CASE TITLE:
Ashok Mahindru & Anr Vs. Vivek Parti
DATE OF ORDER:
29 November 2022
BENCH:
Mr. Barun Mitra
Justice Ashok Bhushan
PARTIES:
Appellant- Ashok Mahindru & Anr.
Respondent- Vivek Parti
SUBJECT
In the present case, the National Company Law Appellate Tribunal, held that section 96(1)(b) does not provide for stay of any future liability or obligation. It only provides for stay of proceedings relating to debt due. The Principle Bench of the Tribunal made these observations while hearing an appeal preferred before it against the order of the Adjucating Authority wherein, an application for stay of proceedings u/s 96(1)(b) by the appellants who were the suspended directors of the Corporate Debtor, was rejected by it.
IMPORTANT LEGAL PROVISION
INSOLVENCY AND BANKRUPTCY CODE
- Section 96-provides that in case an application is filed u/s 94 or 95,an interim-moratorium shall from the date on which the application is filed in relation to all the debts and shall cease to have effect on the date of admission of such application; and
- It further provides that during the period of interim-moratorium, any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed and any creditoror debtorshall not be allowed to bring about any legal action or proceedings in respect of any debt.
- Section 3(11)- defines debt- as a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.
FACTS OF THE CASE
- Proceedings was initiated u/s 9 of the IBC against the Corporate Debtor- Advance Home and Personal Care Ltd on 05.09.2019.
- While the proceedings were underway, on 04.12.2019, an application was filed by the Interim Resolution Professional u/s 19(2) against the Appellants who were Suspended Directors of the Corporate Debtor.
- Another application was filed by the Resolution Professional u/s sec 66 and 67 of the IBC on 23.07.2020.
- By order dated 6.12.2021 and 7.12.2021, proceedings u/s 95 were initiated against the Appellants as a Personal Guarantors for ‘Advance Surfactants India Ltd.’
- As a result, the Appellants filed an application for stay of proceeding u/s 19(2) and section 66 and 67. The said application was rejected by the Adjudicating Authority.
- An appeal against the same rejection is preferred before the present Tribunal.
AGRUMENTS RAISED BY THE APPELLANT
- That in view of the initiation of the interim moratorium in the proceedings u/s 95, all proceedings have to be stayed.
- The learned counsel further submits that in proceedings u/s 19(2) and section 66 and 67 there is a chance that any order may be passed against Appellants in terms of monetary consideration, which might be paid by them eventually. Thus, proceedings are required to be stayed for the interim moratorium has been initiated.
ARGUMENTS RAISED BY THE RESPONDENT
- It was contended by the learned counsel for the respondent that section 96 only provides for the stay of proceedings relating to debt due.
LEGAL ISSUE
- Whether the Adjudicating Authority was right in rejecting the application of the Appellants?
ANALYSIS BY THE TRIBUNAL
- It was observed by the Tribunal that when section 96(1)(b) is read with the definition of ‘debt’ in section 3(11), it is clear that the intention of the legislature was to stay the proceedings related to debt which means a liability or obligation in respect of a claim which is due from any person.
- It can not be read to mean that any future liability or obligation is contemplated to be stayed.
- The Tribunal further observed that the reliance placed by the learned counsel for the respondent on the decision of this Tribunal in Rakesh Kumar Jain, RP HBN Homes Colonizers Pvt. Ltd. V. Jagdish Singh Nain, RP of HBN Foods Ltd. And Ors. [ Company Appeal (AT)(Ins.) No. 425 of 2022] was right.
- In the above mentioned case it was contended that section 14(1) and section 66 of IBC should be read independently. Following observations were made in that case-
- “In view of the settled principle of law both the provisions referred above should be construed harmoniously to give effect to the intendment of the code and to make it workable.”
- The court further observed that with a view to avoid inconsistency or repugnancy, the Court must resort to interpreting the provisions harmoniusly. A statute must always be read as a whole and one provision of the Act should be construed with reference to the other provisions in the same Act, so, as to make a consistent enactment, of the whole statue.
CONCLUSION
The National Company Law Appellate Tribunal, while upholding the decision of the Adjucating Authority stated that stay of proceedings u/s 19(2) and section 66 and 67 is not contemplated u/s 96(1)(b) and IBC does not provide for staying such applications.
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