2019 (10) TMI 1472 - Tri - Insolvency and Bankruptcy

Grant of period of two weeks for filing the reply, if any, to the Application filed by the Resolution Professional of the Corporate Debtor - Counsel for the Applicant brings to the notice of the Tribunal that a delay of more than three weeks in filing the reply hampers the CIRP of the Corporate Debtor prejudicially as the CIRP is to expire on 02.11.2019 and that the CIRP is a time bound process - HELD THAT - On established position of Law, pursuant to the initiation of CIRP and declaration of moratorium and during the period of moratorium under Section 14 of the IBC, 2016 no encumbrance or charge can be created over the property by any authority including the Respondent except in accordance with provisions of IBC, 2018 even for the dues which are payable by the Corporate Debtor. Further it is also evident from Section 238 of IBC, 2016 wherein it has been provided that the provision of IBC, 2016 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. Thus, taking into consideration the provisions of Section 14 of IBC, 2016 read with Section 238 of IBC, 2016, in view of the CIRP pending in relation to the Corporate Debtor, the assets of the Corporate Debtor could not have been dealt with by the Respondent of the assets of the Corporate Debtor - the encumbrance which had been created by way of attachment registered by the Respondent stands cancelled - application closed.

Summary

Issues: Delay in filing reply affecting Corporate Insolvency Resolution Process (CIRP), Creation of encumbrance during moratorium period, Cancellation of encumbrance by Tribunal.

The judgment delivered by the National Company Law Tribunal, Chennai, addressed the issue of delay in filing a reply impacting the Corporate Insolvency Resolution Process (CIRP). The Respondent was granted time to file a reply, but a significant delay occurred, hindering the CIRP, which is a time-bound process. Due to the delay, the Tribunal proceeded with the Application's disposal without considering the Respondent's submissions. The Tribunal highlighted that during the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), no encumbrance or charge can be created over the property by any entity, including the Respondent, except as per the provisions of the IBC, even for dues payable by the Corporate Debtor.

The judgment extensively cited Section 14 of the IBC, 2016, which declares a moratorium on various actions, including transferring, encumbering, or disposing of the Corporate Debtor's assets during the insolvency commencement date. It emphasized that no encumbrance can be created over the property during the moratorium period. Additionally, the judgment referred to Section 238 of the IBC, 2016, stating that the provisions of the IBC shall prevail over any inconsistent provisions in other laws. Therefore, considering the provisions of Section 14 of the IBC and Section 238 of the IBC, the Tribunal concluded that the Respondent could not deal with the assets of the Corporate Debtor during the CIRP.

Consequently, the Tribunal ruled that the encumbrance created by the Respondent through an attachment was cancelled. The Tribunal directed the order's copy to be provided to the relevant Sub Registrar, where the encumbrance was registered, for necessary action. The judgment concluded by closing the Application in light of the cancellation of the encumbrance and the legal provisions governing the CIRP and moratorium under the IBC, 2016.