2018 (5) TMI 1923 - Tri - Insolvency and Bankruptcy

Withdrawal of complaints filed by Respondent - violation of moratorium declared - institution of suits or continuation of pending suits or proceedings against the Corporate Debtor - HELD THAT - The Respondent/Complainant has violated the order of moratorium issued by this Adjudicating Authority, which is deliberate attempt on the part of the complainant and sheer misuse of the process of Law. The complainant is guilty of suppressing the material fact, while filing the complaints before the Learned Metropolitan Magistrate 59th Court, Kurla, Mumbai. As the Respondent/Complainant is well aware about the proceedings initiated by him before this Adjudicating Authority and issuance of the moratorium under Section 14 of the I B Code, 2016. In case the complaints filed by the Respondent/Complainant are not withdrawn, then the action for violation of the moratorium will be taken after giving him due opportunity of being heard. Application disposed off.

Summary

Issues: Violation of moratorium under the Insolvency and Bankruptcy Code, 2016; Proceedings under Section 138 of the Negotiable Instruments Act during CIR process.

The judgment by the National Company Law Tribunal, Chennai, dealt with the violation of the moratorium under the Insolvency and Bankruptcy Code, 2016, by the Respondent/Complainant. The Applicant's Counsel argued that the Respondent had initiated the Corporate Insolvency Resolution (CIR) process against the Corporate Debtor, M/S. Diamond Engineering Chennai Private Limited, and subsequently filed complaints under Section 138 of the Negotiable Instrument Act before the Metropolitan Magistrate Court in Mumbai. The order of moratorium issued by the Adjudicating Authority prohibited the institution of suits or continuation of pending suits against the Corporate Debtor, including the execution of any judgment. Despite this, the Operational Creditor proceeded with the complaints, which was deemed a violation of the moratorium order dated 06.06.2017.

The Counsel for the Respondent/Operational Creditor contended that filing proceedings under Section 138 of the Negotiable Instruments Act was permissible. However, any order passed by the Metropolitan Magistrate Court could impact the CIR process, especially if the Corporate Debtor had to pay the complainant due to compounding of the offense, resulting in preferential treatment. Consequently, the Tribunal stayed the proceedings in the complaints filed before the Metropolitan Magistrate Court in Mumbai, directing the Applicant's Counsel to provide a copy of the order to the court and instructing the Complainant to withdraw the complaints immediately to avoid further consequences for violating the moratorium.

The Tribunal found the Respondent/Complainant guilty of deliberately violating the moratorium order, considering it a misuse of the legal process and a suppression of material facts. The Respondent was aware of the proceedings initiated by the Adjudicating Authority and the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. If the complaints were not withdrawn promptly, the Tribunal warned of taking action against the Respondent for violating the moratorium after providing an opportunity to be heard. Consequently, the Application filed in the matter was disposed of by the Tribunal.