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TMI Blog2021 (8) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Impugned Orders dated 30.08.2019 and 03.09.2019, passed by the Learned Adjudicating Authority (National Company Law Tribunal, Kolkata Bench) in CA(IB) No. 891/KB/2019 and in CP(IB) No. 513/KB/2018. MSC Meditteranean Shipping Company S.A. (hereinafter referred to as the ''MSC Shipping'') preferred Company Appeal (AT) (Insolvency) No. 1048-1049 of 2019. Dissatisfied with the Impugned Order dated 19.11.2019 passed by the Learned Adjudicating Authority, Assistant Commissioner of Customs Special Disposal Cell (Port), Kolkata (hereinafter referred to as the 'Customs Dept.') preferred Company Appeal (AT) (Insolvency) No. 200 of 2020. Since, all the three Appeals deal with common f acts, they are being disposed off by this Common Order. 2. The facts, in brief, are that 'MSC Shipping', in the business of carriage of goods by sea, provides marine containers in which goods are stored and transported. M/s. BRG Iron and Steel Company Pvt. Ltd. (hereinafter referred to as the 'Corporate Debtor') is engaged in the manufacture of articles made out of recycled steel. Between February 2012 and June 2012 a large number of containers containing Alloy and Melting Scrap were delivered by 'MSC S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal on that date and thereafter preferred CA No. 1126/KB/2019 before the Adjudicating Authority, dated 11.07.2019 for impleadment in the proceedings. It is stated that despite a direction from the Learned Adjudicating Authority for the said Application to be listed and the direction for the IRP to file the Reply to the Application, the same was not listed as on 26.08.2019 and 'MSC Shipping' issued a letter to the Registry seeking listing of the said Intervention Application. 5. Vide Impugned Order dated 30.08.2019, the second Application was filed by the Resolution Professional i.e. CA(IB) No. 891/KB/2019 was disposed off inter alia by directing the 'Customs Dept.' to make over the sale proceeds of Rs. 10,60,10,000/- to the Resolution Professional. It is stated that the Application preferred by 'MSC Shipping' i.e. CA 1126/KB/2019 was listed on 03.09.2019 alongwith the primary Application of the Resolution Professional and was disposed off as infructuous on the ground that the Application preferred by the Resolution Professional i.e. CA(IB) 575/KB/2019 was dismissed as withdrawn. 6. For better understanding of the case, the Impugned Orders dated 30.08.2019 and 03.09.2019 are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the application CA(IB)No. 891/KB/2019 (vide order dated 30/08/2019). It is made clear in the said order that if M/s. MSC Mediterranean Shipping Co. SA has any claim, they can submit the same before the RP. Because of the aforesaid order in CA 575 of 2019, this application is not maintainable. CA(IB) No. 1126/KB/2019 is disposed of accordingly. For filing further Progress report list it on 01/10/2019." (Emphasis Supplied) 7. It is also relevant to reproduce the directions issued by the Adjudicating Authority in the Impugned Order dated 19.11.2019, aggrieved by which, the 'Customs Dept.' also preferred an Appeal:- "Ld. Sr. Counsel for the Resolution Professional (RP) appears. Ld. Counsel for the Custom Authorities appears. Ld. Sr. Counsel for RP submits that CoC is considering the Resolution Plan, which is under process and needs further time to file Final Progress Report. However, no Progress Report is filed on today. CA (IB) No. 1255/KB/2019 is an application filed by the Dy. Commissioner of Customs, Special Disposal Cell for recalling the order dated 30/08/2019 praying for certain reliefs, and pressed for granting relief (e). Upon hearing the arguments advanced on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' filed CS No. 168 of 2016 in the Hon'ble High Court of Kolkata against the 'Corporate Debtor' for payment of container, demurrage charges, return of the containers after de-stuffing cargo sale of the de-stuffed cargo and receipt of the proceeds thereof. Learned Counsel argued that as per Clauses 17 and 20.3 of the Bills of Lading, 'MSC Shipping' has lien on the cargo for demurrage charges and other dues. Pursuant to the Order dated 21.09.2017 passed by the Hon'ble High Court of Kolkata, the cargo was de-stuffed and the empty containers returned to 'MSC Shipping'. The 'Corporate Debtor' filed GA 1852 of 2018 praying inter alia for sale of the de-stuffed cargo upon valuation by an independent valuer, which Application, was allowed by the Hon'ble High Court vide a Order dated 26.09.2018 and the 'Customs Dept.' was directed to auction the cargo and hold the sale proceeds subject to further Orders. Accordingly, the 'Customs Dept.' sold the cargo by Public Auction in accordance with the provisions of the Customs Act, 1962 for Rs. 10,60,10,000/- on 26.04.2019. It is argued that 'MSC Shipping' is entitled to receive the sale proceeds as they have lien over the