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2017 (9) TMI 1963 - HC - Insolvency and BankruptcySuit for recovery of khas possession and for mesne profit - continuation of proceedings during moratorium period - Prayer for stay of all further proceedings on the ground that an insolvency proceeding has started under Section 10 of the Insolvency and Bankruptcy Code, 2016 - whether the present suit should be allowed to continue or not? - HELD THAT - If an adjudicating authority is satisfied that the subject matter of the case is such that the Corporate Insolvency Resolution Process cannot be completed within 180 days it may, by order, extend the duration of such process beyond 180 days of such further period as it thinks fit, but not exceeding 90 days. The proviso to sub-section (3) further says that any extension of the period of Corporate Insolvency Resolution Process under the said execution shall not be granted more than once. Therefore, on a conjoint reading of the sub Sections under Section 12 it appears that the resolution process has to be completed within 180 days and further 90 days of extension (once only). If the provisions of the Code are compared with its object, it gives a logical conclusion that the Courts are prohibited from proceeding with the suits and proceedings which has direct nexus with the provisions of Section 14 of the said Code. Admittedly, the defendant is a corporate debtor. Admittedly, in a proceeding under Section 10 a moratorium has been declared, an Insolvency Resolution Professional has been appointed on and from the date of the order under Section 10 of the said code, i.e., 01.05.2017. We are now in September 2017. Therefore, it is expected that within the timeframe mentioned in Section 12 the Insolvency Proceeding will be completed and it is prudent to hold that the trial of the suit will be stayed for the present for a period of four months from date with liberty to the plaintiff to bring it to the notice of the Court with regard to further development in the Insolvency Proceeding. The proceedings of the suit is stayed only for a period of four months for the present with liberty to the parties to pray for extension if situation so demands - application disposed off.
Issues Involved:
1. Application of Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Interpretation of moratorium under Section 14 of the IBC. 3. Rights of landlords under rent legislation vis-à-vis IBC. 4. Overriding effect of the IBC over other laws. 5. Applicability of precedents from other insolvency-related laws. Issue-wise Detailed Analysis: 1. Application of Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016: The defendant filed G.A. No.2791 of 2017 seeking a stay on further proceedings in C.S. No.247 of 2010 due to an ongoing insolvency proceeding under Section 10 of the IBC. The plaintiff argued that the moratorium under Section 14 only stays the execution of proceedings, not the proceedings themselves. However, the court noted that Section 14(1)(a) prohibits the institution or continuation of suits against the corporate debtor, thus supporting the defendant's request for a stay. 2. Interpretation of Moratorium under Section 14 of the IBC: The court examined Section 14, which declares a moratorium prohibiting: - The institution or continuation of suits against the corporate debtor (Section 14(1)(a)). - The recovery of any property by an owner or lessor occupied by the corporate debtor (Section 14(1)(d)). The court concluded that the moratorium applies broadly to prevent any proceedings against the corporate debtor, not just the execution of decrees. 3. Rights of Landlords under Rent Legislation vis-à-vis IBC: The plaintiff contended that their right to evict a tenant should not be suspended by the IBC, arguing this would interfere with their Constitutional Right to Property under Article 300A. The court acknowledged the conflict but emphasized that Section 238 of the IBC gives it an overriding effect over other laws, including rent legislation, thereby suspending the landlord’s eviction rights during the moratorium. 4. Overriding Effect of the IBC over Other Laws: The court referred to Section 238 of the IBC, which states that the IBC provisions override any other inconsistent laws. This was supported by the Supreme Court's decision in "M/s. Innoventive Industries Ltd. vs. ICICI Bank & Anr.," which held that the IBC's moratorium provisions take precedence over state laws. Therefore, the court held that the IBC overrides the rent legislation, preventing the continuation of the eviction suit. 5. Applicability of Precedents from Other Insolvency-related Laws: The plaintiff cited "Sree Chamundi Mopeds Ltd. vs. Church of South India Trust Association" to argue against the stay. However, the court distinguished this case, noting it dealt with the Sick Industrial Companies (Special Provisions) Act, 1985, which has been repealed. The court found the "Innoventive Industries" case more relevant, reinforcing the IBC’s comprehensive moratorium. Conclusion: The court concluded that the suit should be stayed for four months, considering the IBC's time-bound resolution process. The stay was granted with liberty to the plaintiff to update the court on the insolvency proceedings' progress, ensuring compliance with the IBC's objectives. Order: The application for stay was allowed, and the suit proceedings were stayed for four months, subject to further developments in the insolvency resolution process.
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