2021 (2) TMI 516 - Tri - Insolvency and Bankruptcy

Seeking direction to R1 to immediately refund/deposit the sum of ₹ 1,23,93,968/- back to the account maintained by the Corporate Debtor with R2 - seeking direction to R2 to strictly adhere to the provisions of section 17(1)(d) and henceforth only consider instructions of the Applicant RP for any debits to the account of the Corporate Debtor maintained with R2 - seeking directions to necessary directions requiring R1 to file an Affidavit confirming that it would refrain from taking any further adverse actions either against the Corporate Debtor or its assets during the Moratorium period. HELD THAT - A conjoint reading of section 14(1)(a) and section 238 of IBC Code, clearly shows that the Code overrides section 44 of the GVAT Act, as the same is inconsistent with the provisions of the Code. Thus the action of R1 is clearly barred by provisions of section 14(1)(a) - Even though the CIRP period was over and the liquidation order passed by this Bench was stayed by the Hon'ble Appellate Tribunal and the direction was given that the RP will manage the company and ensures that the company will remain as a going concern, we are of the considered opinion that CIRP is still continuing. Thus the Moratorium provided u/s 14 is in operation and the action of R1 is hit by section 14(1)(a) of the Code. R1 is directed to refund the sum of ₹ 1,23,93,968/- to the account of the Corporate Debtor maintained with R2 - application allowed in part.

Summary

Issues:
Application under section 14 of the Insolvency and Bankruptcy Code, 2016 for relief regarding refund and adherence to provisions.

Analysis:
The Applicant, as the Resolution Professional of the Corporate Debtor, filed an application seeking various reliefs under section 14 of the Insolvency and Bankruptcy Code, 2016. The Applicant raised concerns regarding a payment directed by R1 to R2 from the Corporate Debtor's account towards State Tax dues during the Corporate Insolvency Resolution Process (CIRP) period. The Applicant contended that this action violated the moratorium provisions under the Code, specifically section 14(1)(a). The Applicant highlighted that the CIRP was extended by the Tribunal and is still ongoing, as per the directions of the NCLAT. The Applicant also emphasized the overriding effect of the Code over other laws, citing relevant judicial pronouncements to support the argument. Furthermore, the Applicant pointed out that the action of R1 was against the waterfall mechanism provided under section 53 of the Code.

The Tribunal, after considering the submissions and relevant legal provisions, held that the moratorium under section 14 was in operation, despite the completion of the CIRP period and the stay on the liquidation order. The Tribunal found that the action of R1 directing the payment was in violation of the moratorium provisions of the Code. Consequently, the Tribunal directed R1 to refund the sum to the Corporate Debtor's account maintained with R2. However, the Tribunal noted that certain prayers in the application were in the nature of advance ruling and could not be granted at the current stage. The Tribunal allowed the application partially and disposed of the matter, granting relief in terms of the refund but leaving room for further directions if needed in the future.