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2023 (2) TMI 1257 - HC - Income TaxProceedings by the corporate debtor consequent to insolvency proceedings - overriding nature and supremacy of the provisions of the Code over any other enactment in case of conflicting provisions by virtue of Section 238 of the Code - HELD THAT - Clause (a) of Sub-section (1) of Section 14 of the Insolvency and Bankruptcy Code 2016 ( IBC ) only prohibits 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. It does not prohibit any proceedings by the corporate debtor. This Court in Reliance Communication Ltd. v. Rajendra P. Bansal 2023 (2) TMI 45 - BOMBAY HIGH COURT held that a bare perusal of section 14(1) makes it clear that subclause (a) only prohibits the institution or continuation of suits or proceedings against the corporate debtor. This clearly would not be attracted in the present case as the present proceedings are an appeal filed by the corporate debtor. That being so the moratorium can never apply to the present First Appeal since it is filed by the corporate debtor Therefore in our view the Tribunal was not correct in dismissing the appeal filed by Petitioner. The Tribunal however was correct to say that on admission of the insolvency petition filed by the financial creditor under Section 7 of the IBC the Directors of Petitioner have become functus officio. The Tribunal gave liberty to the IRP or the RP as the case may be to pursue all litigations pertaining to Assessee Company in consultation with the Committee of Creditors. It also gave liberty to the IRP/RP to apply for recall of the impugned order. The Tribunal has missed the fact that the appeal itself has been filed through the Resolution Professional. Tribunal should not have dismissed Petitioner s appeal. The impugned order to that extent is quashed and set aside.
Issues:
1. Dismissal of appeal by the Income Tax Appellate Tribunal (ITAT) due to insolvency proceedings. 2. Interpretation of Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) regarding moratorium. 3. Application of moratorium on proceedings against the corporate debtor. 4. Dismissal of the appeal filed by the Petitioner through the Resolution Professional. Issue 1: Dismissal of appeal by ITAT due to insolvency proceedings The High Court noted that the ITAT dismissed the appeal filed by the Petitioner due to insolvency proceedings initiated against the corporate debtor. The moratorium imposed during insolvency proceedings halted the continuation of pending proceedings, including income tax appeals. The Court referred to previous judgments emphasizing the overriding nature of the IBC provisions during such situations. The Petitioner was aggrieved by the dismissal of the appeal, and the Court granted liberty to the Revenue to file a fresh appeal after the moratorium period. Issue 2: Interpretation of Section 14 of the IBC regarding moratorium The Court analyzed Section 14(1) of the IBC, which prohibits the institution or continuation of suits or proceedings against the corporate debtor during the moratorium. It clarified that the moratorium applies only to proceedings against the corporate debtor and its assets, not to proceedings by the corporate debtor. The Court cited relevant judgments to support its interpretation and emphasized that the moratorium does not prevent proceedings by the corporate debtor, such as filing appeals. Issue 3: Application of moratorium on proceedings against the corporate debtor Referring to the Apex Court's judgment, the Court highlighted that the moratorium under the IBC restricts proceedings against the corporate debtor but does not exclude actions by the corporate debtor. The management of the corporate debtor is taken over by the resolution professional during insolvency proceedings, and the committee of creditors supervises all matters. The Court emphasized the displacement of the previous management and the transition to new management upon the approval of a resolution plan. Issue 4: Dismissal of the appeal filed by the Petitioner through the Resolution Professional The Court found that the Tribunal erred in dismissing the appeal filed by the Petitioner through the Resolution Professional. It clarified that the appeal itself was filed by the Resolution Professional on behalf of the corporate debtor. The Court held that the Tribunal should not have dismissed the appeal and quashed the impugned order, restoring the appeal to the Tribunal's file for further proceedings. In conclusion, the High Court set aside the ITAT's dismissal of the appeal, emphasizing the correct interpretation of the IBC's moratorium provisions and the right of the Resolution Professional to pursue litigation on behalf of the corporate debtor during insolvency proceedings.
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