Latest - TMI e-Newsletter
New User/ Regiser
2022 (9) TMI 637 - Insolvency & Bankruptcy
Maintainability of present suit - liquidator is appointed and liquidation proceedings commenced - whether upon commencement of liquidation proceedings against the defendant no.1 company under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) and Liquidator being appointed, the present suit can proceed or not? - HELD THAT:- From the language of Section 33(5) of the IBC, it is clear that the bar/moratorium is only in respect of fresh suits or legal proceedings. Unlike the moratorium under Section 14 of the IBC, where it is clearly noted that the moratorium is in respect of institution of suits or continuation of pending suits or proceedings against corporate debtor, the words “continuation of pending suits or proceedings” are conspicuously absent in Section 33(5) of the IBC - under Section 446 of the Companies Act, 1956, once the Official Liquidator was appointed as the provisional liquidator, neither a fresh suit nor a pending suit could be proceeded against the company except with the leave of the Company Court/Tribunal. Similar position has been maintained under the Section 279 of the Companies Act, 2013. However, the word ‘pending’ is missing in Section 33(5) of the IBC.
A reading of Section 63 of the IBC would reveal that the bar on the Civil Court is only to ‘entertain any suit or proceeding in respect of any matter on which NCLT has the jurisdiction under this Code’. This would not apply to suits, which were already pending before the commencement of liquidation proceedings. Section 231 of the IBC, inter alia states that no injunction shall be granted by a Court in respect of action taken in pursuance to any order passed by the Adjudicating Authority. The intent is clear that the bar is only in respect of civil suits filed after an order has been passed by the Adjudicating Authority. In my view, the aforesaid bar under Sections 63 and 231 of the IBC would only be in respect of fresh suits. Sections 63 and 231 of the IBC cannot be read in manner so as to defeat the provisions of Section 33(5) of the IBC. If Sections 63 and 231 of the IBC are interpreted in the manner canvased by the counsel for the Liquidator, the provision of Section 33(5) of the IBC would be rendered otiose and the moratorium under Section 33(5) of the IBC, which was to apply only in respect of fresh suits would also apply to pending suits. This cannot be the intention of the legislature.
The bar under Sections 33(5), 63 and 231 of the IBC will not apply to the present suit and therefore, the proceedings in the present suit shall continue - the bar/moratorium under Sections 33(5), 63 and 231 of the IBC would not apply to the present suit, the aforesaid claim of the plaintiff can only be adjudicated in the present proceedings. The plaintiff cannot pursue two separate remedies in respect of the same claim. Therefore, the Liquidator is directed not to adjudicate the claim filed on behalf of the plaintiff before the Liquidator.
List the suit along with pending applications before the Roster Bench on 19th September, 2022.