2020 (12) TMI 241 - Tri - Insolvency and Bankruptcy

Direction to Respondent to handover the Original Share Certificates to the Corporate Debtor in relation to its shareholding - Jurisdiction to entertain the applications filed by the Resolution Professional - HELD THAT - As per the provisions of the IBC, 2016, the moment the CIR Process is initiated against the Corporate Debtor, the moratorium under Section 14(1) of IBC 2016 is declared. By virtue of that, all proceedings, which are civil in nature, relating to the Corporate Debtor shall be prohibited to be proceed with, till the time the moratorium remains in force. The proceedings under Section 241-242 of Companies Act 2013 cannot stand as an exception to the moratorium. During the period of moratorium, the Adjudicating Authority under IBC 2016 is vested with jurisdiction to decide any issue arising out of CIR Process of the Corporate Debtor. Further as per Section 60(5)(a) of IBC 2016, this adjudicating authority can entertain or dispose of any application or proceeding by or against the Corporate Debtor - Further, by virtue of Section 238 of IBC 2016, the proceedings under IBC 2016, are having overriding effect over all the other inconsistent laws - Thus, this Bench is having the jurisdiction to entertain the applications filed by the Resolution Professional. As from the plain reading of Clause 6 of the Agreements dated 08.10.2018, it is evident that the Respondent was only having the temporary physical possession of the share certificates and other original documents. No ownership rights were transferred in favour of the Respondent at the time of signing the said agreements - The Respondent, who was given temporary physical possession of the original Share Certificates has not paid the consideration as stipulated in the Agreements dated 08.10.2018. Hence, this Bench is of the view that the Share Certificates along with other original documents possessed by both the Companies, namely, M/s. Hacienda Infosoftech Private Limited and M/s. Challengerz Web Solutions Private Limited, are assets of the Corporate Debtor and the Applicant is well within its rights to claim possession of these certificates along with other original documents with a view to maximize value of the assets of the Corporate Debtor. This Adjudicating Authority directs the Respondent to handover the original Share Certificates along with other original documents of M/s. Hacienda Infosoftech Private Limited and M/s. Challengerz Web Solutions Private Limited to the Resolution Professional of the Corporate Debtor within 7 days from the date of the pronouncement of this order - Application allowed.

Summary

Issues:
1. Dispute over possession of original share certificates and other documents related to shareholding in two companies.
2. Jurisdiction of the tribunal to adjudicate the issue during the Corporate Insolvency Resolution Process (CIRP).
3. Non-joinder of necessary parties in the applications.
4. Applicability of moratorium under Section 14(1) of IBC 2016.

Analysis:
1. Dispute over Share Certificates:
The Resolution Professional filed two applications against the Respondent regarding possession of original share certificates and documents related to shareholding in two companies. The Applicant argued that these assets belong to the Corporate Debtor and should be handed over. The Respondent claimed non-payment of consideration due to the Corporate Debtor's failure to obtain necessary approvals. However, the tribunal found that the Respondent only had temporary physical possession and no ownership rights were transferred. The bench directed the Respondent to return the documents to the Resolution Professional to maximize the Corporate Debtor's assets' value.

2. Jurisdiction of the Tribunal:
The Respondent raised objections regarding the tribunal's jurisdiction due to pending petitions of Oppression and Mismanagement before the Principal Bench. The Respondent argued that the moratorium under IBC 2016 does not apply to these proceedings. However, the tribunal clarified that during the CIR Process, the Adjudicating Authority has jurisdiction to decide issues related to the Corporate Debtor. Sections 60(5)(a) and 238 of IBC 2016 grant the tribunal overriding powers over inconsistent laws, allowing it to entertain applications related to the Corporate Debtor.

3. Non-Joinder of Parties:
The Respondent contended that necessary parties were not included in the applications. However, the tribunal ruled that since the Respondent held the original share certificates, they were the essential party. The non-joinder of other parties did not affect the resolution of the dispute over possession of the documents.

4. Applicability of Moratorium:
The tribunal emphasized that once the CIR Process is initiated, the moratorium under Section 14(1) of IBC 2016 prohibits civil proceedings related to the Corporate Debtor. The tribunal's jurisdiction extends to deciding issues arising during the CIR Process, and the moratorium applies to all proceedings, including those under the Companies Act 2013. Sections 60(5)(a) and 238 of IBC 2016 grant the tribunal authority to entertain applications concerning the Corporate Debtor, overriding conflicting laws.

In conclusion, the tribunal upheld the Resolution Professional's claim, directing the Respondent to return the original share certificates and documents to maximize the Corporate Debtor's assets' value. The tribunal asserted its jurisdiction to adjudicate the dispute during the CIR Process, emphasizing the applicability of the moratorium and its overriding powers under IBC 2016.