cargo. Learned Counsel v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t affording an effective hearing to the Applicants/'MSC Shipping'. Learned Counsel strenuously argued that the Bill for Lading establishes the title of the owner of the goods and in the instant case the 'Corporate Debtor' has not disclosed a single Bill of Lading in support of their case. A consignee/endorsee named in the Bill of Lading is the owner of the cargo. These goods do not belong to the 'Corporate Debtor' which is evident from GA 1852 of 2018 filed by the Corporate Debtor before the Hon'ble High Court of Kolkata seeking permission to participate in the Public Auction thereof. The Resolution Professional is fully aware of the facts and impleaded in CS No. 168 of 2016 to suppress this fact from the Adjudicating Authority. The 'Corporate Debtor' has relinquished its interest by its positive act of seeking sale of the cargo in GA 1852 of 2018 filed by the Hon'ble High Court in May, 2018 which is much prior to the CIRP Admission Order dated 05.03.2019. The Order for sale by the Hon'ble High Court dated 26.09.2018 and hence the 'Corporate Debtor' does not have any title in the Auction cargo. Learned Counsel further submitted that the ratio relied upon by both the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. The Resolution Professional preferred CA(IB) 891/KB/2019 and CA(IB) 575/KB/2019 praying for restraining the 'Customs Dept.' from selling the goods de-stuffed from the 256 containers, when in fact, the 'Corporate Debtor' did not have any right, title or interest of any nature whatsoever in the same. Vide Order dated 30.08.2019, the second Application filed by the 'Corporate Debtor' was disposed off inter alia by directing the 'Customs Dept.' to make over the sale proceeds and handover the custody of remaining 667 containers to the Resolution Professional representing the 'Corporate Debtor'. Learned Counsel strenuously contended that the Adjudicating Authority has failed to appreciate the provisions of the Customs Act 1962, ignoring the demands of Custom Duty amounting to Rs. 78,84,54,741/- raised by the 'Customs Dept.' as against the 'Corporate Debtor'. A pre-deposit sum of Rs. 24,11,11,782/- was paid by the 'Corporate Debtor' and the rest of the charges remain unpaid. Orders dated 03.11.2016 and 02.06.2016 demanding an amount of Rs. 102,31,88,263/- was appealed by the 'Corporate Debtor' before the Commissioner of Customs (Appeals), which was dismissed for non-deposit of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Dept.' informing the 'Corporate Debtor' that the goods detained by them have been put up for auction on 26.03.2019, despite having complete knowledge of the fact that Moratorium was declared under Section 14 of the IBC on 05.03.2019 itself. In order to stop the 'Customs Dept.' from going ahead, the IRP preferred an Application before the Adjudicating Authority being CA(IB) No. 575/KB/2019 on 24.04.2019 praying for stopping the 'Customs Dept.', from auctioning the goods belonging to the 'Corporate Debtor' and Notice was issued in the said Application. Ignoring the intimation by IRP, the Dept. illegally auctioned the goods contained in the 256 containers on 26.04.2019 after the initiation of CIRP on 05.03.2019 which is against the objective and spirit of the Code. Learned Counsel submitted that the value of the goods contained in the balance 667 containers lying in the illegal custody of the Authority is getting eroded with each passing day. The raw material stored in the 667 containers which has been directed to be returned to the 'Corporate Debtor' by the Adjudicating Authority, can be used by the 'Corporate Debtor' as it is still a going concern employing 1800 people. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken place, we do not find it a fit case to set the clock back and remand the matter back to the Adjudicating Authority. In the interest of justice and keeping in view that an urgent Application was filed before the High Court of Kolkata way back in 2016 itself seeking to de-stuff the containers as the goods would be deteriorated and 5 years has lapsed, since, to balance equities, we are of the considered view that remanding the matter back to the Adjudicating Authority would only defeat the scope and spirit of IBC which is a time bound process. 12. To ascertain whether the 'Corporate Debtor' can claim the sale proceeds of the goods of 256 containers, in the present facts and circumstances of the case, it is necessary to reproduce Section 14 of the Code and Section18(1)(f)(g) of the I&B Code which deal with Moratorium, the duties of IRP, the terms and conditions enumerated in the Bills of Lading, Section 48 of the Customs Act, 1962 and the relevant portions of the Orders of Hon'ble High Court of Kolkata:- "20. Section 14 of the 'I&B Code' relates to 'Moratorium' and reads as follows: "14. Moratorium.