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TMI Blog2024 (9) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... a Luxe Realty Pvt. Ltd. (R7) as a party Defendant No. 7 and make certain averments and seek additional reliefs. 3. Meeti Developers Pvt. Ltd. (Meeti), the Defendant No. 1 entered into a Development Agreement dated 27th December 2006 with New Kamal Kunj Co-Operative Housing Society Limited (The Society), the Defendant No. 6, to redevelop the society premises. Under the terms of the development agreement, Meeti Developers Pvt. Ltd. (D1) was required to construct the rehab units for the existing members of the Society (D6) and had right to utilize and deal with the balance available FSI quantified at 74,226 square feet in such manner as Meeti (D1) may deem fit. Addendum Agreements were executed in furtherance of the development agreement, on 31st October 2015 and 18th March 2017. Under the terms of these agreements, Meeti (D1) was authorized to create security interest or encumbrance on the developer's share and the society (D6) agreed that it shall not raise any objection or withhold necessary consent to create such security interest. 4. Thus, to finance redevelopment, Meeti (D1) approached the ECL Finance Limited ("ECL"), the predecessor in interest of the plaintiff, to advance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty (D6). The plaintiff also filed Interim Application No. 431 of 2024 seeking ad-interim and interim reliefs. 9. In the said Interim Application, an affidavit-in-reply came to be filed on behalf of Defendant No. 5 contending that the Society (D6) executed a development agreement on 21st October 2023 with Ajmera Luxe Realty Pvt. Ltd. (Ajmera Luxe), Respondent No. 7. 10. The plaintiff thus asserts the alleged transaction sought to be entered into by Defendant Nos.5 and 6 and Respondent No. 7 is prejudicial to the rights of the plaintiff. It has transpired that Ajmera Luxe (R7) is an associate/subsidiary company of Ajmera Realty (D5). These subsequent events have, according to the plaintiff, necessitated the amendment in the plaint. The plaintiff is thus constrained to amend the plaint so as to make averments regarding the collusion between the Defendant Nos.5 and 6 and Respondent No. 7 and bring the subsequent developments on the record of the Court. 11. The plaintiff avers that the proposed amendment neither changes the nature of the Suit nor the cause of action is altered. The proposed amendment does not cause any prejudice to the defendants. In fact, the impleadment of Ajmera L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assailed on multiple counts. First it is contended that Ajmera Luxe (R7) has no nexus to the dispute at hand and is ex facie neither a necessary nor a proper party to the instant suit. Second, the instant suit has been instituted by the applicant for recovery of money from defendant Nos. 1 to 4 and it is not concerned with the right of redevelopment of the subject property, which has been granted by the society (D6) in favour of Ajmera Luxe (R7). Third, the development agreement dated 21st October, 2023 which is sought to be assailed by the plaintiff has been executed pursuant to an express permission granted by this Court by an order dated 12th September, 2023 in Arbitration Petition (L) No. 6410 of 2023. Since the said order has attained finality, plaintiff cannot be permitted to put further hindrances in much delayed redevelopment project of the society (D6). 17. Referring to the Company Petition, being IB No. 624 of 2023, instituted by the plaintiff against Meeti (D1) and the order dated 5th April, 2024 admitting the petition and, consequently, imposing the moratorium as envisaged by section 14 of the IBC, Ajmera Luxe (R7) contends that the plaintiff is not entitled to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (R7) is that of third parties to CIRP. It is beyond the stretch of imagination that the third parties can be permitted to take benefit of the moratorium under section 14 of the IBC and defeat legitimate rights of the financial creditor by dealing with the assets of the corporate debtor, with impunity. Mr. Joshi urged with a degree of vehemence that by the proposed amendment and the reliefs which the plaintiff proposes to seek, the plaintiff is not at all endangering or touching the property of the corporate debtor. Laying emphasis on the object of the moratorium envisaged by section 14 of the IBC, Mr. Joshi would urge that the legal position has been crystallized by a catena of decisions that even the promoters and directors of the corporate debtor cannot claim immunity from the proceedings by invoking section 14 of the IBC much less the third parties like defendant Nos. 5 and 6 and respondent No. 7 herein. 22. To buttress these submissions, Mr. Joshi placed reliance on the decisions of the Supreme Court in the cases of P. Mohanraj and Ors. vs. Shah Brothers Ispat Private Limited (2021) 6 SCC 258.; Anjali Rathi and Ors. vs. Today Homes & Infrastructure Pvt. Ltd. And Ors. 2021 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is essentially for recovery of the debt purportedly owed by the corporate debtor to the plaintiff. Second, the interdict contained in clause (c) of sub section (1) of section 14 of IBC, according to Mr. Andhyarujina, operates with full rigor as "any action to foreclose, recover or enforce any security interest" created by the corporate debtor in respect of its property is completely barred till the moratorium remains in force. The substratum of the plaintiff's claim, by way of proposed amendment, is the security interest allegedly created by the corporate debtor in its favour. Therefore, no action to enforce such security interest can continue. Resultantly, the application does not deserve to be entertained. 26. Mr. Andhyarujina joined the issue of the protection under Section 14 of IBC being claimed by third parties, by canvassing a submission that resistance of defendant Nos. 5 and 6 and respondent No. 7 does not proceed on the premise that during the currency of moratorium no action can be initiated against them, but on a statutory ground that 'any action to enforce the security interest created by the corporate debtor' which, the plaintiff proposes to resort to, cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the Society (D6) and Meeti (D1) has been lawfully terminated. Therefore, the reliefs sought to be claimed, by the proposed amendment, fundamentally alter the character of the suit. Such an amendment is not permissible in law, submitted Mr. Andhyarujina. To this end, reliance was placed on a decision of the Supreme Court in the case of Asian Hotels (North) Limited vs. Alok Kumar Lodha and Others (2022) 8 Supreme Court Cases 145. 