TMI Blog2020 (10) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... , arbitration panel or other authority is also prohibited. Thus, where a moratorium has been declared under section 14 of IBC, the authority which in the instant case is SEBI/AO will have no jurisdiction to institute any proceedings. Where a proceeding has already been instituted and during the pendency of the proceedings a moratorium order is passed under section 14 then the authority is prohibited from continuing with the proceedings. This is clear from a bare reading of the provisions of section 14(1) of the IBC. The contention of the respondent that the word 'proceedings' depicted in section 14(1) has to be given an expansive meaning cannot be considered either by the adjudicating officer as it would amount to contempt of court. In any case, the prohibition is on the institution of a proceeding. In the instant case, the moratorium kicked in when the petition was filed on November, 2019 under Rule 5(a)(i) of the Insolvency and Bankruptcy (Insolvency and liquidation proceedings of financial service provider and application to Adjudicating Authority) Rules, 2019 and thereafter it was admitted on 3rd December, 2019. The adjudicating officer issued notice subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy resolution process. On 20th November, 2019, the Reserve Bank of India (hereinafter referred to as 'RBI') suspended the board of directors of the appellant under section 45-IE(2) of the Reserve Bank of India Act, 1934 and appointed an administrator to manage the affairs of the company. On 29th November, 2019 RBI filed a Company Petition before the NCLT under Rule 5(a)(1) of the Insolvency and Bankruptcy (Insolvency and liquidation proceedings of financial service provider and application to Adjudicating Authority) Rules, 2019 to initiate corporate insolvency resolution process against the appellant under the provisions of The Insolvency and Bankruptcy Code, 2016. The petition was admitted by NCLT by an order of 3rd December, 2019 and the administrator was appointed as the resolution professional. The moratorium provided under section 14 came in force upon the filing of the application by RBI under Rule 5(a)(i) of the Insolvency and Bankruptcy (Insolvency and liquidation proceedings of financial service provider and application to Adjudicating Authority) Rules, 2019 on 29th November, 2019 in view of Rule 5(b) of the said rules. 3. On 24th December, 2019, the adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Insolvency Law Committee that a proceeding for assessing or determining the liability is different from a proceeding initiated to recover the assessed or determined liability. The Committee further observes that a moratorium on determination of the liability may not have been the intent of the IBC. Hence, I am of the view that the moratorium declared under section 14 of the IBC will not prevent instant proceeding from determining the liability of the corporate debtor and the moratorium declared under the IBC will be applicable to the enforcement/recovery of the determined liability. I note that the instant adjudication proceedings against the Noticee are in the nature of determining the liability of the Noticee for the alleged non-compliance of relevant provisions of the ILDS Regulations, 2008 and LODR Regulations, 2015 and hence the same can be continued. 7. We have heard Mr. Ashish Kamat, Advocate assisted by Mr. Vivek Shetty and Mr. Nishant Upadhyay, Advocates for the Appellant and Mr. Mustafa Doctor, Senior Advocate assisted by Mr. Mihir Mody and Mr. Shehaab Roshan, Advocates for the Respondent through video conference. 8. The contention of the learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity. The learned senior counsel contended that the moratorium declared under section 14 of the IBC does not prevent the adjudicating officer from determining the liability of the corporate debtor and that the moratorium declared under IBC would be applicable only to the enforcement/recovery of the determined liability. The learned counsel thus contended that the adjudicating officer had full powers to proceed against the appellant for the purpose of determining the liability for the alleged non- compliance of the ILDS Regulations and the LODR Regulations. In support of his submission the learned senior counsel placed reliance on a decision of Supreme Court in the case of Babu Lal vs. M/s. Hazari Lal Kishori Lal Ors. (1982) 1 SCC 525 and in P.L. Kantha Rao and Others vs. State of A.P. Ors. (1995) 2 SCC 471 wherein the word 'proceedings' have been explained. 10. Having heard the learned counsel for the parties at some length it would be appropriate to peruse section 14(1) of the IBC which is extracted hereunder:- Moratorium 14(1). Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the moratorium that comes into effect Under Section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against corporate debtors. 5. 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 6.7.2017 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. 15. In Rajendra K Bhutta (supra) the Supreme Court while considering the provisions of section 14(1)(d) of the insolvency code held as under:- However, when it comes to any clash between the MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Cod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on 24th December, 2019. It is quite clear that the proceedings was initiated by the adjudicating officer after the moratorium had come into effect. In our view no proceedings could be instituted in view of section 14(1) of the Act. 19. We are also of the opinion that external aid can only be considered when there is an ambiguity in the provision. In this regard, the provision of section 14 is very clear and explicit and there is no room for any ambiguity. Further, the Supreme Court has categorically explained the effect of section 14 of the IBC. We, therefore, find that the adjudicating officer could not have considered the report of the insolvency committee to come to the conclusion that he had the power to proceed under SEBI law inspite of a moratorium having come into effect under section 14 of the IBC. 20. For the reasons stated aforesaid, the impugned order imposing a penalty and proceeding to recover under section 28A of the Act upon failure to pay cannot be sustained and is quashed. Since the proceedings could not be instituted, we also quash the show cause notice and the entire proceedings. The appeal is allowed. 21. The present matter was heard through video co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