-(1) Subject to provisions of subsections (2) and (3), on the insolvency commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets including intellectual property; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assets subject to the determination of ownership by a court or authority; (g) to perform such other duties as may be specified by the Board. Explanation.-For the purposes of this subsection, the term "assets" shall not include the following, namely:- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator." 13. As can be seen from Section 14 of the IBC Code, the plain language of the Section is that on the commencement of the CIRP, Moratorium shall be declared for prohibiting any action to recover any security interest created by the 'Corporate Debtor' in respect of 'its property'. 'Its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by endorsement passing to the endorsee, the title of the goods covered by such Bill of Lading. Clause (18) provides for payment of demurrage charges in case of non-clearance of goods within the free time available." (Emphasis Supplied) 17. At this juncture, it is relevant to note that the 'MSC Shipping' filed Form B on 04.06.2019 as an 'Operational Creditor' prior to the filing of this Appeal. Additionally, its Agency 'MSC Agency' (India) Pvt. Ltd. also filed Form B on 04.06.2019 as an 'Operational Creditor' before the Resolution Professional. It is significant to mention that both 'MSC Shipping' and its Agency have clearly specified in item 7 'details of how & when Debt occurred' that the claimants provide marine containers and are engaged in the business of carriage of goods by sea. Briefly put, it is stated therein that 'in all the 15 Bills of Lading, the 'Corporate Debtor' and its sister concern 'Bhuvee Profiles' were declared as Consignee and/or Notified Party'. As the consignee/and endorsee and/or holder of the goods being the receiver of the goods are bound by the terms & conditions of the said Bills of Lading. Therefore, admittedly being the consignee of the goods, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'Operational Creditor' in Form B stated that the 'Corporate Debtor' was the 'Consignee'. The ratio of the Judgement in 'Shipping Corporation of India' (Supra) relied upon by the Counsel in support of his case regarding title of goods, it is specified that Bill of Lading is an important mercantile document of title which is transferred in the business world by endorsement to the endorsee. The 'Corporate Debtor' is the consignee/endorsee and has the right & title of the goods. e. 'MSC Shipping' & MSC Agency have filed Form B as 'Operational Creditors' before the Resolution Professional on 04.06.2019 prior to filing of the Appeal on 01.10.2019. 20. Having held so, we observe that 'Its Property' specified under Section 14 of IBC, refers to the property of the 'Corporate Debtor' and in the instant case, Moratorium has application on the subject property as it is owned by the 'Corporate Debtor' and the Resolution Professional under Section 18(1)(f) & (g) of the Code has the right to take control and custody of the asset. 21. Now we address ourselves to whether Adjudicating Authority was justified to making over the Auction proceeds to the 'Corporate Debtor'? 22. At the outset we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs with the imported cargo within a period of four weeks from the date of the order upon payment of the demurrage charges, rent of the container yard, container detention charges and other dues of the plaintiffs. The order records that the first defendant had agreed to the directions given in this order. The third order was passed on 21st September, 2017 wherein the Customs Authority were directed to de-stuff the cargo and the plaintiff was given liberty to take delivery of the empty containers. By the said order, the Customs Authorities were also directed to de-stuff and sell the goods upon notice to the defendants. An appeal carried by the defendant no. 1 from the aforesaid order to the Division Bench was dismissed on 27th October, 2017 where it was noted that the defendant no. 1 had used the custom duties and banker's charges as an excuse to thwart return of the containers to the plaintiff. The last order was passed on 30th April, 2018 where the Court expressed disappointment at the Customs not having taken any steps for de-stuffing the containers in terms of the earlier orders passed by this Court and observed that the cost of de-stuffing of the containers and sale of the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f E-auction or auction-cum-tender have already been prescribed vide Board's Circular No. 50/2005. Customs dated 1.12.2005 and No. 12/2006. Customs dated 20.2.2006". There cannot possibly be any objection to sale by public auction as all interested parties would be able to bid for the goods ensuring that the goods fetch the highest price. Needless to say, the defendant no. 1 will also have an opportunity to participate in such auction and offer the price suggested by counsel in Court for the goods in question. The procedure