quite apart from the positioning of the word ``posting'' in between ``appointment'' and ``promotion'', from which it took its colour, even otherwise, Articles 234 and 235 of the Constitution would make it clear that since ``transfer'' of District Judges is with the High Court and not with the State Government, quite obviously, the expression ``posting'' could not be used in its wider sense see pages 460 and
461. This judgment is an early application of the rule of noscitur a sociis, given the position of a wider word between two narrow words, and more importantly, the reading of other allied provisions in the Constitution.
19. In Godfrey Phillips India Ltd. v. State of U.P., (2005) 2 SCC 515, a Constitution Bench of this Court had to construe the meaning of the expression luxury in Entry 62 of List 2 of the Seventh Schedule to the Constitution of India. In this context, the rule of noscitur a sociis was applied by the Court, the Court also pointing out how a court must be careful before blindly applying the principle, as follows:
``77. In the present context the general meaning of luxury has been explained or clarified and must be understood in a sense analogous to that of the less general words such as entertainments, amusements, gambling and betting, which are clubbed with it. This principle of interpretation known as noscitur a sociis has received approval in Rainbow Steels Ltd. v. CST [(1981) 2 SCC 141 : 1981 SCC (Tax) 90] , SCC at p. 145 although doubted in its indiscriminate application in State of Bombay v. Hospital Mazdoor Sabha [(1960) 2 SCR 866 : AIR 1960 SC 610] . In the latter case this Court was required to construe Section 2(j) of the Industrial Disputes which read:
``2(j) industry means any business, trade, undertaking, manufacture or calling of employers and includes any I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 15 of 59 calling, service, employment, handicraft, or industrial occupation or avocation of workmen.''
78. It was found that the words in the definition were of very wide and definite 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 since it has been amply demonstrated with reference to authority that the meaning of the word ``luxury'' in Entry 62 is doubtful and has been defined and construed in different senses.
xxx xxxxxx
81. We are aware that the maxim of noscitur a sociis may be a treacherous one unless the ``societas'' to which the ``socii'' belong, are known. The risk may be present when there is no other factor except contiguity to suggest the ``societas''. But where there is, as here, a term of wide denotation which is not free from I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 16 of 59 ambiguity, the addition of the words such as ``including'' is sufficiently indicative of the societas. As we have said, the word ``includes'' in the present context indicates a commonality or shared features or attributes of the including word with the included.
xxx xxxxxx
83. Hence on an application of general principles of interpretation, we would hold that the word ``luxuries'' in Entry 62 of List II means the activity of enjoyment of or indulgence in that which is costly or which is generally recognised as being beyond the necessary requirements of an average member of society and not articles of luxury.''
20. In Vikram Singh v. Union of India, (2015) 9 SCC 502, this Court was asked to construe the expression ``government or any other person'' contained in Section 364-A of the Indian Penal Code, 1860 with reference to ejusdem generis. This Court, in repelling the contention, went on to hold:
``26. We may before parting with this aspect of the matter also deal with the argument that the expression ``any other person'' appearing in Section 364-A IPC ought to be read ejusdem generis with the expression preceding the said words. The argument needs notice only to be rejected. The rule of ejusdem generis is a rule of construction and not a rule of law. Courts have to be very careful in applying the rule while interpreting statutory provisions. Having said that the rule applies in situations where specific words forming a distinct genus class or category are followed by general words. The first stage of any forensic application of the rule, therefore, has to be to find out whether the preceding words constitute a genus class or category so that the general words that follow them can be given the same colour as the words preceding. In cases where it is not possible to find the genus in the use of the words preceding the general words, the rule of ejusdem generis will have no application.
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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; if, however, the specific words do not exhaust the class, then adoption of the rule may be favoured because its rejection would make the specific words unnecessary. [See: Construction of Statutes by E.A. Driedger p. 95 quoted by Francis Bennion in his Statutory Construction, pp. 829 and 830.]
28. Relying upon the observations made by Francis Bennion in his Statutory Construction and English decision in Magnhild v.
McIntyre Bros. & Co. [(1920) 3 KB 321] and those rendered by this Court in Tribhuban Parkash Nayyar v. Union of India [(1969) 3 SCC 99], U.P. SEB v. Hari Shankar Jain [(1978) 4 SCC 16 :
1978 SCC (L&S) 481], His Lordship summed up the legal principle in the following words: (Siddeshwari Cotton Mills case [(1989) 2 SCC 458 : 1989 SCC (Tax) 297], SCC p. 464, para 19) ``19. The preceding words in the statutory provision which, under this particular rule of construction, control and limit the meaning of the subsequent words must represent a genus or a family which admits of a number of species or members.
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 18 of 59 If there is only one species it cannot supply the idea of a genus.''
29. Applying the above to the case at hand, we find that Section 364-A added to IPC made use of only two expressions viz.
