2022 (10) TMI 62 - Tri - Insolvency and Bankruptcy

Rejection of Resolution Plan - dues of the respondent in books of account of the corporate debtor or not - Section 30(6) of I B Code - HELD THAT - There is direct violation of Section 14(1)(b) which creates a bar prohibiting encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein. Besides, there is violation of the order of moratorium passed by this Adjudicating Authority on 07.02.2022. Application allowed.

Issues Involved:
1. Compliance with public announcement requirements under Regulation 6(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
2. Validity of the order passed by the Municipal Corporation during the moratorium period.
3. Locus standi of the Municipal Corporation to object to the Resolution Plan.
4. Violation of Section 14 of the Insolvency and Bankruptcy Code (IBC) during the moratorium period.

Issue-wise Detailed Analysis:

1. Compliance with Public Announcement Requirements:
The applicant, Municipal Corporation, Rohtak, argued that the public announcement made by the Resolution Professional (RP) did not comply with Regulation 6(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The applicant contended that the newspapers in which the public announcement was published did not have wide circulation in the relevant locations, thus preventing the applicant from submitting its claim within the stipulated time. However, the RP provided evidence that the public announcement was made in "Financial Express" (English, Chandigarh Edition), "Jansatta" (Hindi, Chandigarh Edition), and "Hari Bhoomi" (Hindi, Rohtak Edition). The Tribunal concluded that the public announcement was in compliance with Regulation 6(1).

2. Validity of the Order Passed by the Municipal Corporation During the Moratorium Period:
The Municipal Corporation issued an order on 18.11.2020 directing the corporate debtor to pay outstanding property and fire taxes, failing which the property was sealed. This order was passed during the moratorium period declared on 07.02.2020. The Tribunal noted that the order was in violation of Section 14(1)(a) of the IBC, which prohibits the institution or continuation of suits or proceedings against the corporate debtor during the moratorium period. The Tribunal emphasized that any enforcement action taken during the moratorium period is invalid.

3. Locus Standi of the Municipal Corporation to Object to the Resolution Plan:
The RP argued that the Municipal Corporation had no locus standi to object to the Resolution Plan as it did not file its claim within the stipulated time and thus was neither a creditor nor a stakeholder. The Tribunal referenced the decision in State Bank of India Vs. Jyoti Structures Limited, where it was held that the RP is not obligated to individually notify each creditor to file their claim. The responsibility lies with the creditors to file their claims after the public announcement. Consequently, the Municipal Corporation's objection to the Resolution Plan was dismissed.

4. Violation of Section 14 of the IBC During the Moratorium Period:
The Tribunal observed that the Municipal Corporation's order to seal the property of the corporate debtor during the moratorium period constituted a direct violation of Section 14(1)(b) of the IBC, which prohibits encumbering, alienating, or disposing of any assets of the corporate debtor during the moratorium. The Tribunal cited precedents, including Indian Overseas Bank Vs. Mr. Dinkar T. Venkatsubramaniam, to support its conclusion that such actions are impermissible during the moratorium period.

Conclusion:
The Tribunal dismissed the application filed by the Municipal Corporation, Rohtak, without order as to cost, and set aside the impugned notice dated 18.11.2020 issued by the Municipal Corporation. The Tribunal upheld the compliance of the public announcement with the relevant regulations and confirmed that the enforcement action taken during the moratorium period was in violation of Section 14 of the IBC.

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