2022 (9) TMI 637 - HC - Insolvency and Bankruptcy

Maintainability of present suit - liquidator is appointed and liquidation proceedings commenced - whether upon commencement of liquidation proceedings against the defendant no.1 company under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) and Liquidator being appointed, the present suit can proceed or not? - HELD THAT - From the language of Section 33(5) of the IBC, it is clear that the bar/moratorium is only in respect of fresh suits or legal proceedings. Unlike the moratorium under Section 14 of the IBC, where it is clearly noted that the moratorium is in respect of institution of suits or continuation of pending suits or proceedings against corporate debtor, the words continuation of pending suits or proceedings are conspicuously absent in Section 33(5) of the IBC - under Section 446 of the Companies Act, 1956, once the Official Liquidator was appointed as the provisional liquidator, neither a fresh suit nor a pending suit could be proceeded against the company except with the leave of the Company Court/Tribunal. Similar position has been maintained under the Section 279 of the Companies Act, 2013. However, the word pending is missing in Section 33(5) of the IBC. A reading of Section 63 of the IBC would reveal that the bar on the Civil Court is only to entertain any suit or proceeding in respect of any matter on which NCLT has the jurisdiction under this Code . This would not apply to suits, which were already pending before the commencement of liquidation proceedings. Section 231 of the IBC, inter alia states that no injunction shall be granted by a Court in respect of action taken in pursuance to any order passed by the Adjudicating Authority. The intent is clear that the bar is only in respect of civil suits filed after an order has been passed by the Adjudicating Authority. In my view, the aforesaid bar under Sections 63 and 231 of the IBC would only be in respect of fresh suits. Sections 63 and 231 of the IBC cannot be read in manner so as to defeat the provisions of Section 33(5) of the IBC. If Sections 63 and 231 of the IBC are interpreted in the manner canvased by the counsel for the Liquidator, the provision of Section 33(5) of the IBC would be rendered otiose and the moratorium under Section 33(5) of the IBC, which was to apply only in respect of fresh suits would also apply to pending suits. This cannot be the intention of the legislature. The bar under Sections 33(5), 63 and 231 of the IBC will not apply to the present suit and therefore, the proceedings in the present suit shall continue - the bar/moratorium under Sections 33(5), 63 and 231 of the IBC would not apply to the present suit, the aforesaid claim of the plaintiff can only be adjudicated in the present proceedings. The plaintiff cannot pursue two separate remedies in respect of the same claim. Therefore, the Liquidator is directed not to adjudicate the claim filed on behalf of the plaintiff before the Liquidator. List the suit along with pending applications before the Roster Bench on 19th September, 2022.

Summary

Issues Involved:
1. Whether the present suit can proceed after the commencement of liquidation proceedings against defendant no.1 under the Insolvency and Bankruptcy Code, 2016 (IBC) and the appointment of a Liquidator.

Issue-wise Detailed Analysis:

1. Continuation of Suit Post Liquidation Proceedings:
- The primary issue is whether the present suit can continue after the liquidation proceedings against defendant no.1 commenced under the IBC.
- The plaintiff seeks a permanent injunction to restrain defendant no.1 from encashing bank guarantees and to recover a sum of Rs.10,69,77,650/-.
- The plaintiff argues that Section 33(5) of the IBC, which imposes a moratorium on the institution of fresh suits, does not apply to pending suits. The plaintiff emphasizes the difference in language between Section 14 and Section 33(5) of the IBC.
- The defendant, represented by the Liquidator, contends that the jurisdiction of Civil Courts is barred under Sections 63 and 231 of the IBC, and only the NCLT has jurisdiction over claims against the corporate debtor. They argue that Section 33(5) should be interpreted to include pending suits to avoid delays in liquidation proceedings.

2. Interpretation of Section 33(5) of the IBC:
- The court examines the language of Section 33(5) and notes that it only bars the institution of fresh suits, unlike Section 14 which includes pending suits.
- The Madras High Court and Kerala High Court have held that Section 33(5) does not apply to pending suits, and the Delhi High Court agrees with this interpretation.
- The court highlights the legislative intent behind Section 33(5) and the differences between the moratoriums under Sections 14 and 33(5).

3. Jurisdiction of Civil Courts:
- The court clarifies that Sections 63 and 231 of the IBC bar Civil Courts from entertaining new suits but do not apply to suits already pending before the commencement of liquidation proceedings.
- The court rejects the Liquidator's argument that the present suit cannot proceed due to the jurisdictional bar under Sections 63 and 231, stating that such an interpretation would render Section 33(5) otiose.

4. Legislative Intent and Judicial Interpretation:
- The court refers to the Report of the Insolvency Law Committee, which suggested that the omission of pending suits from Section 33(5) might be an error. However, since no amendments have been made to Section 33(5) despite multiple amendments to the IBC, the court concludes that the legislature intentionally excluded pending suits.
- The court emphasizes that it cannot supply omissions in a statute through judicial interpretation, adhering to the rule of casus omissus.

5. Adjudication of Plaintiff's Claim:
- The court notes that the plaintiff's claim of Rs.13,15,73,901/- is pending before the Liquidator, but since the present suit will continue, the Liquidator is directed not to adjudicate this claim separately.
- The court concludes that the bar/moratorium under Sections 33(5), 63, and 231 of the IBC does not apply to the present suit, allowing it to proceed.

Conclusion:
- The court rules that the present suit can continue despite the commencement of liquidation proceedings against defendant no.1. The Liquidator is directed not to adjudicate the plaintiff's claim separately, as it will be addressed in the ongoing suit. The case is listed for further proceedings on 19th September, 2022.