2022 (12) TMI 1179 - HC - Companies Law

Application for amendment in the plaint by deleting the name of the defendant no. 1 by substituting the name of the Liquidator of the defendant no. 1 in the cause title as well as in the plaint - overriding provisions of IBC over other laws - Section 238 of the Insolvency and Bankruptcy Code 2016 - HELD THAT - In the instant case, one of the financial creditors of the defendant had initiated proceeding under Section 7 of the Insolvency and Bankruptcy Code 2016 against the defendant and the Tribunal had admitted the application and appointed Liquidator. The Liquidator had made Public announcement calling upon all the stakeholders of the defendant company for submission of their respective claim, if any, and the plaintiff has lodged its claim before the Liquidator but the same was rejected on the ground of limitation but in appeal the Learned Tribunal had admitted the claim of the plaintiff and admittedly the same is to be adjudicated by the Liquidator. As Section 238 of the Code is having the override effect in any other law for the time being in force and thus the suit cannot be proceeded further as the claim made by the plaintiff in the instant suit is similar to the claim raised before the Liquidator - Section 61 of the Code provide for an appeal. In case the Liquidator rejects the claim of the plaintiff, the plaintiff is having remedy of an appeal. This Court held that the suit filed by the plaintiff is cannot be proceeded further and thus CS No. 1 of 2016 is dismissed. The Registrar, Original Side of this Court is directed to release the Bank Guarantees submitted by the defendant no.1 in terms of the order passed by this Court in favour of the Liquidator Shri Krishna Kumar Chhaparia - Application disposed off.

Summary

Issues Involved:
1. Amendment of the plaint to substitute the name of the Liquidator for defendant no. 1.
2. Dismissal of the suit and release of bank guarantees due to the insolvency proceedings.

Issue-wise Detailed Analysis:

1. Amendment of the plaint to substitute the name of the Liquidator for defendant no. 1:

The plaintiff filed an application for amending the plaint to delete the name of defendant no. 1 and substitute it with the name of the Liquidator appointed by the National Company Law Tribunal (NCLT). The plaintiff's counsel argued that during the pendency of the suit, a creditor initiated proceedings before the NCLT, leading to the appointment of a Liquidator for defendant no. 1. Initially, Surendra Kumar Agarwal was appointed as the Liquidator, who was later replaced by Krishna Kumar Chhaparia. The Liquidator issued a public announcement calling for claims from stakeholders, to which the plaintiff responded. Although the Liquidator initially rejected the plaintiff's claim, the National Company Law Appellate Tribunal allowed the plaintiff's appeal, enabling the plaintiff to file the claim before the Liquidator. Given the appointment of the Liquidator, the plaintiff sought to amend the plaint accordingly. The court, after perusing the application and relevant documents, acknowledged the necessity of the amendment and allowed the plaintiff's prayer. Consequently, the application (GA 3 of 2022) was disposed of.

2. Dismissal of the suit and release of bank guarantees due to the insolvency proceedings:

The Liquidator, Krishna Kumar Chhaparia, filed an application seeking the dismissal of the suit and the release of bank guarantees submitted by defendant no. 1. The background of the case involved the plaintiff initially filing a winding-up petition against defendant no. 1 due to default in payment of dues, which led to an order by the court requiring the defendant to furnish bank guarantees. During the pendency of the suit, a financial creditor filed an insolvency petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), resulting in the commencement of the corporate insolvency resolution process and the appointment of a Liquidator. The Liquidator took custody of the defendant company's assets and called for claims from stakeholders, including the plaintiff. The plaintiff's claim, initially rejected by the Liquidator for being time-barred, was later admitted by the Tribunal upon appeal.

The Liquidator argued that under Section 238 of the IBC, the provisions of the Code override other laws, and the suit could not proceed further as the plaintiff's claim was now under the Liquidator's adjudication. The court referred to precedents, including the Supreme Court's decision in Innoventive Industries Ltd. v. ICICI Bank, which emphasized the overriding effect of the IBC and the moratorium on suits against the corporate debtor. Given that the plaintiff's claim in the suit was identical to the claim before the Liquidator, the court held that the suit could not proceed further. The court directed the Registrar to release the bank guarantees submitted by defendant no. 1 to the Liquidator to facilitate the liquidation process. Consequently, the suit (CS No. 1 of 2016) was dismissed, and the application (GA 4 of 2022) was disposed of.