2024 (9) TMI 1325 - HC - Companies Law

Imposition of moratorium u/s 14 of the IBC, 2016 during CIRP - stay of the moratorium imposed - HELD THAT - There is a clear distinction between a direction not to take further steps pursuant to the order dated 16 October 2023 and stay of the moratorium imposed by the said order. Had the learned NCLAT decided to stay the moratorium, it could have done so. There is no stay of the moratorium imposed by the learned NCLT, in the order dated 9 November 2023 of the NCLAT. Reliance on the judgment of a coordinate Bench of this Court in SSMP Industries Ltd v Perkan Food Processors Pvt Ltd 2019 (8) TMI 916 - DELHI HIGH COURT where it was held that ' this court is of the opinion that the Plaintiff's and the defendant's claim ought to be adjudicated comprehensively by the same forum. At this point, till the defence is adjudicated, there is no threat to the assets of the corporate debtor and the continuation of the counter claim would not adversely impact the assets of the corporate debtor. Once the counter claims are adjudicated and the amount to be paid/recovered is determined, at that stage, or in execution proceedings, depending upon the situation prevalent, Section 14 could be triggered. At this stage, due to the reasons set out above, the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court.' This decision is of no avail to the petitioner. It holds that the counter claims by the company which is facing insolvency is maintainable even during the currency of the moratorium. This decision is clearly in terms of the moratorium imposed, as the moratorium restrains actions being instituted or taken against the corporate debtor, whereas a counter claim is a counter claim by the corporate debtor. The moratorium imposed by the NCLT specifically restrains institution and continuation of any proceedings including arbitral proceedings against the respondent. The prayer in this petition is specifically for institution of arbitral proceedings against the respondent. It cannot, therefore, be granted while the moratorium is in place. As such the petition is adjourned sine die, awaiting the proceedings before the NCLAT or any order modifying or lifting the moratorium issued by the NCLT.

Summary

Issues:
1. Moratorium imposed by National Company Law Tribunal (NCLT) during Corporate Insolvency Resolution Process (CIRP).
2. Appeal filed before National Company Law Appellate Tribunal (NCLAT) challenging the moratorium.
3. Interpretation of the stay on moratorium by NCLAT.
4. Relevance of deposit directed by NCLAT in relation to the moratorium.
5. Comparison with a previous judgment regarding counterclaims during insolvency.
6. Petition for arbitral proceedings during the moratorium.

Analysis:
1. The High Court addressed the issue of a moratorium imposed by the NCLT during CIRP, prohibiting legal actions against the corporate debtor, including arbitral proceedings. The NCLAT was approached through an appeal challenging this moratorium, leading to a stay on further steps but not on the moratorium itself.

2. The NCLAT directed a deposit by the appellant, a former Director of the respondent, as a pre-condition for the appeal, which was deemed irrelevant to the moratorium's enforcement against legal actions on the respondent. The High Court clarified the distinction between the stay on proceedings and the moratorium itself, emphasizing the latter's continued validity.

3. Reference was made to a judgment highlighting the maintainability of counterclaims during insolvency, contrasting it with the current scenario. The High Court distinguished the nature of counterclaims by the corporate debtor from actions against the debtor, emphasizing the moratorium's scope and purpose.

4. The petitioner argued that the referral stage of the petition posed no threat to the respondent's assets, disregarding the moratorium's explicit prohibition on legal actions, including arbitral proceedings. The High Court reiterated that the moratorium's restrictions must be upheld until modified or lifted by the NCLT or NCLAT.

5. Consequently, the High Court adjourned the petition sine die, awaiting developments in the NCLAT proceedings or any alteration in the moratorium status. The parties were granted the option to seek a revival of the petition based on future events concerning the moratorium's enforcement.