``Government'' or ``any other person''. Parliament did not use multiple expressions in the provision constituting a distinct genus class or category. It used only one single expression viz. ``Government'' which does not constitute a genus, even when it may be a specie. The situation, at hand, is somewhat similar to what has been enunciated in Craies on Statute Law (7th Edn.) at pp. 181-82 in the following passage:
``... The modern tendency of the law, it was said [by Asquith, J. in Allen v. Emerson (1944 KB 362 : (1944) 1 All ER 344)], is `to attenuate the application of the rule of ejusdem generis'. To invoke the application of the ejusdem generis rule there must be a distinct genus or category. The specific words must apply not to different objects of a widely differing character but to something which can be called a class or kind of objects. Where this is lacking, the rule cannot apply (Hood-Barrs v. IRC [(1946) 2 All ER 768 (CA)]), but the mention of a single species does not constitute a genus. (Per Lord Thankerton in United Towns Electric Co. Ltd. v. Attorney General for Newfoundland [(1939) 1 All ER 423 (PC)].) Unless 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. I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 19 of 59 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 of the words `or otherwise' does not bring into play the ejusdem generis principle: for `manual labour' and `clerical work' do not belong to a single limited genus' and Lord Wright in the same case said: `The ejusdem generis rule is often useful or convenient, but it is merely a rule of construction, not a rule of law. In the present case it is entirely inapt. It presupposes a ``genus'' but here the only ``genus'' is a contract with an employer'.
(emphasis supplied)
30. The above passage was quoted with approval by this Court in Grasim Industries Ltd. v. Collector of Customs [(2002) 4 SCC 297] holding that Note 1(a) of Chapter 84 relevant to that case was clear and unambiguous. It did not speak of a class, category or genus followed by general words making the rule of ejusdem generis inapplicable.
xxx xxxxxx
32. This would mean that the term person appearing in Section 364-A IPC would include a company or association or body of persons whether incorporated or not, apart from natural persons. The tenor of the provision, the context and the statutory definition of the expression person all militate against any attempt to restrict the meaning of the term person to the Government or foreign State or international inter-governmental organisations only.''
29. V. Ramakrishnan (supra) looked at and contrasted Section 14 with Sections 96 and 101 from the point of view of a guarantor to a debt, and in this context, held:
``26. We are also of the opinion that Sections 96 and 101, when contrasted with Section 14, would show that Section 14 cannot possibly apply to a personal guarantor. When an application is filed under Part III, an interim-moratorium or a moratorium is applicable in respect of any debt due. First I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 20 of 59 and foremost, this is a separate moratorium, applicable separately in the case of personal guarantors against whom insolvency resolution processes may be initiated under Part III. Secondly, the protection of the moratorium under these Sections is far greater than that of Section 14 in that pending legal proceedings in respect of the debt and not the debtor are stayed. The difference in language between Sections 14 and 101 is for a reason.
26.1. Section 14 refers only to debts due by corporate debtors, who are limited liability companies, and it is clear that in the vast majority of cases, personal 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) Act, 2020, to argue that the first proviso to Section 32A(1) I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 21 of 59 would make it clear that ``prosecutions'' that had been instituted during the corporate insolvency resolution process against a corporate debtor will result in a discharge of the corporate debtor from the prosecution, subject to the other requirements of sub-section (1) having been fulfilled. According to him, therefore, a prosecution of the corporate debtor under Section 138/141 of the Negotiable Instruments Act can be instituted during the corporate insolvency resolution process, making it clear that such prosecutions are, therefore, outside the ken of the moratorium provisions contained in Section 14 of the IBC. Section 32A(1) of the IBC reads as follows:
``32A. Liability for prior offences, etc.(1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under Section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not __
(a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or
(b) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court:
Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan subject to requirements of this sub-section having been fulfilled:
Provided further that every person who was a ``designated partner'' as defined in clause (j) of Section 2 of the Limited I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 22 of 59 Liability Partnership Act, 2008 (6 of 2009), or an ``officer who is in ``default'', as defined in clause (60) of Section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner incharge of, or responsible to the corporate 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 debtor from proposing a resolution plan and purchasing the property of the corporate debtor in the CIRP and liquidation process, respectively.
Thus, in most cases, the provisions of the Code effectuate a change in control of the corporate debtor that results in a clean break of the corporate debtor from its erstwhile management. However, the legal form of the corporate debtor continues in the CIRP, and may be preserved in the resolution plan. Additionally, while the property of the corporate debtor may also change hands upon resolution or liquidation, such property also continues to exist, either as property of the corporate debtor, or in the hands of the purchaser.