for sale of goods in the given circumstances has also been provided for under Section 150 of The Customs Act, 1962 which also provides for the manner in which the proceeds of such sale shall be applied. The carrier's lien, as provided for in Clauses 17 and 20.3 of the contract of carriage recorded in the 15 Bills of Lading can be taken into consideration at the appropriate stage. Clause 3.1 of the Circular No. 12/2006 dated 20th February, 2006 of the Customs is particularly relevant. Under this clause, the disposal of seized, confiscated and "time-expired" goods shall take place simultaneously through public auction and sealed tender. In view of the above, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under section 57 without warehousing the same. (2) Save as otherwise permitted by the proper officer, a Bill of Entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor. [(3) The importer shall present the Bill of Entry under sub-section (1) before the end of the next day following the day (excluding holidays) on which the aircraft or vessel or vehicle carrying the goods arrives at a customs station at which such goods are to be cleared for home consumption or warehousing: Provided that a Bill of Entry may be presented [at any time not exceeding thirty days prior to] the expected arrival of the aircraft or vessel or vehicle by which the goods have been shipped for importation into India: Provided further that where the Bill of Entry is not presented withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom such due date as may be specified by rules made in this behalf, and if he fails to pay the duty within the time so specified, he shall pay interest on the duty not paid or short-paid till the date of its payment, at such rate, not less than ten per cent. but not exceeding thirty-six per cent. per annum, as may be fixed by the Central Government, by notification in the Official Gazette.] [Provided that the Central Government may, by notification in the Official Gazette, specify the class or classes of importers who shall pay such duty electronically: Provided further that] where the Bill of Entry is returned for payment of duty before the commencement of the Customs (Amendment) Act, 1991 (55 of 1991) and the importer has not paid such duty before such commencement, the date of return of such Bill of Entry to him shall be deemed to be the date of such commencement for the purpose of this section:] [Provided also that] if the Board is satisfied that it is necessary in the public interest so to do, it may, by order for reasons to be recorded, waive the whole or part of any interest payable under this section.] 48. Procedure in case of goods not cleared, warehoused, or transhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain in the custody of the 'Customs Dept.'. Vide Order dated 03.02.2020, by the Adjudicating Authority, 'Corporate Debtor' has gone into liquidation and is being run as a going concern. We do not find force in the contention of the Learned Counsel appearing for the 'Customs Dept.' that Section 48 of the Customs Act, 1962, is applicable to the facts of this case. This Tribunal in 'Commissioner of Customs (Preventive) West Bengal' Vs. 'Ram Swarup Industries Ltd. and Ors.' Company Appeal (AT) (Insolvency) No. 563 of 2018 has dealt with Section 48 of the Customs Act, 1962, in similar circumstances where the goods were auctioned during the Moratorium period, held that the assets of the 'Corporate Debtor', during the Moratorium period, cannot be alienated, transferred or sold to the third party. In the instant case also the Order of Moratorium was passed by the Adjudicating Authority on 05.03.2019. Immediately thereafter it was not open to the 'Customs Dept.' to conduct the auction on 26.04.2019 though the goods were lying with them for more than 2 years and there was a direction by the Hon'ble High Court Kolkata prior to the CIRP period. Having failed to auction the goods prior to the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moratorium. ..... 7. Section 238 gives an overriding effect to the IBC over all other laws. The provisions of the IBC vest exclusive jurisdiction on the NCLT and the NCLAT to deal with all issues pertaining to the insolvency process of a corporate debtor, and the mode and manner of disposal of its assets. Section 238 reads as follows : "238. Provisions of this Code to override other laws. - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 8. Section 231 of the IBC bars the jurisdiction of civil courts in respect of any matter in which the Adjudicating Authority i.e. the NCLT or the NCLAT is empowered by the Code to pass any Order. Section 231 is set out hereinbelow for ready reference: "231. Bar of jurisdiction. - No civil court shall have jurisdiction in respect of any matter in which the Adjudicating Authority or the Board is empowered by, or under, this Code to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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