TMI Blog2019 (12) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... e M/s. Tata Steel BSL Ltd., is none other than the resolution applicant approved by NCLT - this Court can easily come to the conclusion that the resolution plan was in force and newly substituted defendant is none other that resolution applicant approved by NCLT. It is also relevant to note that the suit has been presented before this Court on 28.11.2017. It is admitted by both sides with regard to the proceedings before the NCLT the Company petition was filed before NCLT against the defendant under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the Adjudicating authority of the National Company Law Tribunal on 03.07.2017. It is also not disputed by the plaintiff herein that the Company Petition was admitted on 26.07.2017 and moratorium under Section 14 of the Insolvency and Bankruptcy Code was admittedly declared by the Adjudicating Authority. When the institution of the suit itself prohibited by an order of moratorium passed in the given case and such suit has been filed during the existence of moratorium. Merely because these facts has not been stated in the plaint it cannot be said that the Court cannot go into maintainability of the suit or rejecting the suit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, Principal Bench, New Delhi (Adjudicating Authority) and a Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) was declared by the Adjudicating Authority Prohibiting/Barrig institution of the suits against the Defendant/Respondent. On 28.07.2017 in terms of order dated 26.07.2017, public announcement was made in respect of initiation of Corporate Insolvency Resolution Process (CIRP) of the Applicant. Further announcement called for claims from all the creditors of the applicant including the plaintiff. The Plaintiff has not filed any claim whereas they filed the present suit on 28.11.2017. The suit was numbered on 18.12.2017. Notice was ordered on 20.12.2017. The respondent/Plaintiff filed the suit for recovery of money for supply of goods/services. The alleged amount is an operational Debit and the Respondent/Plaintiff is an Operational Creditor as defined under Section 5(20) and 5(21) of the IBC. It is further stated that the Plaintiff being the Operational Creditor in terms of the public announcement the Respondent/Plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings can be proceeded. Only adjudication during the moratorium period can be questioned. It is his further contention that on the date of this application the moratorium not in existence. All the effect and consequences of moratorium came to an end by 15.05.2018. The moratorium as contemplated by the Code cannot be construed as a total bar against the adjudicating any valid dispute but only as a standstill period in order to facilitate smooth completion of the resolution process. Intent of legislature is only to restrain the parallel proceedings when the insolvency resolution proceedings is under progress and not to a bar any adjudication after completion of the resolution process. Hence, the application does not satisfy the requirement under Order VII Rule 11 of C.P.C. and the same is liable to be dismissed. The Respondent even prior to filing of the above suit had sent a notice dated 13.2.2017 for which the applicant sent a reply dated 13.06.2017 with false pavements. Hence, prayed for dismissal of the application. 4. Learned counsel Mr.P.V. Balasubramanian appearing for the Applicant submitted that State Bank of India, Financial creditor filed Petition under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t against the Defendant-Corporate Debtor by presenting the Plaint on 28.11.2017. The suit was numbered on 18.12.2017. The suit having been instituted in violation of the Moratorium mandated under S.14 of the IBC, the said suit is still born, filed on the fact that there is a bar under Law and as such non-est in the eyes of law. 6. In support of his submission he relied upon the following Judgments: 1. Alchemist Asset Reconstruction Company Ltd., vs. M/s.Hotel Gaudavan Pvt. Ltd., Others [Civil Appeal No.16929 of 2017 arising out of S.L.P.(C) No.18195 of 2017 dated 23.10.2017]. 