2022 (11) TMI 1282 - AT - Insolvency and Bankruptcy

Stay of proceedings relating to the debt due - Appellants submits that in view of the triggering of the interim moratorium in proceedings under Section 95 by order dated 06.12.2021 and 07.12.2021 all proceedings have to be stayed - HELD THAT - Section 96(1)(b) read with the definition of debt in Section 3(11), what is contemplated to be stayed is the proceeding relating to debt, which means a liability or obligation in respect of a claim which is due from any person. Interim moratorium shall be for such proceedings which relate to a liability or obligation due i.e. due on date when interim moratorium has been declared. Section 96(1)(b) cannot be read to mean that any future liability or obligation is contemplated to be stayed. Thus, stay of proceedings under Section 19(2) and Section 66-67 is not contemplated under Section 96(1)(b) and the scheme of Code in no matter provide for stay of such applications. The Adjudicating Authority did not commit any error in rejecting application of the Appellants praying for stay of proceedings under Section 19(2) and Section 66-67. Hon ble Supreme Court in STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. 2018 (8) TMI 837 - SUPREME COURT , where the Hon ble Supreme Court had occasion to consider Section 96 and Section 101 with Section 14 and it was observed that Section 14 cannot be possibly apply to a personal guarantor - Hon ble Supreme Court in the above case does not support the submissions of the Appellants which has been raised in the facts of the present case that proceedings under Section 19(2) and Section 66-67 shall be deemed to have been stayed by virtue of interim moratorium under Section 96(1)(b). Thus, no error has been committed by the Adjudicating Authority in rejecting application of the Appellants - appeal dismissed.

Summary

Issues:
1. Interpretation of Section 96 of the Insolvency and Bankruptcy Code regarding the scope of interim moratorium.
2. Whether proceedings under Section 19(2) and Section 66-67 should be stayed during the interim moratorium period.

Analysis:
1. The judgment dealt with the interpretation of Section 96 of the Insolvency and Bankruptcy Code, specifically focusing on the scope of interim moratorium. The Appellants contended that all proceedings should be stayed due to the triggering of the interim moratorium. However, the Respondent argued that Section 96 does not contemplate staying proceedings under Section 19(2) and Section 66-67. The Tribunal examined the relevant provisions and the definition of 'debt' under Section 3(11) of the Code to determine the applicability of the interim moratorium.

2. The Tribunal analyzed Section 96(1)(b) which states that any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed during the interim moratorium period. It was emphasized that the term 'debt' includes a liability or obligation due from any person. The Tribunal concluded that the interim moratorium is intended for proceedings related to liabilities or obligations due at the time of its declaration, not for future liabilities. Therefore, the stay of proceedings under Section 19(2) and Section 66-67 was not contemplated under Section 96(1)(b) of the Code.

3. The Tribunal referenced a previous judgment to support its interpretation, highlighting the importance of harmoniously construing different provisions of the Code to make it effective and workable. The judgment emphasized that Section 14 of the Code, which deals with a different aspect, should not be applied to personal guarantors, as observed by the Supreme Court in a specific case. The Tribunal concluded that the Adjudicating Authority did not err in rejecting the Appellants' application for a stay on proceedings under Section 19(2) and Section 66-67 during the interim moratorium period.

4. In light of the arguments presented and the legal analysis conducted, the Tribunal dismissed the appeal, affirming that no error was committed by the Adjudicating Authority in rejecting the Appellants' application. The judgment underscored the importance of interpreting the Code's provisions in a manner that aligns with its objectives and statutory framework, ultimately upholding the decision of the lower authority.