2017 (10) TMI 856 - AT - Companies Law

Corporate insolvency process - whether the Adjudicating Authority cannot exclude any court from the purview of Moratorium for the purpose of recovery of amount or execution of any judgement or decree, including the proceeding, if any, pending before the Hon ble High Courts and Hon ble Supreme Court of India against a corporate debtor ? - Held that - From clause (a) of sub-Section (1) of Section 14, it is clear that institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order by any court of law, tribunal, arbitration panel or other authority come within the purview of moratorium. The said provision specifically do not exclude any Court, including the Hon ble High Courts or Hon ble Supreme Court of India. There is no provision to file any money suit or suit for recovery before the Hon ble Supreme Court except under Article 131 of the Constitution of India where dispute between Government of India and one or more States or between the Government of India and any State or States on one side and one or two or more States is filed. Some High Courts have original jurisdiction to entertain the suits, which may include money suit or suit for recovery of money. The Hon ble Supreme Court has power under Article 32 of the Constitution of India and Hon ble High Court under Article 226 of Constitution of India which power cannot be curtailed by any provision of an Act or a Court. In view of the aforesaid provision of law, we make it clear that moratorium will not affect any suit or case pending before the Hon ble Supreme Court under Article 32 of the Constitution of India or where an order is passed under Article 136 of Constitution of India. Moratorium will also not affect the power of the High Court under Article 226 of Constitution of India. However, so far as suit, if filed before any High Court under original jurisdiction which is a money suit or suit for recovery, against the corporate debtor such suit cannot proceed after declaration of moratorium, under Section 14 of the I&B Code.

Summary

Issues:
Challenge to impugned order dated 19th July 2017 passed by the Adjudicating Authority regarding the declaration of moratorium under section 7 of the Insolvency & Bankruptcy Code, 2016. Interpretation of Section 14 of the I&B Code concerning the scope of moratorium and its impact on pending suits or proceedings against a corporate debtor, including the exclusion of certain courts from the moratorium.

Analysis:
The Appellant, a financial creditor, challenged the order passed by the Adjudicating Authority declaring a moratorium under the I&B Code. The issue revolved around the exclusion of certain courts from the moratorium for the purpose of recovery of amounts or execution of judgments. The Adjudicating Authority had prohibited various actions, including the institution of suits or continuation of pending suits against the corporate debtor, transferring assets, enforcing security interests, and recovering property. The Appellant argued that no court should be excluded from the moratorium's purview for recovery or execution purposes.

Upon examining the provisions of the I&B Code, specifically Section 14 related to Moratorium, the Tribunal analyzed the scope of the moratorium. Section 14(1) outlines the actions prohibited during the moratorium, including suits against the corporate debtor and asset transfers. The Tribunal noted that the provision did not exclude any court, including the High Courts or Supreme Court of India, from the moratorium's application.

The Tribunal clarified that while the moratorium would not affect cases pending before the Supreme Court under Article 32 or where orders are passed under Article 136 of the Constitution, it would impact suits filed before High Courts under original jurisdiction involving money recovery against the corporate debtor. The Tribunal emphasized that the moratorium would not impede the powers of the Supreme Court under Article 32 or the High Courts under Article 226.

In light of the legal provisions and the interpretation of the scope of moratorium, the Tribunal clarified that the impugned order by the Tribunal regarding the moratorium stood clarified. The appeal was disposed of with the above observations, emphasizing that suits before High Courts involving money recovery against the corporate debtor could not proceed post the declaration of moratorium under Section 14 of the I&B Code.