2021 (4) TMI 1119 - Tri - Insolvency and Bankruptcy

Stay on proceedings till the completion of CIRP - Order passed during moratorium, is sought to be stayed - Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - In the present Applications, order dated 06.12.2019 was passed during moratorium. The Ld. ADJ-1 has failed to appreciate Section 238 and Section 14 of IBC, 2016 and the binding pronouncements of the Hon'ble Supreme Court. It is evident that the said order of the Ld. ADJ-1 is a nullity in law and ipso facto, ab-initio void and non-est. Application allowed.

Summary

Issues:
- Application filed under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 seeking relief against execution orders.
- Validity of orders passed by the Court of Ld. ADJ-1 during the Corporate Insolvency Resolution Process (CIRP).
- Interpretation of Section 238 and Section 14 of the IBC, 2016 in relation to moratorium.

Analysis:
1. The Application was filed under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 seeking relief against execution orders passed by the Court of Ld. ADJ-1 during the CIRP. The Adjudicating Authority had admitted the application for initiation of CIRP for the Corporate Debtor and appointed the Resolution Professional. The Respondent had filed a civil suit against the Corporate Debtor, leading to orders directing payment. The Applicant argued that the execution orders were against the moratorium imposed under the IBC, seeking a stay on proceedings.

2. The Adjudicating Authority noted that the Respondent failed to represent in the proceedings despite service of notices. The Authority had previously passed a restraining order against execution directions of the Ld. ADJ-1, emphasizing the importance of the moratorium under Section 14 of the IBC. Citing a Supreme Court judgment, the Authority reiterated that the moratorium prohibits the institution or continuation of pending suits or proceedings against Corporate Debtors.

3. In a similar application, the Adjudicating Authority had previously observed that any interference with the provisions of the IBC during CIRP was impermissible. It was emphasized that execution orders against Corporate Debtors were illegal and ineffectual, as the assets of the Corporate Debtor were required to be preserved under the IBC. The Authority highlighted the need to uphold the sanctity of the insolvency resolution process.

4. The Adjudicating Authority found that the orders passed by the Court of Ld. ADJ-1 during the moratorium were void in law and non-est, failing to consider the provisions of Section 238 and Section 14 of the IBC. Consequently, the Authority allowed the Application, directing the Court of Ld. ADJ-1 not to take coercive steps and to halt execution proceedings during the CIRP. The Application was disposed of with the aforementioned directions, emphasizing compliance with the IBC provisions and the Supreme Court's binding pronouncements.

Conclusion:
The judgment by the National Company Law Tribunal, Jaipur Bench, addressed the issues surrounding the validity of execution orders during the Corporate Insolvency Resolution Process, emphasizing the importance of the moratorium under the Insolvency and Bankruptcy Code, 2016. The Tribunal upheld the sanctity of the insolvency resolution process and directed the concerned court to refrain from coercive actions and halt execution proceedings against the Corporate Debtor.