2023 (1) TMI 306 - HC - Insolvency and Bankruptcy

Jurisdiction to entertain and dispose of the Interim Application - Seeking withdrawal of money deposited - whether respondent can be allowed to withdraw the monies deposited by appellant pursuant to this Court s order dated 10th December 2012 towards stay of execution of the impugned judgment given that appellant is undergoing CIRP? - effect of moratorium under Section 14 of the IBC. Whether this Court does not have the jurisdiction to entertain and dispose the Interim Application? - HELD THAT - The NCLT can exercise jurisdiction and adjudicate upon the First Appeal or the Interim Application only if it is statutorily empowered to do so. The IBC does not confer any such statutory power upon the NCLT to sit in appeal over a judgment and decree of a Civil Court, nor decide an interim application arising out of such civil appeal. This is a power that is solely vested in a civil court under Section 96 of CPC - In Gujarat Urja 2021 (3) TMI 340 - SUPREME COURT the Hon ble Supreme Court laid down the test to ascertain the matters which can be adjudicated upon by the NCLT under Section 60(5)(c) and held that only those disputes which arise solely from the insolvency of the corporate debtor can be entertained by the NCLT under this provision. It is therefore clear that in order for appellant to establish that this Court is divested of its jurisdiction to entertain the First Appeal or the Interim Application, it would have to be established that the First Appeal and the Interim Application arise solely from the insolvency of the corporate debtor. Such is clearly not the case here, since the First Appeal arises out of a challenge against the Impugned Judgment passed by the Trial Court on the issue of termination of respondent s employment. It has nothing to do with the insolvency of the corporate debtor. The NCLT could never sit in appeal over the judgment/decree of a Civil Court. Such a judgment/decree can only be corrected in appeal and, therefore, the NCLT would not have jurisdiction to hear and decide the First Appeal. It is this Court which is the only appropriate forum to exercise jurisdiction over the First Appeal and the Interim Application, and not the NCLT - Appellant has also sought to rely upon Section 231 of the IBC to contend that the jurisdiction of this Hon ble Court is barred. Section 231 creates a bar on the jurisdiction of a civil court only where the Adjudicating Authority (i.e., NCLT in this case) has the jurisdiction over a given issue. Since, as held above, the NCLT does not have jurisdiction to adjudicate upon the First Appeal or the Interim Application, Section 231 cannot bar the jurisdiction of this Court. Whether the amount deposited by appellant in the Trial Court pursuant to the order dated 10th December 2012 is affected by the moratorium under Section 14 of the IBC? - HELD THAT - Once the monies have been deposited, they cease to remain the asset of the judgment debtor. The monies are custodia legis. They are placed beyond the reach of the parties. They are held in trust by the Court. The monies are secured for the benefit of the judgment creditor and there is only a postpone of the right of the plaintiff to receive the said amount which is necessitated because of the pendency of the First Appeal - once appellant had deposited the sum of Rs.32,16,909/- in the Trial Court pursuant to this Court s order dated 10th December 2012 as a condition for stay of execution of the Impugned Judgment, the said amount ceased to belong to/be in the control of appellant. Appellant was not entitled to/the owner of the said amount as on the date of commencement of CIRP (i.e., 15th May 2018). Once appellant ceased to be the entitled to/owner of the said amount, the said amount is unaffected by the moratorium which comes into effect under Section 14 of the IBC upon the commencement of CIRP. Resultantly, there is no bar on this Court from allowing the withdrawal of the amount by respondent if this Court so deems fit. Application disposed off.

Summary

Issues involved:
1. Jurisdiction of the Court to entertain and dispose of the Interim Application.
2. Applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) to the monies deposited by the appellant in the Trial Court.

Issue-wise detailed analysis:

I. Jurisdiction of the Court to entertain and dispose of the Interim Application:

Jurisdiction Analysis:
The Court analyzed whether it had the jurisdiction to entertain and dispose of the Interim Application filed by the respondent. The appellant argued that the National Company Law Tribunal (NCLT) should have jurisdiction under Section 60(5) of the IBC. However, the Court noted that the NCLT is a statutory tribunal with limited jurisdiction as prescribed by the IBC, unlike a civil court with general jurisdiction under Section 9 of the Code of Civil Procedure (CPC). The Court referenced the Supreme Court judgments in *Embassy Property Developments Pvt. Ltd. v. State of Karnataka* and *Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta*, which clarified that NCLT's jurisdiction is limited to matters arising solely from the insolvency of the corporate debtor.

The Court concluded that the First Appeal and the Interim Application did not arise solely from the insolvency of the corporate debtor. The First Appeal challenged a judgment regarding the termination of the respondent's employment, unrelated to insolvency. The Interim Application concerned monies deposited before the insolvency commencement date. Therefore, the NCLT did not have jurisdiction, and this Court retained jurisdiction over the Interim Application.

Conclusion on Jurisdiction:
The Court held that it had jurisdiction to entertain and dispose of the Interim Application, as the issues did not arise solely from the insolvency of the corporate debtor, and the NCLT was not empowered to adjudicate on such matters.

II. Applicability of the moratorium under Section 14 of the IBC to the monies deposited by the appellant in the Trial Court:

Moratorium Analysis:
The Court examined whether the moratorium under Section 14 of the IBC applied to the monies deposited by the appellant in the Trial Court. The moratorium prohibits the institution or continuation of suits or proceedings against the corporate debtor, including execution of any judgment, decree, or order. The Court noted that the moratorium applies only to the assets belonging to the corporate debtor.

The Court referenced multiple judgments, including *P.S.L. Ramanathan Chettiar v. O.R.M.P.R.M. Ramanathan Chettiar*, which held that money deposited in court by a judgment debtor remains the property of the judgment debtor, but is placed beyond the reach of the parties pending appeal. The Court also cited *Nahar Builders v. Housing Development and Infrastructure Ltd.*, where it was held that the moratorium under Section 14 of the IBC does not apply to monies deposited in court before the insolvency commencement date.

The Court concluded that the monies deposited by the appellant in the Trial Court did not constitute an asset of the appellant as on the insolvency commencement date. Therefore, the moratorium under Section 14 of the IBC did not preclude the respondent from seeking withdrawal of the deposited monies.

Conclusion on Moratorium:
The Court held that the moratorium under Section 14 of the IBC did not apply to the monies deposited by the appellant in the Trial Court, as these monies did not constitute the appellant's asset at the time of insolvency commencement. Consequently, the respondent was entitled to seek withdrawal of the deposited amount.

Findings and Conclusions:
1. The Court has jurisdiction to entertain and dispose of the Interim Application.
2. The moratorium under Section 14 of the IBC does not prohibit the withdrawal of monies deposited by the appellant in the Trial Court.

Final Judgment:
The Court allowed the respondent to withdraw the balance amount deposited by the appellant in the Trial Court, as the deposited monies did not constitute the appellant's asset under the moratorium provisions of the IBC.