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 23 of 59 17.2. However, even after commencement of CIRP or after its successful resolution or liquidation, the corporate debtor, along with its property, would be susceptible to investigations or proceedings related to criminal offences committed by it prior to the commencement of a CIRP, leading to the imposition of certain liabilities and restrictions on the corporate debtor and its properties even after they were lawfully acquired by a resolution applicant or a successful bidder, respectively. Liability where a Resolution Plan has been Approved. 17.3. It was brought to the Committee that this had created apprehension amongst potential resolution applicants, who did not want to take on the liability for any offences committed prior to commencement of CIRP. In one case, JSW Steel had specifically sought certain reliefs and concessions, within an annexure to the resolution plan it had submitted for approval of the Adjudicating Authority. Without relief from imposition of the such liability, the Committee noted that in the long run, potential resolution applicants could bedisincentivised from proposing a resolution plan. The Committee was also concerned that resolution plans could be priced lower on an average, even where the corporate debtor did not commit any offence and was not subject to investigation, due to adverse selection by resolution applicants who might be apprehensive that they might be held liable for offences that they have not been able to detect due to information asymmetry. Thus, the threat of liability falling on bona fide persons who acquire the legal entity, could substantially lower the chances of its successful takeover by potential resolution applicants. 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 xxxxxx I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 24 of 59 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 the corporate debtor, unless they themselves were involved in the commission of the offence, or were related parties, promoters or other persons in management and control of the corporate debtor at the time of or any time following the commission of the offence, and could acquire the corporate debtor, notwithstanding the prohibition under Section 29A.
17.7. Thus, the Committee agreed that a new Section should be inserted to provide that where the corporate debtor is successfully resolved, it should not be held liable for any offence committed prior to the commencement of the CIRP, unless the successful resolution applicant was also involved in the commission of the offence, or was a related party, promoter or other person in management and control of the corporate debtor at the time of or any time following the commission of the offence. 17.8. Notwithstanding this, those persons who were responsible to the corporate debtor for the conduct of its business at the time of the commission of such offence, should continue to be liable for such an offence, vicariously or otherwise, regardless of the fact that the corporate debtor's liability has ceased.'' (emphasis supplied)
32. This Court, in Manish Kumar v. Union of India, 2021 SCC OnLine SC 30, upheld the constitutional validity of this provision. This Court observed:
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 25 of 59 ``280. We are of the clear view that no case whatsoever is made out to seek invalidation of Section 32A. The boundaries of this Court's jurisdiction are clear. The wisdom of the legislation is not open to judicial review. Having regard to the object of the Code, the experience of the working of the code, the interests of all stakeholders including most importantly the imperative need to attract resolution applicants who would not shy away from offering reasonable and fair value as part of the resolution plan if the legislature thought that immunity be granted to the corporate debtor as also its property, it hardly furnishes a ground for this this Court to interfere. The provision is carefully thought out. It is not as if the wrongdoers are allowed to get away. They remain liable. The extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate. We must also not overlook the principle that the 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 26 of 59 amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this Section shall apply unless__
(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice.
Explanation.__ For the purposes of this Section, ``debt or other liability'' means a legally enforceable debt or other liability.''
36. Section 138 contains within it the ingredients of the offence made out. The deeming provision is important in that the legislature is cognizant of the fact that what is otherwise a civil liability is now also deemed to be an offence, since this liability is made punishable by law. It is important to note that the transaction I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 27 of 59 spoken of is a commercial transaction between two parties which involves payment of money for a debt or liability. The explanation to Section 138 makes it clear that such debt or other liability means a legally enforceable debt or other liability. Thus, a debt or other liability barred by the law of limitation would be outside the scope of Section 138. This, coupled with fine that may extend to twice the amount of the cheque that is payable as compensation to the aggrieved party to cover both the amount 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 in an arbitral award against the corporate debtor being upheld, as a result of which, monies would then be payable by the corporate debtor. A Section 34 proceeding is a proceeding against the corporate debtor in a court of law pertaining to a challenge to an arbitral award and would be covered just as an appellate proceeding in a decree from a suit would be covered. This judgment does not, therefore, state the law correctly.'' I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 28 of 59
18. The Learned Counsel for the Applicant/Appellant seeks in aid of the Judgment of the Hon'ble Supreme Court of India dated 08.09.2021 in Anjali Rathi and Ors. V Today Homes and Infrastructure Private Limited &Ors., (vide SLP (C) No. 12150 of 2019 with Civil Appeal No. 5231-38 of 2019 - Anjali Rathi & Etc. V Today Homes and Infrastructure Pvt. Ltd. with SLP (C)_ of 2021 (arising out of SLP (C) Diary No. 45043 of 2019 - Varun Gupta and Ors., V Today Homes and Infrastructure Pvt. Ltd. &Anr.), wherein at paragraphs 8, 14, 15 and 16, it is observed as under:-
8. ``Thereafter, the petitioners lodged their claims before the Resolution Professional10, though without prejudice to their contentions in the proceedings pending before this Court. The RP issued an Information Memorandum to prospective Resolution Applicants in terms of the IBC. Two Resolution Applicants came forth before the RP, namely: (i) I & E Advertising Private Limited;
and (ii) a consortium representing the home buyers. It appears that the developer had other projects as well, and the consortium represented the homer buyers of all the projects.
14. Further, since the moratorium declared in respect of the first respondent Corporate Debtor continues to operate under Section 14 of the IBC, no new proceedings can be undertaken or pending ones continued against the Corporate Debtor. Section 14(1) of the IBC reads as follows:
"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--
I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 29 of 59
(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 (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/management of the Corporate Debtor, against whom proceedings could continue. Speaking through Justice Rohinton F Nariman, the Court held:
"102. Since the corporate debtor would be covered by the moratorium provision contained in Section 14 IBC, by which continuation of Sections 138/141 proceedings against the corporate debtor and initiation of Sections 138/141 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 30 of 59 proceedings against the said debtor during the corporate insolvency resolution process are interdicted, what is stated in paras 51 and 59 in AneetaHada [AneetaHada v.
Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 :
(2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] would then become applicable. The legal impediment contained in Section 14 IBC would make it impossible for such proceeding to continue or be instituted against the corporate debtor. Thus, for the period of moratorium, since no Sections 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Sections 141(1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act."
(emphasis supplied) We thus clarify that the petitioners would not be prevented by the moratorium under Section 14 of the IBC from initiating proceedings against the promoters of the first respondent Corporate Debtor in relation to honoring the settlements reached before this Court. However, as indicated earlier, this Court cannot issue such a direction relying on a Resolution Plan which is still pending approval before an Adjudicating Authority.
16. In view of the above directions, SLP (C) No 12150 of 2019 and SLP (C) Diary No 45043 of 2019 shall stand disposed of as well as the civil appeal, being Civil Appeal Nos 5231-5238 of 2019. Liberty is granted to the petitioners to take recourse to the remedies which are available in law after the decision of the I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 31 of 59 Adjudicating Authority on the approval application under Section 31(1), and subject to the consequence thereafter.''
19. The Learned Counsel for the Applicant/Appellantsubmits that in the Power Grid Corporation of 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 32 of 59 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 Order'.
22. The Learned Counsel for the Applicant/Appellant while rounding up contends that in view of the express prohibition in Section 14 of the I & B Code, 2016, for any continuation of any proceedings by or against the Corporate Debtor and because of the pendency of the Resolution Professional's Appeal, which is directly, substantially and holistically on the same grounds as in the instant proceedings, the Stay Application is to be allowed and the reliefs sought by the Applicant thereunder be granted. 1st Respondent's Submissions (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) :
23. According to the Learned Senior Counsel for the 1 st Respondent / SREI Infrastructure Finance Limited that the ArcelorMittal India Private Limited and ArcelorMittal Nippon Steel India Limited have assailed the Judgment and Order dated 10.11.2020, passed by the `Adjudicating Authority' (`National Company Law Tribunal', Kolkata Bench) in Comp. I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 33 of 59 App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020.
24. The Learned Counsel for the 1st Respondent submits that the 1st Respondent/ SREI Infrastructure Finance Limited is currently undergoing `Corporate Insolvency Resolution Process', under the I & B Code, 2016, by means of an `Order' dated 08.10.2021, passed by the `Adjudicating Authority' (National Company Law Tribunal', Kolkata Bench) in admitting the Petition filed by the `Reserve Bank of India' and that the `Moratorium' in regard to the `1st Respondent / SREI' is in force.
25. The Learned Counsel for the 1st Respondent contends that the `test' for an `Application' of Section 14 of the I & B Code, 2016, is mentioned in the decision of P. Mohanraj and Ors. V Shah Brothers Ispat Private Limited 2021 (6) SCC at Page 258, wherein at paragraphs 30 and 32, it is observed and held as under:
30. ``It can be seen that Para 8.11 refers to the very judgment under appeal before us, and cannot therefore be said to throw any light on the correct position in law which has only to be finally settled by this Court. However, Para 8.2 is important in that the object of a moratorium provision such as Section 14 is to see that there is no depletion of a corporate debtor's assets during the insolvency resolution process so that it can be kept running as a going concern during this time, thus maximising value for all stakeholders. The idea is that it facilitates the continued operation I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 34 of 59 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 present Appeals will not lead to any depletion or diminution of 1st Respondent / SREI Assets. In fact, according to the 1st Respondent, if the instant Appealsare allowed, the 1st Respondent/SREI will gain nothing and lose nothing and in the event of the present Appealsare dismissed, 1st Respondent / SREI will be benefitted as the RTU Charges payment will add to its Assets.
27. The Learned Counsel for the 1st Respondent urges before this `Tribunal', that the Applicant/Appellant's reliance of the observations I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 35 of 59 made in paragraph 97 of the decision of the Hon'ble Supreme Court of India in the matter of P. Mohanraj& Others. V Shah Brothers IspatPvt. Ltd. 2021 (6) SCC 258 ispertinent, because the observations made in paragraph 97 is a finding on the basis of the test extracted supra and that the Hon'ble Supreme Court of India had observed that continuation of proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 might result in `confirmation' of an `Award' against the `Corporate Debtor' which can be executed.
28. According to the Learned Counsel for the 1 st Respondent,the decision in the matter of Alchemist Asset Reconstruction Company 2018 (16) SCC 94 is in applicable to the facts of the instant case, since Alchemist case, Section 37 of the Arbitration and Conciliation Act, 1996, proceedings were taken out which might result in execution of the Arbitral Award against the Corporate Debtor and in that context, a finding was rendered by the Hon'ble Supreme Court in Secton 14 (1) (a) of the I & B Code, 2016, interdicts institution or continuation of the proceedings against the Corporate Debtor.
