Even otherwise, the provisions of the SARFAESI Act may be having different criteria for enforcement of recovery of outstanding Debt, which is not the subject matter of this Bench. The expression “disbursed” refers to money which has been paid against consideration for the “time value of money”. You feedback is highly appreciated and help us to motivate our team. Consequently, the Committee agreed that they need not be paid for pre-CIRP dues at this stage Claims may be submitted by suppliers in respect of the dues owed to them for supplies not compelled by the moratorium. 28-12-2019. Consequently, the Committee agreed that they need not be paid for pre-CIRP dues at this stage, Claims may be submitted by suppliers in respect of the dues owed to them for. It was brought to the Committee that in some cases government authorities that have granted licenses, permits and quotas, concessions, registrations, or other rights (collectively referred to as “grants”) to the corporate debtor attempt to terminate or suspend them even during the CIRP period. granted by Government authorities during the Moratorium period. NCLAT in Mrs. Madhurima Mridul & Anr. One other important distinction is that in an operational debt, there is no consideration for the time value of money – the consideration of the debt is the goods or services that are either sold or availed of from the operational creditor. 616 of 2018 the NCLAT Delhi Bench had an occasion to deal with such an instance. Officers of the Customs show that after their knowledge of the order of Moratorium they intended to sell the machinery, in question, though it was lying with the Customs Authority since 13th April, 2009 / 27th April, 2009. 8.7. Vs. UCO Bank (2021) ibclaw.in 50 NCLT held that as per Section 14 of IB Code and in line with the decision of the Hon’ble NCLAT in the matter of Indian Overseas Bank vs. Mr. Dinkar T. Venkatsubramaniam, Resolution Professional for Amtek Auto Limited, [2017] ibclaw.in 50 NCLAT, the amount received during the CIRP when the moratorium is in force, is the asset of the Corporate Debtor and RP has to deal with the same as per the provisions of the IB Code. Prohibition on Termination on Grounds of Insolvency8.1. Copyright © TaxGuru. Examples given of advance payments being made for turnkey projects and capital goods, where customisation and uniqueness of such goods are important by reason of which advance payments are made, are wholly inapposite as examples vis-à-vis advance payments made by allottees. Whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments Act can be said to be covered by the moratorium provision, namely, Section 14 of the IBC: The Court held that it can thus be seen that regard being had to the object sought to be achieved by the IBC in imposing this moratorium, a quasi-criminal proceeding which would result in the assets of the corporate debtor being depleted as a result of having to pay compensation which can amount to twice the amount of the cheque that has bounced would directly impact the CIRP in the same manner as the institution, continuation, or execution of a decree in such suit in a civil court for the amount of debt or other liability. 60(5) of the Code-click here. Vs. M/S. (b) a surety in a contract of guarantee to a corporate debtor. Whenever any illustration is given, it will be given to have an understanding about the provision of law. Resolution Professional of Videocon Industries Ltd. (2020) ibclaw.in 372 NCLAT, NCLAT held that it is clear that the amount of Rs.20 Crores deposited by way of Bank Guarantee was against the sum of Rs.76.45 Crores awarded, therefore, said amount of Rs.20 Crores, if payable to the Financial Creditor will be out of Rs.76.45 Crores as awarded in its favour. Hon’ble Delhi High Court in the matter of. This is clear from a bare reading of the provisions of section 14(1) of the IBC. However, so far as suit, if filed before any High Court under original jurisdiction which is a money suit or suit for recovery, against the corporate debtor such suit cannot proceed after declaration of moratorium, under Section 14 of the Code. Also, the expression “proceedings” used by the legislature in Section 14(1)(a) is not trammelled by the word “legal” as a prefix that is contained in the moratorium provisions qua individuals and firms. The contesting respondents have also failed to bring on record any evidence to suggest that the money was borrowed or raised by the Corporate Debtor’ under any other transactions including sale or purchase or other mode having commercial effect of borrowing.”