TMI Blog2021 (12) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... e NCLT wherein it was directed that the bank account of the corporate debtor to be defreezed, held that the designated court under Section 7 of the MPID Act alone is having jurisdiction to decide the validity of any order passed under MPID Act. However, in our considered view the said judgment has no application to the facts of the present case in view of the observations made in Para 26 of the said judgment itself. In the said judgment the Hon'ble High Court of Bombay after considering the judgment of the Hon'ble Apex Court in Innoventive Industries Limited [ 2017 (9) TMI 58 - SUPREME COURT ] categorically observed that the position of law as held by the Hon'ble Apex Court in Innoventive Industries Limited is well settled and there cannot be any dispute about the same however, in the case on hand i.e. in Anil Kohil's case, the learned counsel for the respondent i.e. the RP of the corporate debtor therein has not argued that the provisions of MPID Act are repugnant with the provisions of I B Code whereas in the instant case both the counsels argued elaborately on the issue of repugnancy of the provisions of MPID Act to that of provisions of IBC 2016. The respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiation of the Insolvency Resolution Process against the corporate debtor and requested to de-attach all the properties of the corporate debtor. But the second respondent vide Annexure A-6 letter dated 12.11.2018 stated that the properties of the corporate debtor were attached by the Government of Maharashtra vide notification dated 28.08.2014 under the provisions of the Maharashtra Protection of Interests of Depositors (In Financial Establishments) Act, 1999 (MPID Act) and hence, w.e.f. the said date the property, legally, does not belong to the corporate debtor and the said attachment was made absolute vide orders dated 06.02.2018 and accordingly, rejected the request of the applicant-Resolution Professional. Hence, the CA. 4. Mr. Manish Jain, the learned counsel appearing for the applicant-Resolution Professional while drawing our attention to Section 238 of the IBC, 2016 submits that the Code is having overriding effect against all other laws including the MPID Act under which the second respondent is claiming rights over the property of the corporate debtor. 5. The learned counsel for the applicant-Resolution Professional placed reliance on the following decisions in sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/2017, dated 17.04.2017, Supreme Court; and x. Ashita Nilesh Patel another v. Deputy Secretary - Home Department others, C/SCA/18637/2015 8. In the backdrop of the above submissions the issues fell for our consideration in this CA are:- (i) Whether this Tribunal has jurisdiction to entertain the instant CA? (ii) Whether the attachment of the properties of the corporate debtor made under the provisions of the Maharashtra Protection of Interests of Depositors (In Financial Establishments) Act, 1999 (MPID Act) vide notification dated 28.08.2014 i.e. prior to the date of initiation of CIRP against the corporate debtor is liable to be de-attached in view of the overriding affect under Section 238 and other provisions of IBC 2016? 9. Before we consider the various decisions on the subject, it is relevant to refer some of the provisions of IBC 2016:- Section 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. xx xx 32A. (1) Notwithstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not-- (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) 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. Explanation.--For the purposes of this sub-section, it is hereby clarified that,-- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfills the requirements specified in this sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Concurrent List, that repugnancy can be applied to determine as to whether one particular statute or part thereof has to give way to the other. 51.3. The question is what is the subject matter of the statutes in question and not as to which entry in List III the competing statutes are traceable, as the entries in List III are only fields of legislation; also, the language of Article 254 speaks of repugnancy not merely of a statute as a whole but also any provision thereof. 51.4. Since there is a presumption in favour of the validity of statutes generally, the onus of showing that a statute is repugnant to another has to be on the party attacking its validity. It must not be forgotten that every effort should be made to reconcile the competing statutes and construe them both so as to avoid repugnancy - care should be taken to see whether the two do not really operate in different fields qua different subject matters. 51.5. Repugnancy must exist in fact and not depend upon a mere possibility. 