TMI BlogDeclaration of moratorium [ Section 14 ]X X X X Extracts X X X X X X X X Extracts X X X X ..... m Periods [ Section 14(1) ] Subject to provisions of sections 14(2) and section 14(3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:- As per section 14(1)(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; Relevant Case Laws In Alchemist Asset Reconstruction Company Limited Vs. Hotel Gaudavan Private Limited - SC, Dated 20.10.2017 the Supreme Court affirmed that once a moratorium is imposed under the IBC, any proceeding initiated against the CD is non-est (does not exist) in law. In Canara Bank Vs. Deccan Chronicle Holdings Limited - Company Appeal (AT) (Insolvency), Dated 14.09.2017 the NCLAT held that the moratorium will not affect any proceedings initiated or pending before the Supreme Court under Article 32 of the Constitution of India or where an order is passed under Article 136. Further, it will not affect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement and control. The MD of the erstwhile CD sought to quash the prosecution under section 138 in view of the approval of the resolution plan. The High Court confirmed that the moratorium under section 14 of the IBC prohibits proceedings, but such proceedings do not include prosecution. In the matter of Varrsana Ispat Limited Vs. Deputy Director, Directorate of Enforcement -NCLAT, Dated 02.05.2019 The RP had sought de-attachment of properties attached with the Directorate of Enforcement under the Prevention of Money Laundering Act, 2002, a considerable time prior to the initiation of CIRP. The NCLAT had held that section 14 of the IBC is not applicable to the criminal proceeding or any penal action taken pursuant to the criminal proceeding or any act having the essence of crime or crime proceedings. The Supreme Court also upheld the order passed by the NCLAT [ Varrsana Ispat Limited Vs. Deputy Director, Directorate of Enforcemen t, Civil Appeal No. 5546 of 2019]. While the bar under IBC is automatic, practically the IRPs/RPs may need to file an application before various forums where proceedings against the CD is continuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Code is applicable on the property occupied under a Joint Development Agreement. The Hon'ble Supreme Court answered the issue raised in the case in affirmative in favour of the corporate debtor and held that It is clear that Section 14(1)(d) of the Insolvency Bankruptcy Code, when it speaks about recovery of property occupied , does not refer to rights or interests created in property but only actual physical occupation of the property. Explanation .- notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period; Supply of essential goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the insurance company through its agent sought to terminate the insurance policy insuring the CD, on account of the CD entering CIRP. The AA, while protecting the insurance cover of the CD, held that the policy could not be terminated since it is essential for the very existence of the CD. The NCLAT, in the appeal, also upheld the view of the AA as during the CIRP, the CD is to continue as a going concern, and directed the appellant to continue with the insurance policy. The NCLAT also directed the IRP to pay the insurer any amount owing as an installment during the CIRP. In Gujarat Urja Vikas Nigam Ltd. Vs. Amit Gupta - NCLAT, Dated 15.10.2019 the NCLAT upheld the order of the AA, setting aside the termination of the Power Purchase Agreement of the CD by the authority on the sole ground of initiation of CIRP of the CD. The AA held that in light of section 238 of the IBC, any terms of the PPA in direct contravention of the IBC could not be enforced. The NCLAT upheld the decision of the AA while acknowledging that the subsistence of the agreement was imperative to ensure that the CD was kept as a going concern. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moratorium period under section 14 of the IBC against the Corporate Debtor. Effect of the order of Moratorium [ Section 14(4) ] The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process. No t e s : T h e provision of section 14(1) of the Code is not applicable on a surety in a contract of guarantee to a corporate debtor. Thus, recovery proceedings, insolvency resolution process or bankruptcy proceedings against surety (guarantor) can be initiated even if moratorium is granted to corporate debtor. I t is clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