2. M.D., Bhoruka Textiles Limited vs. Kashmiri Rice Industries [(2009) 7 SCC 521] 3. RM.M.Ramanathan Chettiar vs. Ramaswami Pillai and Others [(1957)2 MLJ 267] 4. Alikutty Sahib vs. Cherian and Others [AIR 1961 Ker 138] 7. Hence his contention is that cessation of moratorium cannot revive monetary claim, which was instituted by a pre-existing creditor during moratorium. Hence it is his contention that cessation of moratorium is linked to approval of Resoution Plan under section 31(1) or an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. It is the contention Mr.N.V.V.Krishna learned counsel appearing for the Respondent/Plaintiff that the applicant/Defendant was represented by the counsel as early as 20.06.2018 and on the same day the commercial courts jurisdiction of the suit was determined and adjourned for filing written statement. Thereafter, amendment application also filed by the Applicant. It is the further contention that for an application for rejection, only plaint averment alone to be considered. Plaint can be rejected only with the averments made in the plaint do not disclose a cause of action or on a reading thereof the suit appears to be barred under any law. It is his further contention that Moratorium came to an end with the completion of the Corporate Insolvency Resolution Process. It has been completed on 15.05.2018. With the approval of the Insolvency resolution process on 15.05.2018 the moratorium automatically comes to an end and there is no restriction in adjudicating the suit further. It is further submitted that the legislation intended to impose a moratorium pending resolution process only to ensure that multiple proceedings are not taken simultaneously to help obviate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings which took place in Delhi, whereas the respondent/plaintiff is in chennai and the applicant did not bring it to the notice of the respondent about the commencement of the resolution process even though notices were received by the applicant about the claim of the respondent. For the first time the applicant brought to the notice of the respondent about the resolution process only after filing the amendment petition during July 2019. This application has filed after the lapse of more than a year and a half after entering appearance on behalf of the applicant. Hence prayed for dismissal of the application. 11. In support of his contention he relied upon the following judgments: 1. RM.M. Ramanathan Chettiar vs. Ramaswami Pillai and Ors. [ MANU/TN/0519/1957] 2. K.L.Kuttayan Chettiar and Ors. vs. K.V.R.Surendranathachary and Ors. [MANU/TN/0374/1982] 3. Alikutty Sahib v. Cherian and Ors. [MANU/KE/0048/1961] 4. State Bank of India vs. Bhushan Steel Limited [C.P.(IB) 201 (PB)/2017] 12. Mr.R. Sankaranarayanan, Learned Amicus Curiae who assisted the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the task of the IRP begins with collect information regarding the assets, finances and operation of the corporate debtor. The same section specifies the object of such collection of data. Therefore the primary task is to ascertain the financial position and this can be done by getting all the particulars of the Corporate Debtor from the Corporate Debtors including the lists of assets and liabilities. Once this information is collected Section 18(1)(b) comes into operation and the claims made by the creditors is compared with the lists of assets and liabilities obtained from the Corporate Debtor. Even as per the regulation 13(1) the provision provides for receiving and collating the claims it can mean only comparing the claim made by the any one creditor with the records of the Corporate Debtor. The IRP has to find out the financial position of the Corporate Debtor. It is inconceivable to presume that the financial position of a Corporate Debtor can be determined by omitting a liability disclosed in the balance sheet including the annual report where normally contingent liabilities are also taken into account. The RP cannot ignore the admitted liabilities according to the balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess does not reserve the right of the corporate debtor and right to proceed against them for recovery of money would stand good in the hands of the liquidator or the Resolution Applicant under the supervision of monitoring committee. It is his further contention that UNCITRAL Legislative Guide provides for the entitlement of both identified as well as identifiable creditors to receive notice of all claims of the corporate debtor. Hence it is his contention that it would be illogical to extinguish the right of the creditor on account of his failure to submit a claim before the RP in the absence of any mandatory duty imposed by law coupled with another provision which extinguishes the debt. An extinguishment of a debt amounts to confiscation of a property rights guaranteed under the Art.300-A of the Constitution of India and without due process of law. Hence it is his contention that mere failure of creditor to submit the claim before the Resolution Professional Right of the Creditor would not extinguish. 14. In support of his contention he relied upon the judgment in State Bank of India vs. ARGL Ltd., [CA-1215(PB)/2019 NCLT New Delhi dated 12.03.2019] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Adjudicating Authority. 