. An arbitral order passed post admission of CIRP against the Corporate Debtor is in violation of objective of the Code and is in contravention of moratorium under Section 14 of the Code: NCLT in Mr. Atul Rajwadkar Vs. HDFC Bank Limited & Ors. In this background, the Resolution Professional moved an application before the Adjudicating Authority (NCLT), Mumbai Bench for direction against the Appellant to refund the aforesaid two amounts withdrawn during the period of moratorium. However, the dues that arose for such grants prior to the commencement of the CIRP would not be required to be paid during the moratorium period and claims may be filed for such dues during the CIRP. If, supply of water for drinking and sanitization purpose is an essential service, the supply of electricity is also deemed to be, limited for lighting purpose and other domestic purposes, which are in modern days considered as essential service. However, the Appellate Tribunal allowed to the Financial Creditor to incorporate the debited amount in a separate set of Ledger, in accordance with the ‘RBI Guidelines’, but not to be treat the amount debited for adjustment. As per section 12 of the Code, the CIRP shall be completed within a period of 180 days from the date of admission of the application to initiate such process, and the period can only be extended by 90 days, subject to an application being made to the adjudicating authority after a resolution is passed at a meeting of the committee of creditors by a vote of seventy-five percent of the voting share. 8.10. Thus an equity contributor is interested in the residual value i.e. The moratorium continues to be in operation till it is revoked. NCLAT did not find any reason to interfere with the decisions taken by the Resolution Professional, CoC and the Adjudicating Authority to protect the interest of the Corporate Debtor while considering the interest of the Appellant. (2019) ibclaw.in 473 NCLAT, the Adjudicating Authority rightly held that during the period of Moratorium, Union of India, Ministry of Petroleum & Natural Gas (Exploration Division), cannot recover any amount nor can issue demand notice to the Corporate Debtor through Interim Resolution Professional to pay any amount. THE MORATORIUM UNDER SECTION 14Continuation of Licenses, etc. The High Court held that: (a) moratorium under section 14(1)(a) is intended to prohibit debt recovery actions against the assets of corporate debtor;(b) continuation of proceedings under sec. The petition under Section 7 was admitted by the Adjudicating Authority by Order dated 04th February 2019. Required fields are marked *, Notice: It seems you have Javascript disabled in your Browser. At the time of argument, learned Counsel for the Resolution Professional submitted that as there were dues payable by the Appellant, the Corporate Debtor could exercise lien on the goods which were available with the Corporate Debtor and thus, according to the learned Counsel, the Adjudicating Authority rightly protected the interest of the Appellant as well as Corporate Debtor by directing that while returning the goods, side by side the dues payable by the Appellant should come to the Corporate Debtor. This, provision has been given an expansive reading by the Appellate Authority and the, Adjudicating Authority, that had passed orders preventing recovery by stock. e. Resolution Professional pay the current electricity charges only and Electricity charges dues prior to date of moratorium cannot be paid during CIRP, electricity supplier need to file claim before Resolution Professional for prior period charges. In other jurisdictions too, a moratorium may, be put in place on the advent of formal insolvency proceedings, including, liquidation and reorganization proceedings. NCLAT held that the Adjudicating Authority rightly stayed demand notice dated 22nd October, 2018 during the pendency of the resolution process as long as the Moratorium is applicable on the Corporate Debtor. Performance Bank Guarantee(PBG) given by the Corporate Debtor is not covered under Moratorium: NCLAT in the matter of GAIL (India) Limited Vs. Rajeev Manaadiar & Ors. [2019] ibclaw.in 74 NCLAT, the imported goods of Corporate Debtor are in the custody of the Custom Authority, but the ownership remains with the Corporate Debtor, no step having taken for sale of goods in terms of Section 48 of the Customs Act, 1962. )/170/KB/2017 the NCLAT held the payment by the homebuyers under an assured returns scheme by the Developer will get covered under the definition of Financial Creditor under the Code. c. The Adjudicating Authority has no jurisdiction to set aside the order passed by the Indian Council of Arbitration. Short Note on Insolvency and Bankruptcy Code, 2016 (IBC, 2016), Operational Debt and Operational Creditor, Persons who may initiate Corporate Insolvency Resolution Process(CIRP), Analysis provisions of Limitation Act, 1963 with respect to Insolvency and Bankruptcy Code, 2016, Analysis of Minimum amount of default under Section 4 of IBC, Procedure of filing application by Financial Creditor before NCLT under Section 7 of the IBC, Procedure of filing application by Operational Creditor before NCLT under Section 8 & 9 of the IBC, Initiation of CIRP by corporate applicant under Section 10 of the IBC, Analysis of withdrawal of CIRP proceeding pursuant to settlement under Section 12A of Insolvency and Bankruptcy Code, 2016 (IBC), Declaration of moratorium and public announcement [Section 13, 14 & 15 of the IBC], All about the Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 including judicial pronouncements, Appointment and tenure of Interim Resolution Professional and Resolution Professional [Section 16, 22 & 27 of the IBC], Role of an Interim Resolution Professional and Resolution Professional, Receive and collate all the claims submitted by creditors, Constitution of Committee of Creditors under Section 21 of IBC, Role of Committee of Creditors & It’s Commercial Wisdom, Analysis of provisions on Authorised Representative under IBC, Meetings & Voting of the Committee of Creditors under Section 24 