51.6. Repugnancy may be direct in the sense that there is inconsistency in the actual terms of the competing statutes and there is, therefore, a direct conflict betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the repugnancy. In other words, only that portion of the State's statute which is found to be repugnant is to be declared void. 51.10. The only exception to the above is when it is found that a State legislation is repugnant to Parliamentary legislation or an existing law if the case falls within Article 254(2), and Presidential assent is received for State legislation, in which case State legislation prevails over Parliamentary legislation or an existing law within that State. Here again, the State law must give way to any subsequent Parliamentary law which adds to, amends, varies or repeals the law made by the legislature of the State, by virtue of the operation of Article 254(2) proviso. xx xx 60. It is clear, therefore, that the earlier State law is repugnant to the later Parliamentary enactment as under the said State law, the State Government may take over the management of the relief undertaking, after which a temporary moratorium in much the same manner as that contained in Sections 13 and 14 of the Code takes place under Section 4 of the Maharashtra Act. There is no doubt that by giving effect to the State law, the aforesaid plan or scheme which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference to the very same Maharashtra Protection of Interests of Depositors (In Financial Establishments) Act, 1999 i.e. the MPID Act itself, as under:- 8. The Resolution Professional asserted that in the annual report of M/s. Mohan India Limited, there is no subsidiary except M/s. Mohan Infracon Limited nor there is any joint-venture/associate company. It has been accepted that Mohan India Ltd. and Mohan Infracon Pvt. Ltd. are not shareholders of the Corporate Debtor. 9. Apart from the lack of connection between the Corporate Debtor and Mohan India Ltd., there is moratorium operating under Section 14 of the Code for the period of Corporate Insolvency Resolution Process. It attracts prohibition on continuation of pending suits or proceedings against the Corporate Debtor in any court of law, arbitration, tribunal, panel or other authority. It has been submitted that non obstante clause in Section 238 of the IBC provide for over-riding effect on the provisions of the Code over all other laws in the country including the provisions of the MPID Act. In that regard, reliance has been placed on the judgment rendered by Hon'ble Supreme Court Innoventive Industries Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvency and Bankruptcy Code, 2016 came to the fore-front in the context of imposition of moratorium. The view of Hon'ble the Supreme Court is discernible from the head notes prepared by the learned Editors of the reports and the same read as under:- A. Insolvency and Bankruptcy Code, 2016 - Maharashtra Relief Undertakings (Special Provisions) Act, 1958 - Repugnancy with 2016 and Effect of - Moratorium given to company under the Maharashtra Act, as in the present case where, by Notifications dt. 22-7-2015 and 18-7-2016 under Maharashtra Act, liabilities of the appellant were temporarily suspended for a period of one year - Irrelevance of, for stalling of insolvency proceedings against such company under the 2016 Insolvency Code - Held, the Insolvency Code is a Parliamentary law that is an exhaustive code on the subject - matter of insolvency in relation to corporate entities, and is made under Entry 9, List III in the Seventh Schedule - Further, earlier State Law (Maharashtra Act) is repugnant to the later Parliamentary enactment (Insolvency Code) as under the said State law, the State Government may take over the management of the relief undertaking, after which a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , here also the State law must give way to any subsequent Parliamentary law which adds to, amends, varies or repeals the law made by the legislature of the State, by virtue of the operation of Art. 254(2) proviso D. Constitution of India - Art. 254 - Laws made by Parliament and legislature of State - When, even in the absence of a direct conflict, are repugnant - Test of implied repeal - Applicability of - Held, the test applied in such cases is based on the principles on which the rule of implied repeal rests, namely, that if the subject - matter of the State legislation or part thereof is identical with that of the Parliamentary legislation, so that they cannot both stand together, then the State legislation will be said to be repugnant to the Parliamentary legislation E. Constitution of India - Art. 254 - Onus to prove repugnancy - Held, since there is a presumption in favour of the validity of statutes generally, the onus of showing that a statute is repugnant to another has to be on the party attacking its validity F. Insolvency and Bankruptcy, 2016 - Ss. 7 and 9 - Appeal against the orders of NCLAT by erstwhile Directors of the Company - Non-maintainability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing power under section 7 of the I.B. Code against the Corporate Debtor as contemplated under I.B. Code, which is also the Financial Establishment under the MPID Act and de-freezing of the corporate Debtor's account attached in MPID proceedings is ordered. This order is the subject matter of challenge in this petition. xx xx 26. The learned counsel of the Respondent relied on judgments of Hon'ble Supreme Court in West U.P. Sugar Mills Association(supra), M. Karunanidhi (supra) and Innoventive Industries Ltd.