9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (12) TMI 92 - AT - IBCAdjustment of Security Deposit Towards Pre-CIRP Dues - applicability of Section 14 of the IBC, 2016 - whether a deposit lying with a third party can be adjusted against pre-CIRP dues by it during the moratorium which comes into effect immediately on admission of Corporate Debtor in CIRP, during the pendency of the said CIRP? - HELD THAT - As per Section 14(1)(c), there is prohibition for any action to foreclose, recover or enforce any security interest created by the Corporate Debtor. Subsection (2) envisages that the Corporate Debtor will continue to run as a going concern and that supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended or interrupted during the CIRP, whereas Sub-section (2A) provides that the supply of essential goods or services shall continue except where Corporate Debtor does not pay the dues arising from such supply during the moratorium period. In Paschimanchal Vidyut Vitran Nigam Ltd. v. HAS Traders Others, 2023 (7) TMI 831 - SUPREME COURT , the Hon ble Supreme Court has held that IBC will prevail over provisions of the Electricity Act, 2003, despite the latter containing two specific provisions which open with non-obstante clauses. In the scheme of the IBC, 2016 once a Corporate Debtor is admitted into CIRP, all recovery action for past dues come to a standstill. During CIRP period, the Corporate Debtor has to be kept as a going concern and all essential supplies of goods or services have to be continued, subject to payment of dues arising from such supply during the moratorium period , that is, on payment of current dues. Recovery of past dues is specifically prohibited and the specified procedure envisages that the creditor will file claim, in proper form, before IRP/RP, which has been done in the present case. The Appellant could not have adjusted the security payment deposit against pre-CIRP dues. In the light of the provisions of IBC, 2016 and the guidance provided by the judgments cited above, it is clear that the Ld. NCLT was correct in directing that the security payment deposit be not adjusted against the past dues of pre-CIRP period, but instead be adjusted only against the dues arising post CIRP. There are no reason to interfere in the order of Ld. NCLT. This appeal, accordingly, is dismissed.
Issues Involved:
1. Whether the appropriation of a security deposit towards pre-CIRP dues during the moratorium period is permissible under the Insolvency and Bankruptcy Code (IBC), 2016. 2. The applicability of Section 14 of the IBC, 2016, regarding the moratorium and its impact on the enforcement of security interests. 3. The role of the Central Electricity Regulatory Commission (CERC) regulations in the context of the IBC proceedings. Issue-wise Detailed Analysis: 1. Appropriation of Security Deposit Towards Pre-CIRP Dues: The primary issue in this case was whether the Central Transmission Utility of India Limited (CTUIL) could adjust a security deposit of Rs. 108.44 crores against pre-CIRP dues of the Corporate Debtor during the moratorium period. The National Company Law Tribunal (NCLT) held that such appropriation is impermissible and contrary to the provisions of the IBC, 2016. The tribunal directed that the security deposit should be adjusted towards post-CIRP dues instead. This decision was based on the principle that once a company is admitted into CIRP, all recovery actions for past dues must cease, and any security interest created by the Corporate Debtor cannot be enforced during the moratorium period. 2. Applicability of Section 14 of the IBC, 2016: Section 14 of the IBC, 2016, imposes a moratorium that prohibits any action to foreclose, recover, or enforce any security interest created by the Corporate Debtor. The tribunal emphasized that the moratorium aims to keep the Corporate Debtor's assets intact during the insolvency resolution process, facilitating an orderly completion of the process and ensuring that the Corporate Debtor continues as a going concern. The tribunal referenced several judgments, including those from the Supreme Court, which reinforced the notion that the moratorium under Section 14 acts as a shield against pecuniary attacks on the Corporate Debtor, thereby providing it with the necessary breathing space to rehabilitate itself. 3. Role of CERC Regulations: The appellant argued that the CERC regulations allowed for the adjustment of the security deposit against pre-CIRP dues following the FIFO (First In First Out) method. However, the tribunal found that the provisions of the IBC, 2016, specifically Section 238, override any inconsistent provisions in other laws, including the Electricity Act and CERC regulations. The tribunal cited judgments that supported the primacy of the IBC over other statutes, emphasizing that any claims regarding pre-CIRP dues must be submitted to the Resolution Professional for adjudication and payment as per the approved resolution plan. In conclusion, the tribunal upheld the NCLT's decision, dismissing the appeal and affirming that the security deposit should not be adjusted against pre-CIRP dues. The tribunal reiterated the importance of adhering to the IBC's provisions, which prioritize the resolution process and the continuation of the Corporate Debtor as a going concern over the recovery of past dues.
|
