2018 (3) TMI 1454 - Tri - Insolvency and Bankruptcy

Bar of jurisdiction under Insolvency & Bankruptcy Code - action by District Disaster Management Authority sinking FDD - impact on the corporate debtors - Held that - the subject matter involved in this case is not auction of the FDD but it is an action in progress in pursuance of the order given under the Disaster Management Act, 2005. When such an action being ordered, can anybody remain waiting until the Resolution Professional/Corporate Debtor take necessary steps to remove the sinking FDD from the Port. If for any reason, such salvage operations are put to stay in the light of the declaration of moratorium, what will happen if any grave occurrence taken place? Instead of applying equity, let us look into as to whether overriding effect and the moratorium directions given under Insolvency & Bankruptcy Code will have any bearing on the Disaster Management Act, 2005. In view of the legal position as on today existing, can it be construed that Insolvency & Bankruptcy Code, simply for the reason of later enactment, prevails over the Act of 2005? To our belief, it can t be, because this Tribunal is barred to interfere with the jurisdiction exercised by the Collector of Goa. In the light of this background, we don t even believe that we need to further clarify that operation of fields under both enactments is distinct and therefore overriding effect will not operate on the Act of 2005. Once jurisdiction itself is barred to this Adjudicating Authority under section 71 of the Act 2005, this Bench could not even look into the merits as to whether such order is right or wrong or into maintainability of the proceedings initiated or orders issued under the Act of 2005, let alone overriding effect of Insolvency & Bankruptcy Code on the Disaster Management Act, 2005. This Corporate Debtor has to go before Hon ble High Court of Bombay-Goa by way of filing Writ Petition or by making its grievance in the Writ Petition already pending before the Hon ble High Court of Bombay-Goa.

Issues Involved:
1. Intervention by Mormugao Port Trust (MPT) for modification of an order.
2. Environmental threat due to the sinking Floating Dry Dock (FDD) of the Corporate Debtor.
3. Conflict between the Disaster Management Act, 2005 and the Insolvency and Bankruptcy Code, 2016.
4. Jurisdictional bar under both enactments.
5. Auction of the FDD and its implications.

Issue-wise Detailed Analysis:

1. Intervention by Mormugao Port Trust (MPT) for modification of an order:
The Mormugao Port Trust (MPT) sought intervention to modify an order dated 12.12.2017 to facilitate the statutory functioning of the Port Trust and comply with orders from the Hon’ble High Court and other statutory authorities. The Corporate Debtor had leased land and water area from MPT but failed to discharge their obligations, leading MPT to issue a termination notice on 4.3.2017. The Corporate Debtor's Floating Dry Dock (FDD) posed environmental risks due to its deteriorating condition.

2. Environmental threat due to the sinking Floating Dry Dock (FDD) of the Corporate Debtor:
The sinking FDD, positioned close to another abandoned vessel containing about 350 tons of fuel oil, posed a significant environmental threat. Notices from the Director General of Shipping and the Goa State Pollution Control Board highlighted the risk of oil spills and environmental damage. The District Disaster Management Authority ordered the Corporate Debtor to take immediate action to mitigate these risks, failing which MPT was directed to conduct salvage operations.

3. Conflict between the Disaster Management Act, 2005 and the Insolvency and Bankruptcy Code, 2016:
The Tribunal examined whether the moratorium under the Insolvency and Bankruptcy Code (IBC) would have any bearing on actions taken under the Disaster Management Act. The IBC's moratorium prevents proceedings against the Corporate Debtor, but the Disaster Management Act mandates immediate action to prevent environmental hazards. The Tribunal emphasized that environmental protection and public safety take precedence over economic interests.

4. Jurisdictional bar under both enactments:
The Tribunal analyzed the jurisdictional bars under both the IBC and the Disaster Management Act. The IBC restricts civil courts from intervening in matters under its jurisdiction, while the Disaster Management Act prohibits any court, except the Supreme Court or High Court, from entertaining actions against authorities acting under the Act. The Tribunal concluded that it lacked jurisdiction to interfere with actions taken under the Disaster Management Act.

5. Auction of the FDD and its implications:
MPT proposed to auction the FDD to prevent environmental hazards, as directed by the District Authority. The Corporate Debtor argued that the auction was undervalued and sought a stay, citing the IBC moratorium. However, the Tribunal noted that the High Court had already permitted the auction and directed the proceeds to be deposited with the High Court. The Tribunal clarified that grievances regarding the auction proceeds should be addressed to the High Court, not the Tribunal.

Conclusion:
The Tribunal disposed of MPT's intervention application, stating that the IBC moratorium does not affect actions taken under the Disaster Management Act. The Tribunal dismissed the Corporate Debtor's application for a stay on the auction as misconceived, emphasizing that only the High Court or Supreme Court has jurisdiction over such matters under the Disaster Management Act.

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