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2019 (12) TMI 242 - HC - Insolvency and BankruptcySuit for recovery of money for supply of goods/services - alleged amount is an operational Debit and the Respondent/Plaintiff is an Operational Creditor as defined under Section 5(20) and 5(21) of the IBC - pre-existing creditor - Plaint can be rejected only with the averments made in the plaint do not disclose a cause of action or on a reading thereof the suit appears to be barred under any law - contention of the learned counsel for the applicant/defendant is that by order dated 26.07.2017, the Adjudicating Authority under Section 14 of the Insolvency and Bankruptcy Code, 2016 had declared moratorium prohibiting/barring institution of suit. HELD THAT - Though no circumstance pleads in the plaint to find out whether the suit is maintainable or not or liable to be rejected, it is to be noted that suit has been originally filed against M/s.Bhusham Steel Ltd., as the defendant. During the pendency of the suit in the place of defendant M/s. Tata Steel BSL Ltd., was substituted as defendant. The M/s. Tata Steel BSL Ltd., is none other than the resolution applicant approved by NCLT - this Court can easily come to the conclusion that the resolution plan was in force and newly substituted defendant is none other that resolution applicant approved by NCLT. It is also relevant to note that the suit has been presented before this Court on 28.11.2017. It is admitted by both sides with regard to the proceedings before the NCLT the Company petition was filed before NCLT against the defendant under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the Adjudicating authority of the National Company Law Tribunal on 03.07.2017. It is also not disputed by the plaintiff herein that the Company Petition was admitted on 26.07.2017 and moratorium under Section 14 of the Insolvency and Bankruptcy Code was admittedly declared by the Adjudicating Authority. When the institution of the suit itself prohibited by an order of moratorium passed in the given case and such suit has been filed during the existence of moratorium. Merely because these facts has not been stated in the plaint it cannot be said that the Court cannot go into maintainability of the suit or rejecting the suit. Merely because these averments in the plaint do not reveal any bar under law the Court is without any power to go into the question, the literal interpretation of the provision under Order VII Rule 11(d) C.P.C to be given - The Court has to apply the relevant law to determine that the plaint is liable to be rejected on the ground of bar under law. The proceedings before Insolvency and Bankruptcy Code is not disputed before this Court. Such being the position the Court can take Judicial notice of such proceedings. It is thus clear from a reading of the proviso to Section 14(4) that the cessation of moratorium is linked to approval of a Resolution Plan under Section 31 (1) of an Order for Liquidation of the CD under Section 33. A resolution plan will be approved by an Adjudicating Authority only if it is in compliance of the requirements of such a plan, as set out in Section 30 of the Insolvency and Bankruptcy Code - In the present instance, the Resolution Plan submitted by the Resolution Applicant was approved by the Adjudicating Authority and as such the relevant provision is Section 31 (1) of the Code. This Court is of the view that suit filed by Plaintiff during existence of Moratorium is barred by law. No doubt only plaint averments are required to be seen to find out whether suit appears to be barred by any law. However when the law itself prohibits the institution of the suit which has not been disclosed in the plaint and suppressed. The Court can still reject the plaint on the basis of the bar contained in the law - this court hold that the suit is not maintainable. Accordingly, the plaint is rejected. Application dismissed.
Issues Involved:
1. Whether the suit filed during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) is maintainable. 2. Whether the cessation of the moratorium period revives the right to adjudicate the suit. 3. Whether the plaint should be rejected under Order VII Rule 11 of the Civil Procedure Code (CPC). Issue-wise Detailed Analysis: 1. Whether the suit filed during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) is maintainable: The Applicant/Defendant argued that the suit was filed on 28.11.2017, during the moratorium period declared under Section 14 of the IBC, which commenced on 26.07.2017. The moratorium prohibits the institution of suits against the corporate debtor. The Respondent/Plaintiff, being an operational creditor, should have filed its claim before the Resolution Professional instead of filing the suit. The suit, therefore, is barred by law and should be dismissed. The court highlighted that the language of Section 14(1)(a) of the IBC is peremptory, mandating a 'stand-still' period to preserve the corporate debtor's assets. The moratorium was in effect from 26.07.2017 to 15.05.2018, during which the suit was filed, making it non-est in law. The court cited the Supreme Court's judgment in Alchemist Asset Reconstruction Company Ltd. v. M/s. Hotel Gaudavan Pvt. Ltd., which held that any proceedings initiated during the moratorium period are non-est. 2. Whether the cessation of the moratorium period revives the right to adjudicate the suit: The Respondent/Plaintiff contended that the moratorium ended with the approval of the resolution plan on 15.05.2018, thus removing any restrictions on adjudicating the suit. The purpose of the moratorium is to ensure a stand-still period to facilitate the orderly completion of the resolution process, not to bar adjudication after its completion. The court referred to Section 14(4) of the IBC, which states that the moratorium ceases upon the approval of the resolution plan or liquidation order. However, the court noted that the cessation of the moratorium does not revive a claim filed during the moratorium period. The approved resolution plan binds all creditors, and any claims must be submitted to the Resolution Professional. The court cited the Supreme Court's judgment in Swiss Ribbons v. Union of India, which emphasized that all claims must be decided during the resolution process to avoid uncertainty for the resolution applicant. 3. Whether the plaint should be rejected under Order VII Rule 11 of the Civil Procedure Code (CPC): The Applicant/Defendant argued that the plaint should be rejected under Order VII Rule 11(d) of the CPC as it is barred by law. The Respondent/Plaintiff contended that only the plaint's averments should be considered for rejection, and the moratorium had ended by the time of adjudication. The court held that the institution of the suit during the moratorium period was prohibited by law, making it non-maintainable. The court emphasized that the prohibition under Section 14 of the IBC is clear, and any suit filed during this period is non-est. The court also invoked its inherent powers to reject the plaint, noting that continuing the suit serves no purpose once the resolution plan is approved. Conclusion: The court concluded that the suit filed during the moratorium period is barred by law and non-est. The cessation of the moratorium does not revive the right to adjudicate the suit. Consequently, the plaint was rejected under Order VII Rule 11 of the CPC, and the related application was closed.
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