2019 (8) TMI 1035 - AT - Insolvency and Bankruptcy

Maintainability of appeal - appeal preferred by Corporate Debtor - SARFAESI Act, 2002 - HELD THAT - A person may be assignee under the SARFAESI Act, 2002. On that ground the application u/s 7 cannot be rejected. The action, if any, taken under SARFAESI Act, 2002 will not proceed in view of the order passed, in view of provisions of Moratorium passed under I B Code. Appeal dismissed.

Summary

Issues:
- Maintainability of the appeal by the Corporate Debtor
- Validity of the application under SARFAESI Act, 2002
- Impact of the Moratorium under I&B Code on SARFAESI Act proceedings

Analysis:

1. Maintainability of the appeal by the Corporate Debtor:
The appeal was filed by the Corporate Debtor against an application filed by the Respondent under the SARFAESI Act, 2002. The Adjudicating Authority admitted the application, leading to the appeal by the Corporate Debtor. The Appellate Tribunal, however, found that the appeal was not maintainable at the instance of the Corporate Debtor. Referring to the decision of the Supreme Court in "Innoventive Industries Ltd. Vs. ICICI Bank (2018) 1 SCC 407," the Tribunal emphasized that once an insolvency professional is appointed to manage the Company, the erstwhile Directors cannot maintain an appeal on behalf of the Company. The Tribunal highlighted that the Company is the sole appellant in this case, making the appeal not maintainable. Despite this, the Tribunal chose not to dismiss the appeal solely on this ground, providing a detailed judgment to address the paradigm shift in the law regarding management rights in insolvency cases.

2. Validity of the application under SARFAESI Act, 2002:
The Respondent claimed to be an assignee under the SARFAESI Act, 2002 and had taken steps under the same Act. The Appellate Tribunal acknowledged the Respondent's status as an assignee under the SARFAESI Act. However, the Tribunal noted that the mere status of being an assignee under the SARFAESI Act did not warrant the rejection of the application under Section 7 of the I&B Code. The Tribunal highlighted that the action taken under the SARFAESI Act would not proceed due to the Moratorium imposed under the I&B Code, emphasizing the legal implications of the Moratorium on proceedings initiated under the SARFAESI Act.

3. Impact of the Moratorium under I&B Code on SARFAESI Act proceedings:
The Tribunal considered the impact of the Moratorium under the I&B Code on the proceedings initiated under the SARFAESI Act, 2002. It clarified that any action taken under the SARFAESI Act would not proceed in view of the Moratorium imposed under the I&B Code. This analysis underscored the legal significance of the Moratorium in suspending certain actions, including those initiated under other statutes like the SARFAESI Act. Consequently, the Tribunal dismissed the appeal, citing the reasons related to the maintainability of the appeal and the implications of the Moratorium on the SARFAESI Act proceedings.