Perusal of Pending Proceeding before HC after declaration of Moratorium in IBC, 2016

In this editorial author discusses Judgment National Company Law Appellate Tribunal (NCLAT) in the case of Steamline Industries  Ltd Vs. Tecpro Systems Ltd with reference to Section 14(1)(a) and 238 of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) on the issue  “Whether Pending Proceeding before Honourable High Court can be peruse after declaration of Moratorium in IBC, 2016”

A. Factual Background:

I. CIRP has already been initiated against the Corporate Debtor u/s 7 of IBC, 2016.

II. Moratorium ordered U/s 13 read with section 14 of the I&B Code.

III .The civil suits against the CD and another pending before the Honourable High Court of Delhi can’t be proceed.

IV. Appellant: it’s filed an application before the NCLT, Principle Bench, New Delhi, to permit the Appellant to pursue the proceedings pending before the Honourable High Court of Delhi in Civil Suit.

V. NCLT: The NCLT rejected the application preferred by Appellant with cost u/s 14(1)(a).

Section 14(1)(a) : “Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:—

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;”

VI. Appellant: Its submit that the suit in question has been filed under “Commercial Court Act” therefore, the provisions of the said Act will prevail over the “I&B Code”.

FINDINGS OF THE NCLT BENCH: 

Hon’ble NCLAT states that, submission of Appellate can’t be accepted in view of section 238 of the ‘I&B Code” which read as follow:

as per Section 238 The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

Therefore, No relief can be granted to the Appellant.

The detailed discussion on Section 238 has been made by Hon’ble NCLAT in the case of ICICI Bank Ltd Vs. Innoventive Industries Ltd. In this case The NCLAT held that section 238 of the Code is a non-obstante clause which overrides the all other Acts, and thus the provisions of the Code shall prevail over the provisions of the MRU Act.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

Read Other Articles Written by CS Divesh Goyal