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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. Asheesh Jain, Senior Standing Counsel with Mr. Vikrant A. Maheshwari, Advocate.
  • Ms. Anne Mathew, Advocate.
Judges
  • S. Muralidhar
  • Prathiba M. Singh, JJ.
Acts
  • sub-Section (1) of Section 31
  • Section 7 of the Code
  • Section 5(1) of the Code
  • Section 14(1)(a) of the Code
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. Asheesh Jain, Senior Standing Counsel with Mr. Vikrant A. Maheshwari, Advocate.
  • Ms. Anne Mathew, Advocate.
Judges
  • S. Muralidhar
  • Prathiba M. Singh, JJ.
Acts
  • sub-Section (1) of Section 31
  • Section 7 of the Code
  • Section 5(1) of the Code
  • Section 14(1)(a) of the Code
See more information ...
Smart Summary

Factual and Procedural Background

The National Company Law Tribunal (NCLT), acting as the Adjudicating Authority (AA) under the Insolvency and Bankruptcy Code, 2016 (‘Code’), admitted a petition filed by the State Bank of India under Section 7 of the Code against the Respondent-Assessee on 18 July 2017. The NCLT ordered a moratorium prohibiting the institution or continuation of suits or proceedings against the Respondent, including execution of any judgment or order. The present appeal involves the Income Tax Department challenging an order of the Income Tax Appellate Tribunal (ITAT) regarding the tax liability of the Respondent-Assessee, which was stayed by the moratorium imposed under the Code.

Legal Issues Presented

  1. Whether the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code prohibits the continuation of pending proceedings, including appeals by the Income Tax Department against the Respondent-Assessee.
  2. Whether, under the Code, permission from the NCLT is required to continue pending proceedings against the corporate debtor during the moratorium period.
  3. The applicability and supremacy of the Insolvency and Bankruptcy Code over other inconsistent laws as per Section 238 of the Code.

Arguments of the Parties

Appellant's Arguments (Income Tax Department)

  • The Income Tax Department submitted that unlike certain earlier insolvency statutes, the Insolvency and Bankruptcy Code does not provide for permission to be sought from the NCLT to continue pending proceedings against the corporate debtor in other fora.
  • The Department sought to challenge the moratorium imposed by the NCLT on continuation of proceedings, including the present appeal against the ITAT order.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
M/S. Innoventive Industries Ltd. v. ICICI Bank & Anr. (Civil Appeal No. 8337-8338/2017) Establishment of the supremacy of the Insolvency and Bankruptcy Code over other inconsistent laws as per Section 238 of the Code. The Court relied on this Supreme Court decision to affirm that the Code prevails notwithstanding any inconsistent provisions in other laws, thereby supporting the moratorium imposed under Section 14(1)(a).

Court's Reasoning and Analysis

The Court examined the relevant provisions of the Insolvency and Bankruptcy Code, particularly Section 14 which mandates a moratorium on suits or proceedings against the corporate debtor from the insolvency commencement date. The Court emphasized Section 238, which makes the Code prevail over any inconsistent laws. Referring to the Supreme Court’s decision in M/S. Innoventive Industries Ltd., the Court confirmed that the moratorium imposed by the NCLT on 18 July 2017 effectively prohibits continuation of the Income Tax Department’s appeal against the ITAT order. The Court noted that the Code does not provide for permission to continue pending proceedings during the moratorium, and the moratorium remains in force until the corporate insolvency resolution process is complete or the resolution plan is approved or liquidation ordered by the NCLT. Based on these legal principles and statutory provisions, the Court upheld the moratorium and disposed of the appeals accordingly.

Holding and Implications

The Court’s final decision is DISPOSED OF with liberty granted to the Income Tax Department to revive the appeals only subject to further orders of the NCLT. The moratorium under the Insolvency and Bankruptcy Code remains effective, thereby restraining continuation of proceedings against the corporate debtor during the insolvency resolution process. This decision directly affects the parties by enforcing the statutory moratorium but does not establish any new precedent beyond reaffirming the Code’s supremacy and the scope of the moratorium.

Show full summary ...

    Pr. Commissioner Of Income Tax-6, New Delhi v. Monnet Ispat & Energy Ltd.

    1. The Court has heard the learned counsel for both parties. The provisions of the Insolvency and Bankruptcy Code, 2016 (‘Code’) and, in particular, Section 14 thereof has been perused.

    2. It appears to the Court that Section 238 of the Code is categorical that the Code will apply, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Section 14(1)(a) of the Code states, inter alia, that on the ‘insolvency commencement date’ the Adjudicating Authority (AA) shall by order declare moratorium for prohibiting “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.” That the Code will prevail over all other statutes inconsistent therewith has been explained in the recent decision dated 31 August, 2017 of the Supreme Court in Civil Appeal No. 8337-8338/2017 (M/S. Innoventive Industries Ltd. v. Icici Bank & Anr. S).

    3. In the instant case, the National Company Law Tribunal (NCLT) [which by virtue of Section 5(1) of the Code is the AA] has by its order dated 18 July 2017 admitted the petition under Section 7 of the Code filed by the State Bank of India against the Respondent Assessee and prohibited, inter alia, “the institution of suits or continuation of pending suits or proceedings” against the Respondent. This would include the present appeal by the Income Tax Department (‘Department’) against the order of the Income Tax Appellate Tribunal (‘ITAT’) in respect of the tax liability of the Respondent-Assessee.

    4. Mr. Asheesh Jain, learned Senior Standing counsel for the Revenue, points out that unlike some of the earlier insolvency statutes the Code does not envisage permission being sought from the NCLT for continuation of the continuation of pending proceedings against the Respondent in other fora. In the order dated 18July 2017 is clear that the moratorium continues “till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-Section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, as the case may be.”

    5. Consequently, these appeals are disposed of with liberty to the Appellant-Department to revive them subject to the further orders of the NCLT.

    6. Copy of the order be given dasti under the signature of the Court Master.

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    Comments

    Pr. Commissioner Of Income Tax-6, New Delhi v. Monnet Ispat & Energy Ltd.
    (Sep 4, 2017)