29. Likewise, it is the plea of the 1st Respondent that the reliance placed on the side of the Applicant/Appellant in respect of the decision in Anjali Rathi and Others V Today Homes and Infrastructure Pvt Ltd and I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 36 of 59 Others 2021, SCC Online SC 729 is not an apt one because of the fact that was a case of execution proceedings under the Consumer Protection Act, 1986 and would have been instance of a proceeding which is against the interest of the `Corporate Debtor'.
30. The Learned Counsel for the 1st Respondent urges before this `Tribunal' that ambit of the `Resolution Professional's `Appeal' and the instant `Appeals'arewholly different and in fact, the Resolution Professional's Appeal challenges the `Orders' dated 04.12.2020 and 08.12.2020, passed by 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'.
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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 of upsetting and/or re-opening a resolution plan finally approved by a competent authority (and more so when approved by this Hon'ble Court);
(b) In directing the Hon'ble Adjudicating Authorities and the Hon'bleAppellate Tribunal to refrain from issuing notice and/or calling upon an (erstwhile) resolution professional in a proceeding which arise after the culmination of the corporate insolvency resolution process;''
32. The Learned Counsel for the 1st Respondent comes out with an argument that an `Adjudicating Authority' and the `Appellate Tribunal' are to examine whether the proceeding will result in upsetting or re- opening an approved Resolution Plan and this contention is still available to the `AM India' (Applicant/Appellant) and `AM Nippon' (2nd Respondent). Moreover, the 1st Respondent (SREI) is seeking `implementation of the `Resolution Plan' for the `ESIL' and not seeking to re-open or upset it.
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33. The Learned Counsel for the 1st Respondent submits that in reality, `no stay' of the `instant Appeals' are sought or granted in the Resolution Professional's Appeal by the Hon'ble Supreme Court of India and that the Resolution Professional of the `ESIL' has not applied for `deferment' before this `Tribunal' and the aspect of `stay' / `deferment' of the present Appeals at the behest of the Applicant/Appellant (AM India) or 2nd Respondent (AM Nippon), being Respondents in Resolution Professional's Appeal before the Hon'ble Supreme Court of India does not arise.
34. The Learned Counsel for the 1st Respondent takes an emphatic stand that if the prayer in the Resolution Professional's Appeal before the Hon'ble Supreme Court of India does not affect the continuance of the hearing before this `Tribunal', the `commonality of questions of law' or `grounds' is an irrelevant one.
35. That apart, the Hon'ble Supreme Court of India through an `Order' dated 02.08.2021 had rejected the Applicant/Appellant's and the R2's (AM Nippon's) prayer for transfer of the instant Appeals before it and more importantly, the Applicant/Appellant and the 2nd Respondent have failed to point out to the Hon'ble Supreme Court that an `Order' I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 39 of 59 permitting their intervention in the Resolution Professional's Appeal is unnecessary since they are already Respondents to the Resolution Professional's Appeal.
36. The Learned Counsel for the 1st Respondent adverts to the decision 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 2 nd Respondent (AM Nippon).
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37. The Learned Counsel for the 1st Respondent strenuously contends that the `Applicant/Appellant' (AM India) and the 2nd Respondent (AM Nippon) cannot indirectly continuing the `Order of Interim Relief' by seeking `deferment' of the hearing of the instant `Appeal', because of the fact that they enjoy the Interim Relief for more than a year.
38. In so far as the contentions that (a) RTU Charges are not payable since there was no demand during CIRP of ESIL; (b) The order dated 10.11.2020 passed by the Ld. Adjudicating Authority holding AM India and AM Nippon liable to pay RTU Charges as CIRP Cost amounts to a hydra head popping up or upsetting the resolution plan for ESIL approved by Hon'ble Supreme Court; and (c) SREI has no right to seek payment of RTU Charges as CIRP Cost since it was paid the resolution amount in ESIL's CIRP thus have no `Locus' and are issues of merits that have no bearing on the `Deferment Applications'. These issues can only be adjudicated at the time of final hearing of the present Appeals.'' Applicant/Appellant's Submissions (in I.A. No. 673 of 2022 in Comp. App (AT) (INS) No. 1043 of 2020):
39. The Learned Senior Counsel for the Applicant/Appellant contends that once the `Moratorium' is in place, continuation of any `Suit' or I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 41 of 59 `Proceeding' in any Court / Tribunal / Forum for Authority against the `Corporate Debtor' shall be stayed till the completion of `Corporate Insolvency Resolution Process' as per the I & B Code, 2016.
40. According to the Learned Counsel for the Applicant/Appellant that in the instant case, the 1st Respondent/SREI (Corporate Debtor) is a `Contesting Party' with an ongoing `Corporate Insolvency Resolution Process' and till the `CIRP' of the 1st Respondent/SREI is completed, the present `Proceedings' filed by the `Applicant/Appellant' cannot proceed and any action taken in violation of Section 14 of the Code is an inconsistent one in the `eye of law'.
