2021 (5) TMI 732 - Tri - Insolvency and Bankruptcy

Penalty proceedings against Corporate Debtor - contravention of the moratorium or not - submission of claim towards the Customs duty and Estate dues after initiation of CIRP - HELD THAT - It is settled that the Code is a complete code in itself as recognized by the Hon ble Apex Court in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT . Section 238 of the Code mandates that the provisions of the Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having the effect by virtue of any such law. The message set out by this salutary provision is loud and clear that the provisions of the Code would come into operation notwithstanding anything inconsistent therewith contained in any other law and such law shall cease to have any effect till such time the provisions of the Code remains applicable. A plain reading of section 14 of the Code would inter alia indicate that neither any suit or proceedings can be instituted or continued before any other Authority. Sub-section (1)(d) provides that no property by an owner or lessor can be recovered which is under occupation of the Corporate Debtor. Explanation to the Section makes it abundantly clear that all the rights and privileges granted in respect of such possession shall continue and cannot be curtailed by any authority including the Central and the State Governments. All the dues claimed under the show cause notices and the consolidated notice dated 11.02.2019 admittedly relate to a period preceding the declaration of CIRP. In any case the Respondent has already presented a claim before the IRP in respect of the outstanding duty and dues. The Respondent accordingly shall stay his hands from seeking any action in terms of the notices indicated above. No order u/s 74(2) of the Code can be passed, the same being of a penal nature - application allowed.

Summary

Issues Involved:
Application seeking directions against Respondent not to proceed with penalty proceedings against Corporate Debtor during Corporate Insolvency Resolution Process (CIRP).

Analysis:
1. Background and CIRP Initiation:
- Tribunal initiated CIRP for Corporate Debtor under Insolvency and Bankruptcy Code, 2016 (the Code) on 31.01.2019.
- Interim Resolution Professional (IRP) appointed, and moratorium declared under section 14 of the Code.

2. Actions During CIRP:
- Resolution Professional took steps under IBBI Regulations, made Public Announcement, and called for proof of claims.
- Committee of Creditors appointed Resolution Professional by majority vote.
- Corporate Debtor in arrears of government dues for premises in SEZ, leading to eviction notices.

3. Penalty Proceedings and Moratorium:
- Respondent initiated penalty proceedings against Corporate Debtor for non-compliance with notices and non-payment of dues.
- Applicant argued that moratorium under section 14 of the Code prohibits any coercive action during CIRP.

4. Legal Provisions and Interpretation:
- Section 238 of the Code mandates its provisions to have effect notwithstanding any other law.
- Section 14 of the Code imposes a moratorium on various actions, including suits, property disposal, and recovery during CIRP.

5. Case Law and Precedents:
- Respondent cited cases related to different legal matters, not directly applicable to the present case.
- Tribunal emphasized the importance of Code provisions and the moratorium's protective scope during CIRP.

6. Tribunal's Decision:
- Respondent's claim for dues already presented before IRP; hence, no further action warranted during CIRP.
- Tribunal allowed the Application, directing Respondent not to proceed with penalty notices during CIRP.
- Refused to pass a penal order under section 74(2) of the Code, with no costs imposed.

In conclusion, the Tribunal upheld the moratorium's sanctity during CIRP, preventing any penalty proceedings or coercive actions against the Corporate Debtor by the Respondent. The decision reaffirmed the Code's comprehensive framework and the protective measures in place to facilitate the resolution process without external disruptions.