29. Mr. Sachin Mhatre, learned counsel for defendant No. 6 supplemented the submissions of Mr. Andhyarujina. 30. Mr. Joshi, learned senior counsel for the plaintiff, submitted that the contention on behalf of respondent No. 7 that the plaintiff has an efficacious remedy under section 60 (5) of IBC is a part of a litigative strategy to defeat the rights of the plaintiff. The NCLT has no jurisdiction over the matters de hors the insolvency proceedings. Had the plaintiff approached NCLT against the defendants other than the corporate debtor, and respondent No. 7, the jurisdiction of NCLT would have been promptly questioned on that count alone. Mr. Joshi submitted that the decision of the Supreme Court in the case of Gujarat Urja Vikas Nigam Limited vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. Explanation - ...... 35. Before construing the nature of the bar envisaged by clauses (a) and (c) of sub section (1), it is necessary to note the object of IBC and especially the mechanism of moratorium under section 14. The avowed object of IBC is to ensure revival and continuation of the corporate debtor, by protecting the corporate debtor from its own management and from a corporate death by liquidation. IBC is not envisaged as a mere recovery legislation for creditors but its primary focus is revival of the corporate debtor as a going concern and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable. The legal impediment contained in Section 14 of the IBC would make it impossible for such proceeding to continue or be instituted against the corporate debtor. Thus, for the period of moratorium, since no Section 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Section 141 (1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act. (emphasis supplied) 38. In the case of Anjali Rathi (supra) following the aforesaid decision in the case of P. Mohanraj (supra), the Supreme Court ruled that the petitioners therein, would not be prevented by the moratorium under section 14 of IBC from initiating the proceedings against the promoters of corporate debtor. The observations in paragraphs 17 and 18 read as under:- 17] At this juncture, we must however clarify the right of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate debtor from suits or proceedings, so as to ensure that the assets of the corporate debtor are preserved for successful insolvency resolution. Third, the prohibition under clause (c), on the other hand, is against any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property. Fourth, the bar under clause (a) is for proceeding against the corporate debtor whereas under clause (c), it is against enforcement of security interest created by the corporate debtor. Fifth, the focus under clause (a) is on the suit or proceedings against the corporate debtor but under clause (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor over its property is prohibited. Sixth, though there is an element of continuity and action against the corporate debtor may fall both under clause (a) and (c), a situation, governed by clause (c), is not inconceivable where the corporate debtor may not be necessarily involved as a party. Seventh, the prohibition contained in clause (c) appears to be of wide amplitude than the bar to the suit or proceedings against the corporate debtor under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the counter claim did not deserve to be stayed under section 14 of the IBC and both the suits and counter claim ought to proceed to trial. 46. Reliance was also placed on a decision of the Allahabad High Court in the case of Trading Engineers (supra) wherein the aforesaid decision of the Delhi High Court in the case of Power Grid (supra), was followed with approval. 47. I have carefully considered the aforesaid decisions. I find substance in the submission of Mr. Andhyarujina that the aforesaid decisions primarily deal with the prohibition contained in clause (a) of section 14 (1) of the IBC. These decisions did not deal with a situation covered by clause (c) of section 14 (1). 48. In the facts of the instant case, the pivotal question that wrenches to the fore is, whether the proposed amendment falls within the dragnet of the prohibition contained in clause (c). If the proposed amendment takes the character of enforcement security interest created by the corporate debtor over its property, it can not be allowed till the moratorium operates. 49. I am afraid to accede to the submission of Mr. Joshi that the proposed amendment to the extent the plaintiff proposes to restrain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 4 to the plaintiff. It could be urged that, primarily the suit is for recovery of debt under the DTD. At the same time, it is necessary to note that, the plaintiff has claimed a declaration that the plaintiff has a subsisting and valid mortgage on the assets over which the first charge and mortgage has been created by Meeti (D1) and that the resolution dated 23rd February, 2023 passed by the Society (D6), as recorded in the letter dated 13th October, 2023, is invalid, illegal and not binding on the plaintiff. 53. Viewed through aforesaid prism, the additional prayer sought to be made by way of the proposed amendment, seeking a further declaration that the development agreement dated 21st October, 2023 entered between the Society (D6) and Ajmera Luxe (R7), is illegal, unlawful, bad in law, non est and in any event not binding upon the plaintiff, is but a facet of assertion of rights which form the cause of action in the suit. The additional relief under prayer clause (B-1) sought to be added by way of amendment appears to be in continuation of the relief claimed in original prayer clause (B) in the plaint. 54. I am unable to persuade myself to agree with the submission of Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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