41. The Learned Counsel for the Applicant/Appellant refers to the decision of the Hon'ble Supreme Court in the matter of Alchemist Asset Reconstruction Company Ltd. v Hotel Gaudavan Private Limited and Ors., 2018 (16) SCC Page 94 (vide paragraphs 4 to 7), wherein it is observed that any proceedings in violation of Section 14 of the Code would be non est in law.
42. The Learned Counsel for the Applicant/Appellantrefers to the decision of Hon'ble Supreme Court of India in P Mohanraj and Ors. v.
Shah Brothers IspatPvt. Ltd., reported in 2021 (6) SCC at Page 258, I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 42 of 59 wherein it is observed and held that in the event of 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'.
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46. The Learned Counsel for the Applicant/Appellant submits that in ESIL RP's Civil Appeal before the Hon'ble Supreme Court of India (wherein the impugned order dated 04.12.2020 and 08.12.2020, passed by by this `Tribunal' in the present proceedings is impugned), `Notice' was issued on 06.04.2021 and on 02.08.2021, a liberty was granted to AMIPL and AMNS to intervene in the said ESIL RP's Civil Appeal and that the Intervening Applications are pending before the Hon'ble Supreme Court of India.
47. In short, the Learned Counsel for the Applicant/Appellant points out that because of the commonality of the scope and purview of both the Appeals Viz. the present Appeal and the ESIL RP's Civil Appeal is enough to grant relief of `Stay' in the present proceedings. Furthermore, because of the Hon'ble Supreme Court of India is seized of these issues in Civil Appeal, it is just and proper, in the interests of justice that present proceedings may be kept in abeyance, till the disposal of the ESIL RP's Civil Appeal.
48. The Learned Counsel for the Applicant/Appellant submits that the 1st Respondent/SREI has not made any endeavour to clarify the position from the Hon'ble Supreme Court of India and the relief of mere I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 44 of 59 deferment as prayed for by the Applicant/Appellantwill not cause any prejudice.
49. It is represented on behalf of the Applicant/Appellant (in I.A. No. 673 of 2022 in Comp. App (AT) (INS) No. 1043 of 2020) that the 1 st Respondent/SREI, besides raising the issue of `maintainability of the Appeal', in its Counter Affidavit before the Hon'ble Supreme Court of India in Civil Appeal Nos. 1015-1016 of 2021 has joined issues on merits and in fact, has taken the plea on merits.
50. The Learned Counsel for the Applicant/Appellant contends that CIRP costs were to be paid as per determination by `ESIL RP' and indeed, the letter dated 13.12.2019 filed by the Advisors of `ESIL RP' clearly mentions that all `CIRP' costs were paid and that the Applicant/Appellant was accordingly resolved from `Insolvency'.
51. The other plea taken on behalf of the Applicant/Appellant is that the determination by `ESIL RP' that `RTU charges' are not payable / will not be paid, was not objected to, despite two rounds of litigation up to the Hon'ble Supreme Court of India, during the `CIRP' of the Appellant i.e., `ESIL / ANMS' .
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52. The Learned Counsel for the Applicant/Appellant points out that 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 46 of 59 Company, but also the `Continuation of Pending Proceedings' (Paragraph 5.3.1.1).
Definition of Moratorium:
55. As a matter of fact, the word `Moratorium' is defined in P RamanathaIyer's Advanced Law Lexicon (5th Edition) 2017 Vol. III at Page 3348 meaning `Authorisation of suspension of payments by a `Debtor' for a specified time'.
56. The term `Moratorium' is described as a legal authorisation to a `Debtor' to `defer' the payment for a certain time as per Schedule Article 53 of the Asian Development Bank Act (18/1966).
Moratorium:
57. It is aptly pointed out by this `Tribunal' that the term `Moratorium' ensures that `plurality of proceedings' are not to take place in a simultaneous manner and help in averting the possibility of potentially contradictory / conflicting result of related proceedings, thereby ensuring that the `Resolution' is a `collective one'.
58. At this juncture, this `Tribunal' significantly points out that the resultant effect of passing the order, in terms of the ingredients of Section I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 47 of 59 7 (5) of the I & B Code, 2016, `Moratorium' as prescribed under Section 14 of the Code, `Shall' come into effect. Consequently, the Corporate Financial Debtor's Assets are not to be liquidated till the `Corporate Insolvency Resolution Process' is completed.
59. The principle of `Moratorium' is to give the `Administrator' to formulate `proposals' and then implement any `proposal' approved by the `Creditor' [vide Re Atlantic Compute Systems P I C (1992) 2 Ch 505, 528 NICHOLLS LJ].
60. It cannot be gainsaid that a `Moratorium' does not `alter' or `destroy', `Creditors and Third Parties Rights'. However, it restricts their `enforcement' [vide Centre Re-Insurance International v. Curzon Insurance Limited (2006) 1 WLR 2863].
Raising of presumption:
61. It is pertinently pointed out by this `Tribunal' that the employment of the word `Shall' raises a presumption that specific provision is imperative, as per decision of the Hon'ble Supreme Court of India in the matter of PesaraPushpamala Reddy v G. Veerasamy, reported in (2011) 4 SCC, Page 306 (vide paragraph 28).