of the IBC, Resolution Professional to conduct the CIRP and manage the operations of the Corporate Debtor, Insolvency Resolution Process Costs & Essential supplies, To identify preferential transactions under Sec. Side by side a ‘Letter of Undertaking’ (‘LOU’) was executed on 20th August, 2009 by the ‘La-Fin Financial Services Pvt. In view of the aforesaid findings, no interference is called for against the impugned order dated 3rd July, 2018 passed by the Adjudicating Authority prohibiting the Customs Authority from selling the assets of the Corporate Debtor. the amount received during the CIRP when the moratorium is in force, is the asset of the Corporate Debtor and RP has to deal with the same as per the provisions of the IB Code. No. [2020] ibclaw.in 12 SC held even Section 14 (1) (d), of IBC, 2016, which prohibits, during the period of moratorium, the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor, will not go to the rescue of the corporate debtor, since what is prohibited therein, is only the right not to be dispossessed, but not the right to have renewal of the lease of such property. Therefore, applying the principle of interpretation, one cannot put any other interpretation on this provision contained in Section 14 of the Code except that it only prohibits a suit or a proceeding of a like nature and does not include any criminal proceeding. It does not speak about initiation of CIRP against the subsidiary of the Corporate Debtor. In the matter of Haravtar Singh Arora Vs. Punjab National Bank & Ors. The arbitral award dated 23.01.2020 is hereby set aside. Let us look at the definition of operational creditor and operation debt under the Code. However, the said account could not have been debited during the period of Moratorium. NCLAT in JAS Telecom Pvt. So far as Appellant is concerned, the rent has not been paid by the Corporate Debtor since 1st January, 2017 that is much prior to order of moratorium. Further, Sub-section 2A inserted vide the Ordinance dated 28.12.2019 empowers the IPR or RP to decide which supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified. Vs. SEBI (2020) ibclaw.in 01 SAT, SAT held that the provision is clear and explicit and needs no further elaboration. For this purpose, see Himachal Pradesh Housing and Urban Development Authority and Anr. CIRP had started on 25.01.2019 and the Appellant in pursuance to the Arbitral Award, proceeded to repossess two trucks belonging to the Corporate Debtor and sold one on 15.03.2019 and another on 8th April, 2019. That being the position, the plea taken by the counsel for the petitioner that all proceedings against the petitioner, who is only a guarantor, ought to be stayed under the SARFESI Act during the continuation of the Insolvency Resolution process qua the Principal Borrower, is rejected as meritless. A bare reading of the judgment in the case of Tayal Cotton shows that in the said case a complaint under Section 138 of the NIA had been filed against the Company and its Directors and in that context, the question had arisen whether Section 14 of the IBC would come in the way of those criminal proceedings. NCLT held that the Section 14(1)(a) of the Code speaks about moratorium for prohibiting institution of suits or continuation of pending suits against the Corporate Debtor including execution of any judgment, etc. (Canara Bank v Deccan Chronicle Holdings Ltd., CP No. i. account of insolvency would be prohibited by the moratorium. The Mumbai Bench of the NCLT in ICICI Bank v. Innoventive Industries(MA 157 in CP 01/I&BP/2016. The method of initiating the proceedings and processes to be followed are different for each category of Creditor. Pursuant to a negotiation, it was agreed between the ‘IL&FS Financial Services Limited’- (‘Financial Creditor’) and the ‘MCX’ Group that (i) the ‘IL&FS Financial Services Limited’- (‘Financial Creditor’) would exit MCX; (ii) the ‘IL&FS Financial Services Limited’- (‘Financial Creditor’) investment in ‘MCX’ would be transferred to another investor viz IFCI; (iii) part of the proceeds realized therefrom would be used by the ‘IL&FS Financial Services Limited’- (‘Financial Creditor’) to purchase from ‘MCX’ 4,42,00,000 equity shares in ‘MCX-SX’ representing 2.46% of its equity share capital; and (iv) the ‘La-Fin Financial Services Pvt. Hon’ble Allahabad High Court in Sanjeev Shriya Vs. State Bank of India and 6 Others [2017] ibclaw.in 09 HC held that Creditor can not be allowed to pursue proceedings under Section 19 (3) of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for recovery of loan amount taken by the debtor (in liquidation) before Debt Recovery Tribunal against the guarantors when NCLT has already issued moratorium under Section 14 of the IBC, 2016 and stayed proceedings in respect of the debtors (in liquidation). (See Shah & Singh, Commentary on Law of Mines & Minerals (Whytes & Co. 2016) para 1.5.9.C) Thus, their termination in certain, circumstances, could have been considered contrary to an order of moratorium, barring actions under Section 14(1)(d) or preventing alienation of property by any person. Once the Moratorium has been declared Custom Authority cannot sale the imported goods of Corporate Debtor in terms of Section 48 of the Customs Act, 1962. NCLAT in Ranjit Das & Ors. 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