2017 (1) TMI 1218 - Tri - Indian Laws

Company Petition under Insolvency and Bankruptcy Code, 2016 for realization of this money - Default by Corporate Debtor - Objective under MRU Act - Whether an order could be passed u/s.7 of the Code or not? - Held that - This Bench, on perusal of this documents filed by the Creditor, it is evident that the Corporate Debtor defaulted in making payments as mentioned above, and he has placed the record of the default with Information Utility and he also placed the name of the Insolvency Resolution Professional to act as interim resolution Professional, having this Bench noticed that default has occurred and there is no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of section 7 is taken as complete, accordingly this Bench hereby admits this Application declaring Moratorium with the directions as mentioned below 1. That this Bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 2. That the supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. 3. That the provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. 4. That the order of moratorium shall have effect from 17.1.2017 till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, as the case may be. 5. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code. 6. That this Bench hereby appoints Mr. Dhinal Shah, 9, Urmikunj Society, Nr. St. Xavier College Corner, Navrangpura, Ahmedabad -389009, Gujrat, email [email protected], Registration No. IBBI/IPA-01/2016-17/015 as interim resolution professional to carry the functions as mentioned under Insolvency & Bankruptcy Code.

Summary

Issues:
1. Invocation of Moratorium under Insolvency and Bankruptcy Code, 2016 due to default in payments by Corporate Debtor.
2. Suspension of liabilities under Maharashtra Relief Undertaking (MRU) Act and its impact on the creditor's petition.
3. Interpretation of non-obstante clauses in both MRU Act and Insolvency and Bankruptcy Code, 2016.
4. Application of Section 238 of IBC 2016 in relation to MRU Act.
5. Admissibility of the Company Petition under Section 7 of the Code despite the MRU Act provisions.
6. Dismissal of Corporate Debtor's application based on MRU Act provisions.
7. Admittance of Financial Creditor's petition for insolvency resolution process.

Analysis:
1. The Applicant, a financial institution, filed a Company Petition under the Insolvency and Bankruptcy Code, 2016 (IBC) against the Corporate Debtor for defaulting on loan repayments. The Applicant sought the invocation of a Moratorium to recover the outstanding amount along with interest and expenses.

2. The Corporate Debtor argued that its liabilities were suspended under the Maharashtra Relief Undertaking Act due to financial assistance provided by the Government of Maharashtra. The relief undertaking aimed to prevent unemployment and suspended liabilities until a specified date, which the Corporate Debtor claimed should bar the Applicant's petition.

3. The Corporate Debtor contended that the non-obstante clause in the MRU Act should prevail over the IBC's provisions, citing different objectives of the two laws. The Applicant, however, argued that the IBC's non-obstante clause would override the MRU Act due to inconsistency.

4. The Tribunal analyzed the interplay of non-obstante clauses in both Acts and concluded that the IBC's provisions would prevail over the MRU Act, as the IBC came into existence after the MRU Act.

5. The Tribunal dismissed the Corporate Debtor's argument, emphasizing that the MRU Act's objective was to protect employees' interests, while the IBC aimed at safeguarding creditors. The Tribunal found no merit in the Corporate Debtor's contentions and dismissed their application.

6. Another application by the Corporate Debtor claiming improper service of notice was also dismissed by the Tribunal, as the Corporate Debtor's arguments had already been heard and rejected.

7. The Tribunal admitted the Financial Creditor's petition for the insolvency resolution process, noting the Corporate Debtor's default and the submission of necessary documents by the Creditor. The Tribunal declared a Moratorium and appointed an interim resolution professional to oversee the process until completion or liquidation.

This comprehensive analysis highlights the legal intricacies involved in the judgment, including the conflict between the MRU Act and the IBC, the interpretation of non-obstante clauses, and the Tribunal's decisions regarding the Company Petition and insolvency resolution process.