17. The suit has been filed on 28.11.2017 and numbered on 18.12.2017. It is also relevant to note that the Insolvency and Bankruptcy code, 2016 was introduced in the parliament, contained notes on clauses, the relevant portions are extracted hereunder: Clause 14 describes the effect of the moratorium. The purposes of the moratorium include keeping the corporate debtor's assets together during the insolvency resolution process and facilitating orderly completion of the processes envisaged during the insolvency resolution process and ensuring that the company may continue as a going concern while the creditors take a view on resolution of default. This also ensures that multiple proceedings are not taking place simultaneously and helps obviate the possibility of potentially conflicting outcomes of related proceedings. This also ensures that the resolution process is a collective one. The order under this Clause 14 inter alia, prohibits the institution or continuation of suits or any legal proceedings against the corporate debtor, the disposal of any assets of the corporate debtor and debt enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution professional of his powers during the course of the corporate insolvency resolution period. Where the resolution plan meets the criteria set out in Clause 31(1), the adjudicating authority shall sanction the plan. The plan shall be biding on the corporate debtors, its creditors, employees, shareholders, guarantors and other stakeholders. Further, the moratorium imposed under section 14 ceases to have effect upon approval of the plan. However, it is important to note that the plan is binding on all the relevant stakeholders. Therefore, if a plan requires stakeholders to do or not do certain actions for the successful implementation of a plan, it shall be binding on all the affected parties who shall be bound to undertake the actions set out in the plan. The resolution professional is also required to forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Insolvency and Bankruptcy Board of India to be kept as part of its record-keeping function. 18. Section 14 of the Insolvency and Bankruptcy Code is reads as follows: 14.(1) Subject to provisions of sub-sections (2) and (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. 21. It is thus clear from a reading of the proviso to Section 14(4) that the cessation of moratorium is linked to approval of a Resolution Plan under Section 31 (1) of an Order for Liquidation of the CD under Section 33. A resolution plan will be approved by an Adjudicating Authority only if it is in compliance of the requirements of such a plan, as set out in Section 30 of the Insolvency and Bankruptcy Code. In the present instance, the Resolution Plan submitted by the Resolution Applicant was approved by the Adjudicating Authority and as such the relevant provision is Section 31 (1) of the Code. S.31 (1) of the Insolvency and Bankruptcy Code reads as follows: 31.(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, 3 [including the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., Vs. M/s.Hotel Gaudavan Pvt. Ltd., and Others] has held as follows: 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 or 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. 24. The Hon'ble Apex Court in the above judgment has held that arbitration proceedings started after moratorium is non est in law. 25. The judgment passed by this Court in K.L.Kuttayan Chettiar and others Vs. K.V.R.Surendranathachary and others reported in (1982)2 MLJ 1443 pertaining to the relevant agricultural Act (XV of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other matters as my be specified. (b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under Sections 13 and 15. 29. According to Amicus resolution applicant also to make due enquiry. Hence, his contention that the debt cannot be extinguishing merely because the claim has not been preferred, such submission cannot be countenanced for the simple reason. Once the CIRP is admitted the proceedings become one in rem as held by the Honoruable Supreme Court. Therefore, it is for the creditor to file claim before RP. In this regard, recently pronounced three judges bench of the Hon'ble Apex court in Civil Appeal Nos.8766-67, 5634-5635, 5716-5719, 5996, 6266, 6269, 6409, 8768, 7266, 7260, 8769 of 2019 Diary Nos.24417, 31409, 36838 of 2019, Writ Petition (Civil) Nos.1055, 1064, 1049, 1050, 1057, 1061, 1060, 1056, 1063, 1066, 1087, 1110, 1113, 1121, 1246, 1296. para 67 held as follows: 67. For the same reason, the impugned NCLAT judgment in holding that claims that ,ay exist apeart from those decoded on merits by the resolution professional and by the Adjudicating Authority/Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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