(supra). All these judgments are on the issue of repugnancy. In paragraph 50 of Innoventive Industries Ltd. (supra), the following propositions are set out. 50. The case law referred to above, therefore, yields the following propositions: i) Repugnancy under Article 254 arises only if both the Parliamentary (or existing law) and the State law are referable to List III in the 7th Schedule to the Constitution of India. ii) In order to determine whether the Parliamentary (or existing law) is referable to the Concurrent List and whether the State law is also referable to the Concurrent List, the doctrine of pith and substance must be applied in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the State law trenches upon the Parliamentary statute. Negatively put, where Parliamentary legislation does not purport to be exhaustive or unqualified, but itself permits or recognises other laws restricting or qualifying the general provisions made in it, there can be said to be no repugnancy. viii) A conflict may arise when Parliamentary law and State law seek to exercise their powers over the same subject matter. This need not be in the form of a direct conflict, where one says do and the other says don't . Laws under this head are repugnant even if the rule of conduct prescribed by both laws is identical. The test that has been applied in such cases is based on the principle on which the rule of implied repeal rests, namely, that if the subject matter of the State legislation or part thereof is identical with that of the Parliamentary legislation, so that they cannot both stand together, then the State legislation will be said to be repugnant to the Parliamentary legislation. However, if the State legislation or part thereof deals not with the matters which formed the subject matter of Parliamentary legislation but with other and distinct matters though of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable to the present case as found in paragraphs 40 and 41 in the judgment of Embassy Property Developments Pvt. Ltd. (supra) is, at the cost of repetition, again quoted hereinbelow: 40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. 41. This shows that wherever the corporate debtor has to exercise rights in judicial, quasi judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60. Thus it is clear that the appropriate forum to challenge the attachment of the account of the Respondent is the Designated Court under MPID Act where the Respondent can raise all contentions on merits and also can point out the provisions of I.B. Code and the effect of the same on the steps taken under the MPID Act. It will be for the MPID Court to consider the interplay of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act were also issued. 29. The learned counsel for the Petitioner has also relied on the judgment of NCLAT in the case of JSW Steel Ltd.(supra) wherein it has been held that the action of Directorate of Enforcement did not meet the criteria under Section 32-A(1)(b) of I.B. Code. However, in the present case, the Designated Court under MPID Act will examine the said aspect and therefore, the said judgment is not applicable to the present case. 30. Thus, in view of the above discussion, we hold that the NCLT has no jurisdiction to examine legality or validity of action taken under MPID Act and it is only the Designated Court constituted under Section 6 of the MPID Act that will have exclusive jurisdiction to deal with the same. Therefore, the impugned order passed by the NCLT is without jurisdiction and therefore, amenable to a challenge in our writ jurisdiction. 31. Thus, it is clear that the only remedy for Respondent-IRP is to approach the Designated Court under Section 7 of the MPID Act. Therefore, the impugned order passed by NCLT by which the said account was directed to be de-freezed, is without jurisdiction. The learned AGP has rightly relied on the judgments i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no application to the facts of the present case in view of the observations made in Para 26 of the said judgment itself. In the said judgment the Hon'ble High Court of Bombay after considering the judgment of the Hon'ble Apex Court in Innoventive Industries Limited (Supra) categorically observed that the position of law as held by the Hon'ble Apex Court in Innoventive Industries Limited is well settled and there cannot be any dispute about the same however, in the case on hand i.e. in Anil Kohil's case, the learned counsel for the respondent i.e. the RP of the corporate debtor therein has not argued that the provisions of MPID Act are repugnant with the provisions of I B Code whereas in the instant case both the counsels argued elaborately on the issue of repugnancy of the provisions of MPID Act to that of provisions of IBC 2016. In view of categorical declaration of law on the issue of overriding effect of the provisions of IBC over any Act, more particularly on a State Act similar to the MPID Act i.e. Maharashtra Relief Undertakings (Special Provisions) Act, 1958, the provisions of which are akin to MPID Act, both the issues framed in the instant IA deserved to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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