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62. It is worthwhile to mention that Rule 57 (2) of Schedule 2 to the Income Tax Act, 1961, provides that the full amount of purchase money payable `shall be paid by the `Purchaser' to the `Tax Officer' on or before 15th day from the date of Sale of Property'. In fact, the Hon'ble Supreme Court of India by relying on the word `Shall' as well as `earlier decisions of the Court on parimateria 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 49 of 59 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 Breach:
66. A mere running of the eye of the word `Shall' employed in Section 14 (1) of the I & B Code, 2016, symbolises that on declaration of `Moratorium', it is mandatory for the `Adjudicating Authority' to pass an `Order' prohibiting the filing or continuation of pending `Suits' or `Proceedings; against the `Corporate Debtor'. In this connection, this `Tribunal' points out that when a `Statute' employs the word `Shall' `ex facie', it is mandatory.
67. Section 14 (3) of the I & B Code, 2016, enjoins that the Central Government in consultation with any `Financial Sector Regulator' or any other `Authority', may notify to which `Moratorium' may not apply. As such, the Central Government is endowed with the `Power' to look at this aspect and to delve into the realm of `exemption' and to `address' the same.
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68. As per Section 14 (4) of the Code, the `Order of Moratorium' is to have effect from the date of such an `Order' till the completion of `Corporate Insolvency and Resolution Process'. However, during the `Corporate Insolvency and Resolution Process', if the `Adjudicating Authority' (NCLT) approves the `Resolution Plan' as per Section 31 (1) of the I & B Code or passes an `Order' for `Liquidation' of `Corporate Debtor' under Section 33, the `Moratorium' has to`cease' to have effect from the date of such an `Approval' or `Liquidation', as the case may be.
69. No wonder, Section 74 of the I & B Code, 2016, prescribes `punishment' for `violation' of the terms of the `Moratorium Order' under Section 14 of the Code or `approved Resolution Plan', under Section 31 of the Code.
Discussions (in I.A. No. 682 of 2022 inComp. App (AT) (INS) No. 1038 of 2020)and(in I.A. No. 673 of 2022 in Comp. App (AT) (INS) No. 1043 of 2020) :
70. At the outset, this `Tribunal' points out that the Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020 have been preferred by the Appellants, based on the `Common Final Order' dated 10.11.2020, passed by the `Adjudicating Authority', I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 51 of 59 (`National Company Law Tribunal', Court - I, Ahmedabad Bench) in I.A. Nos. 245, 348 of 2020 in CP(IB)/39 & 40 of 2017, I.A. Nos. 349 of 2020 in I.A.No. 284 in I.A. No.245 of 2020 in CP(IB)/39 & 40 of 2017, I.A. No.284 of 2020 in I.A. No. 245 of 2020 in CP(IB)/39 & 40 of 2017 and I.A. No.285 of 2020 in I.A. No. 245 of 2020 in CP(IB)/39 & 40 of 2017.
71. In the main 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 52 of 59 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 comes to be known that on 15.11.2019, the Hon'ble Supreme Court of India had approved the Resolution Plan in respect of `Essar Steel India Limited' (`ESIL'), now `AMNS', and based on the `Application' projected by the 1st Respondent/SREI Infrastructure Finance Limited, the `Adjudicating Authority, had passed an `Order' declaring that the `Appellant' (Successful Resolution Applicant) and `AMNS' (erstwhile `ESIL') were liable to pay the RTU Charges to `OSPIL'. In fact, the Appellant, `AMNS' and the Resolution Professional of former `ESIL' (ESIL RP) filed `Applications' questioning the maintainability of the `Application' filed by the `1st Respondent/SREI'. Added further, the `ESIL RP' had sought his deletion from the `Memo of Parties' and ultimately, the `Applications' were disposed of, by a `Common Order' (although no specific order was passed on the reliefs sought for by the Resolution Professional of ESIL).
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74. To be noted, that on 04.12.2020, this `Tribunal' had issued `Notice' in Comp. App (AT) (INS) No. 1038 of 2020, filed by the Appellant and granted an ad-interim stay on the operation of the `impugned order'.
75. Also that, the 3rd Respondent / ESIL RP (in Comp. App (AT) (INS) No. 1038 of 2020) assailed the `impugned order' dated 04.12.2020 and also the `Order' dated 08.12.2020, passed in Comp. App (AT) (INS) No. 1043 of 2020, filed by `AMNS' against the same `impugned order', vide Civil Appeal No. 1015-1016 of 2021 (RP's Appeal), before the Hon'ble Supreme Court of India.
76. The `ESIL Resolution Professional', in his Appeal had sought directions from the `Appellate Tribunal' and the `Adjudicating Authority' in refraining themselves to entertain `Applications' that attempt to raise frivolous claims qua the `Resolution Plan' approved for the erstwhile `ESIL', by the `Adjudicating Authority', this `Tribunal' and `Hon'ble Supreme Court of India, and that on 06.04.2021, the Hon'ble Supreme Court of India was pleased to issue `Notice' in the said Appeal.
