2022 (8) TMI 476 - AT - Insolvency and Bankruptcy

Moratorium - raising of presumptions - It is the contention of the Learned Counsel for the Applicant/Appellant that once a Moratorium is in place, continuation of any Suit or Proceeding in any Court/Tribunal/Forum/Authority against the Corporate Debtor shall be stopped until the completion of CIRP - continuation of the proceedings will be in violation of Section 14 of the I B Code, 2016 - interplay between section 14 and section 32A of IBC - HELD THAT - As a matter of fact, the word Moratorium is defined in P RamanathaIyer s Advanced Law Lexicon (5th Edition) 2017 Vol. III at Page 3348 meaning Authorisation of suspension of payments by a Debtor for a specified time - The term Moratorium is described as a legal authorisation to a Debtor to defer the payment for a certain time as per Schedule Article 53 of the Asian Development Bank Act. Raising of presumption - HELD THAT - It is pertinently pointed out by this Tribunal that the employment of the word Shall raises a presumption that specific provision is imperative - It is worthwhile to mention that Rule 57 (2) of Schedule 2 to the Income Tax Act, 1961, provides that the full amount of purchase money payable shall be paid by the Purchaser to the Tax Officer on or before 15th day from the date of Sale of Property. Effect of Moratorium its Breach - HELD THAT - A mere running of the eye of the word Shall employed in Section 14 (1) of the I B Code, 2016, symbolises that on declaration of Moratorium, it is mandatory for the Adjudicating Authority to pass an Order prohibiting the filing or continuation of pending Suits or Proceedings; against the Corporate Debtor. In this connection, this Tribunal points out that when a Statute employs the word Shall ex facie, it is mandatory. As per Section 14 (4) of the Code, the Order of Moratorium is to have effect from the date of such an Order till the completion of Corporate Insolvency and Resolution Process. However, during the Corporate Insolvency and Resolution Process, if the Adjudicating Authority (NCLT) approves the Resolution Plan as per Section 31 (1) of the I B Code or passes an Order for Liquidation of Corporate Debtor under Section 33, the Moratorium has to cease to have effect from the date of such an Approval or Liquidation, as the case may be - No wonder, Section 74 of the I B Code, 2016, prescribes punishment for violation of the terms of the Moratorium Order under Section 14 of the Code or approved Resolution Plan, under Section 31 of the Code. Application disposed off.

Summary

Issues Involved:
1. Application of Moratorium under Section 14 of the IBC.
2. Continuation of proceedings against the Corporate Debtor during the moratorium.
3. Impact of pending Civil Appeals before the Supreme Court on the current proceedings.
4. Determination of CIRP costs and their challenge post-CIRP.

Issue-wise Detailed Analysis:

1. Application of Moratorium under Section 14 of the IBC:
The Applicant/Appellant contends that once a moratorium is in place, continuation of any suit or proceeding against the Corporate Debtor must be stayed until the completion of the CIRP, as per Section 14 of the IBC, 2016. The moratorium was imposed by the Adjudicating Authority (NCLT, Kolkata Bench) on 08.10.2021, following the initiation of CIRP against the 1st Respondent/SREI Infrastructure Finance Limited. The Reserve Bank of India superseded the Board of Directors of the 1st Respondent and appointed an Administrator.

2. Continuation of proceedings against the Corporate Debtor during the moratorium:
The Applicant/Appellant argues that the proceedings against the 1st Respondent, being a Corporate Debtor, cannot proceed during the moratorium period. This stance is supported by precedents from the Supreme Court, which have held that any proceedings in violation of Section 14 of the IBC are non est in law. The 1st Respondent counters that Section 14 does not apply to the instant appeals as the outcome will not lead to the depletion or diminution of the 1st Respondent's assets. If the appeals are allowed, the 1st Respondent will neither gain nor lose anything; if dismissed, it will benefit from the RTU Charges payment.

3. Impact of pending Civil Appeals before the Supreme Court on the current proceedings:
The Applicant/Appellant highlights that similar issues are pending before the Supreme Court in Civil Appeals No. 1015-1016 of 2021, filed by the erstwhile Resolution Professional of Essar Steel India Limited (ESIL). The Supreme Court had issued notices in these appeals, which challenge the orders passed by this Tribunal. The Applicant/Appellant argues that the adjudication of these civil appeals will have a direct bearing on the current proceedings and requests that the present proceedings be kept in abeyance until the Supreme Court's adjudication.

4. Determination of CIRP costs and their challenge post-CIRP:
The Applicant/Appellant asserts that the determination of CIRP costs made by the Resolution Professional during the CIRP can be challenged subsequently under Section 60(5) of the IBC or otherwise after the conclusion of the CIRP and the successful implementation of the resolution plan. The 1st Respondent contends that the ESIL RP's appeal before the Supreme Court does not affect the hearing of the instant appeals, as the primary relief sought is the setting aside of notices issued to the Resolution Professional.

Conclusion:
The Tribunal, considering the moratorium imposed by the NCLT, Kolkata Bench, and the pending civil appeals before the Supreme Court, orders the deferment of the proceedings in Comp. App (AT) (INS) No. 1038 of 2020 and Comp. App (AT) (INS) No. 1043 of 2020 for 12 weeks from the date of receipt of this order. The parties are at liberty to pursue their remedies in the pending civil appeals before the Supreme Court for redressal of their grievances.