2023 (6) TMI 793 - HC - Insolvency and Bankruptcy

CIRP - Prohibition on recovery proceedings against the Corporate debtor - Imposition of moratorium - statutory bar imposed by Section 14 of the Insolvency and Bankruptcy Code 2016 - resolution plan rejected - requirement of Liquidation of Corporate Debtor - HELD THAT - The fact remains that the IRP was unable to obtain a resolution plan within the specified time and the resolution plan not having manifested and the request for extension of time has been rejected by the Tribunal the consequences as provided by the proviso to Section 14 of the IB Code is deemed to have taken effect. The proviso stipulates that if the Adjudicating Authority approves the Resolution Plan under sub-section (1) of Section 31 of the IB Code or passes an order for liquidation of corporate debtor under Section 33 of the IB Code the moratorium shall cease to have effect. A conjoint reading of the proviso to Section 14 of the IB Code and the provisions of Section 33 of the IB Code would show that where the resolution plan is rejected or not accepted the Tribunal is required to pass an order requiring corporate debtor be liquidated in the manner laid down in the chapter and carry out such other actions as mandated therein. From a reading of the above it is apparent that the prohibition under Section 14 of the IB Code prohibiting the initiation of proceedings or continuation of proceedings was in place as on the date of filing of the appeal. The instant appeal could not have been registered and the parties ought to have awaited the result of the proceedings pending before the NCLT Chennai in IBA No. 483/2020 - the Registry is directed to return the papers with liberty to the appellant to re-present the same before this Court or before the Competent Forum in accordance with law. The appeal stands ordered accordingly and disposed off for statistical purpose.

Summary

Issues:
- Challenge to decrees in two suits by the appellant
- Statutory bar under Section 14 of the Insolvency and Bankruptcy Code, 2016
- Declaration of moratorium and public announcement under Section 13
- Consequences of moratorium under Section 14
- Liquidation process under Section 33

Analysis:
1. The appellant challenged decrees in two suits, one decreeing amounts due from the appellant and the other rejecting the suit for recovery from the respondent. The respondent raised a statutory bar under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IB Code), prohibiting suits during moratorium.

2. Section 13 of the IB Code declares a moratorium after admission of an application under Section 7, 9, or 10. The Tribunal declared a moratorium, and Section 14 prohibits suits against the corporate debtor. The Interim Resolution Professional (IRP) failed to obtain a resolution plan within the specified time, triggering consequences under the proviso to Section 14.

3. The proviso states that if the Tribunal approves a resolution plan under Section 31 or orders liquidation under Section 33, the moratorium ceases. Section 33 outlines the initiation of liquidation, requiring the Tribunal to pass a liquidation order if a resolution plan is not received or is rejected.

4. The judgment emphasized that the prohibition under Section 14 was in force at the time of the appeal's filing. Consequently, the appeal should not have been registered, and parties should have awaited the NCLT's decision in the ongoing proceedings.

5. The Court directed the Registry to return the papers, allowing the appellant to re-present them after the NCLT's decision. The appeal was ordered and disposed of accordingly, with any pending applications also being disposed of due to the appeal's resolution.