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TMI Blog2022 (8) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and Section 66 of IBC. Section 14 of IBC is a bar against institution and prosecution of any suits or proceedings or execution of orders and decrees in other courts or Tribunals but not a bar to pass appropriate order in the pending proceedings against the resolution professional or suspended directors and related parties, before the Adjudicating Authority, during the insolvency resolution process or liquidation process. Section 66 of IBC empowered the Tribunal to pass appropriate orders when the suspended directors or insolvency professional of the Corporate Debtor carried on fraudulent trading or business during resolution process. Therefore, the Adjudicating Authority passed the impugned order only by exercising power that conferred on it by Section 66 of IBC. Hence, the contention that during moratorium, the Adjudicating authority shall not pass an order impugned in this appeal is unsustainable, without any merit. Section 60 (5) (a) of IBC permits the Adjudicating Authority to pass any order on any application or proceeding by or against the corporate debtor or corporate person notwithstanding anything to the contrary contained in any other law for the time being in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the provision of law. The Appellant is a corporate insolvency resolution professional of HBN Homes Colonizers Ltd. and whereas the 1st Respondent is Mr. Jagdish Singh Nain Resolution Professional of HBN Foods Ltd. The Appellant is looking after the insolvency resolution process, questioned the above order on the ground that during moratorium imposed under Section 14 of IBC, the Adjudicating Authority is not competent to issue such direction impugned in the Appeal, thereby, committed a serious error in issuing such direction and sought to set aside the directions issued by the Adjudicating Authority in I.A. No. 2844/2020, filed under Section 66 of the IBC. Few facts are necessary for deciding the real controversy in this present appeal. Tricolite Electrical Industries Ltd. (Operational Creditor) filed Company Petition No.IB-82/PB/2018 to initiate insolvency resolution process and the petition filed under Section 9 of IBC was admitted by Judgment dated 24.07.2019, in other CP (IB) 1359/ND/2019 was filed by Financial Creditor against HBN Foods Ltd. and other petition by Jagdish Singh Nain was appointed as resolution professional for completing insolvency resolution pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idation process. Thus, bar under Section 14 (1) (a) is not applicable and consequently the contention of the appellant is to be rejected and finally requested to dismiss the appeal affirming the order passed by the Adjudicating Authority. During hearing the learned counsel for the appellant raised a serious objection about the legality of the order passed during currency of moratorium in the insolvency resolution process or liquidation process. The only ground raised before the Tribunal is that when moratorium is in operation, during insolvency resolution process or liquidation process, issue of such direction for contribution of Rs. 2687.27 lacs, making the Respondent Nos. 2 to 21 responsible jointly and severally to assets of corporate debtor within two months from the date of order and to institute a criminal prosecution against the Respondent Nos. 2 to 21 under Section 69 of IBC is illegal and vitiated by irregularity. Whereas the counsel for the Respondent submitted that Section 14 (1) (a) is not a bar to pass appropriate order under section 66 of IBC. Section 66 permits the Adjudicating Authority to pass appropriate order during pendency of insolvency resolution process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority; Section 14 (1) (a) of IBC interdicts institution of suits are continuation of pending suits are proceedings against the corporate debtor including execution of any judgment decree or order of any court of law, Tribunal, Arbitration Panel or other authority. Thus, it prohibits institution and prosecution of any proceedings against the corporate debtor but does not prohibit passing any order by the Adjudicating Authority during insolvency resolution process or liquidation process against resolution professional and its suspended Directors or related parties. The counsel for the appellant contended that it applies to transfer of any amount from corporate debtor to the assets of financial or operational creditors. No doubt prohibition is only against the proceedings in any other courts or Tribunals etc. but not a prohibition against passing of any order in the pending insolvency or liquidation process against the Corporate Debtor. On the other hand, Section 66 permits the Adjudicating Authority to pass appropriate orders on application of any person when any transaction was entered into fraudulently. Section 66 of IBC reads as follows: 66. Fraudulent trading or wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness by corporate debtor through its corporate insolvency resolution professional or suspended directors, during insolvency resolution process or liquidation process. These two provisions have to be read independently to achieve the object of the enactment. While interpreting the provisions, the statute must be construed to make it effective and workable. The Courts/ Tribunals strongly lean against a construction which reduces the statute to a futility, vide judgment of Apex Court in M. Pentiah Vs. Veeramallappa Muddala AIR 1961 SC 1107 . A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim: ut res magis valeat quam pereat , vide judgment of Apex Court in CIT Vs. S. Teja Singh AIR 1959 SC 352 . On application of the principles that courts while pronouncing orders upon the constitutionality of a statute start with a presumption in favour of constitutionality and prefer a construction which keeps the statute within the competence of the Legislature, vide judgment of Apex Court in Corporation of Calcutta Vs. Liberty Cinema AIR 1965 SC 1107 . In view of the settled principle of law both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empowered the Tribunal to pass appropriate orders when the suspended directors or insolvency professional of the Corporate Debtor carried on fraudulent trading or business during resolution process. Therefore, the Adjudicating Authority passed the impugned order only by exercising power that conferred on it by Section 66 of IBC. Hence, the contention that during moratorium, the Adjudicating authority shall not pass an order impugned in this appeal is unsustainable, without any merit. If such contention is accepted by this Tribunal, Section 66 of IBC would become otiose or redundant. The impugned order was passed directing the Respondent Nos. 2 to 21 to contribute Rs. 2687.27 lacs to the assets of Corporate Debtor. Respondent No. 2 is resolution professional of HBN Homes Colonizers Ltd. and not a Corporate Debtor, the other respondents or related parties viz. different companies, thus the order was passed against insolvency resolution professional and other companies who indulged in fraudulent trade or business to defeat the rights of creditors of corporate debtor, as they are jointly and severally liable for such fraudulent trading or business. Therefore, we find no illegality i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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