77. On 02.08.2021, in the `Resolution Professional's Appeal, the Hon'ble Supreme Court of India had granted `liberty' to the `Appellant' and `AMNS' to intervene in the `Resolution Professional's Appeal', and I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 54 of 59 I.A. No. 95649 of 2021 (Appellant / AMIPL) and I.A. No. 100703 of 2021 were filed and they are pending.
78. It transpires that on 08.10.2021, the Adjudicating Authority (National Company 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 I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 55 of 59 be continued against a `Corporate Debtor', during the `Moratorium' period.
81. Contending contra, it is projected on the side of the 1 st Respondent/SREI that the ingredients of the Section 14 of the I & B Code, 2016, have no `applicability' to the instant two `Appeals', because of the prime fact that the ultimate decision of this `Tribunal' in the present `Appeals' will not result in `depletion' or `diminution' of the 1st Respondent/SREI's Assets.
82. Continuing further, it is the stand of the 1st Respondent/SREI before this `Tribunal' that the 1st Respondent/SREI will neither gain nor lose anything, in the event of the instant `Appeals' are ultimately allowed.Conversely, if the `Appeals' are dismissed by this `Tribunal', then the 1st Respondent/SREI will be the `Beneficiary' because of the fact that the payment of `RTU Charges' will enhance its `Assets'.
83. According to the 1st Respondent/SREI, before the Hon'ble Supreme Court of India in Civil Appeal Nos. 1015 - 1016 of 2021 between Satish Kumar Gupta v. SREI Infrastructure Finance Limited, through its Authorised Representative and Others, there is no prayer for `Stay' in respect of the hearing of the instant `Appeals' or `Stay' of the proceedings I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 56 of 59 before this `Tribunal' and that the `Statutory Appeals' cannot be put on hold because of the fact that similar legal grounds are raised before the Hon'ble Supreme Court of India. Besides this, the final determination of these `Appeals' is not to be stifled to await for the issuance of declarations by the Hon'ble Supreme Court of India.
84. Be that as it may, in the light of foregoing detailed deliberations, this `Tribunal',on a careful consideration of divergent contentions advanced on either side, keeping in mind the facts and circumstances of the instant case in an encircling manner, especially the factum of `Moratorium' being declared by the `Adjudicating Authority' (`National Company Law Tribunal', Kolkata Bench) vide `Order' dated 08.10.2021, made in CP (IB)/295/KB/2021, in and by which, the Petition filed by the Reserve Bank of India, was `admitted' for initiation of `Corporate Insolvency Resolution Process' against the `1st Respondent/SREI', the main proceedings in Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043of 2020 against the 1st Respondent/SREI cannot proceed until the completion of `Corporate Insolvency Resolution Process' against the 1st Respondent/SREI,in lieu of the pendency of Civil Appeals No.1015-1016 of 2021 (filed by the erstwhile Resolution Professional of `ESIL' / `3rd Respondent' in both the `Appeals' before this I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 57 of 59 `Tribunal'), wherein, the `Notices' were ordered on 04.12.2020 and 08.12.2020 respectively, by this `Tribunal'in Comp. App (AT) (INS) No. 1038 of 2020and Comp. App (AT) (INS) No. 1043 of 2020,were assailed before the Hon'ble Supreme Court of India and the same is awaiting `Adjudication', centering around the points as to whether, the `Learned Adjudicating Authorities' and the `Appellate Tribunal' may entertain `Applications' that endeavour to upset a `Resolution Plan' approved by a `Competent Authority', this `Tribunal' and finally by the `Hon'ble Supreme Court of India', whether the determination of the `CIRP' costs made by the Resolution Professional during the pendency of `CIRP' can be assailed later on as per Section 60 of the Code or otherwise after the completion of `CIRP' and after successful implementation of the `Resolution Plan', etc.,and bearing in mind of the primordial fact,as regards the `commonality of the substantive controversies' (both on factual and legal plane), hovering around the two instant pending `Appeals', Viz. Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020, based on judicial propriety, sobriety, comity of Judicial discipline,good conscience, fair play and even as a matter of prudence, `Orders' deferment of the proceedings in Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020,on the file of this `Tribunal' for a period of 12 weeks from the date I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 58 of 59 of receipt of copy of this Order, in furtherance of substantial cause of justice.
Conclusion:
85. With the aforesaid observations and directions, 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, stand disposed of. No costs.
Before parting with the case, this `Tribunal' opines that it is open to the respective `Parties' to pursue their remedies in pending Civil Appeal Nos. 1015-1016 of 2021 before the Hon'ble Supreme Court of India for redressal of their grievances, if they so desire / advised.
[Justice M. Venugopal] Member (Judicial) [Dr. Ashok Kumar Mishra] Member (Technical) 02/08/2022 SR/GC I.A. No. 682 of 2022 in Company Appeal (AT) (INS) No. 1038 of 2020 I.A. No. 673 of 2022 in Company Appeal (AT) (INS) No. 1043 of 2020 Page 59 of 59