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Smart Summary

Factual and Procedural Background

The court received a report filed by respondent no. 6 in the form of an affidavit, filed as per a previous direction, and took it on record. Respondent no. 6 was directed to serve copies on the appearing parties. Counsel for respondent no. 7 produced a photocopy of a certified order dated August 27, 2019 of the National Company Law Tribunal, Kolkata Bench showing the company is under a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 by reason of an ongoing Corporate Insolvency Resolution Process (CIRP). The court directed respondent no. 7 to provide that NCLT order to counsel for the petitioners. The matter was listed for further orders on January 24, 2020.

Legal Issues Presented

  1. Whether proceedings initiated or continued against the corporate debtor (including execution of any judgment, decree or order) may lawfully proceed in view of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, as reflected in the NCLT order dated August 27, 2019.

Arguments of the Parties

Respondent No. 7's Arguments

  • Relied on Clause (iv)(a) (page 11) of the NCLT order dated August 27, 2019, contending that Section 14 of the Code of 2016 prohibits institution of suits or continuation of pending suits or proceedings against the corporate debtor, including execution of any judgment, decree or order, thereby precluding such actions.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court recorded the affidavit filed by respondent no. 6 and ordered service of copies on the appearing parties. On receiving the certified copy of the NCLT order (dated August 27, 2019) establishing a moratorium under Section 14 of the IBC due to an ongoing CIRP, the court directed respondent no. 7 to furnish that order to petitioners' counsel. Having noted respondent no. 7's reliance on Clause (iv)(a) of the NCLT order and Section 14's prohibition on suits, continuations and executions against the corporate debtor, the court observed prima facie that the police would be acting without jurisdiction if they proceeded on the basis of the petitioners' complaints, since such proceedings appear to fall within the moratorium. The petitioners' counsel sought one day to take instructions, and the matter was adjourned for orders to January 24, 2020 at 10:30 a.m.

Holding and Implications

Prima facie, police action on the petitioners' complaints against the corporate debtor would be without jurisdiction because the company is under a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (per the NCLT order dated August 27, 2019).

Direct consequences implemented by the court: respondent no. 6 was to serve copies of the affidavit on the appearing parties; respondent no. 7 was to provide the certified NCLT order to petitioners' counsel; further consideration was deferred to the listing on January 24, 2020. The opinion does not announce or apply any new legal precedent.

    India Infoline Finance Limited And Another v. State Of West Bengal And Others

    Sabyasachi Bhattacharyya, J.:— A report is filed in the form of an affidavit by the respondent no. 6, as per previous direction. Let the same be taken on record.

    2. The respondent no. 6 is directed to serve copies thereof on the appearing parties here and now.

    3. Learned counsel appearing for the respondent no. 7 hands up a photocopy of the certified copy of an order dated August 27, 2019 passed by the National Company Law Tribunal, Kolkata Bench, which indicates that the company is under a moratorium as envisaged under Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code of 2016”) in view of a Corporate Insolvency Resolution Process (CIRP) already undergoing with regard to the company.

    4. Learned counsel for the respondent no. 7 is directed to hand over a copy of the order of the National Company Law Tribunal to learned counsel for the petitioners to enable him to take instruction in the matter.

    5. Learned counsel for the respondent no. 7 further relies on Clause - (iv)(a) at page-11 of the said order and argues that the institution of suits or continuation of pending suits or proceedings against the corporate debtor, including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority has been prohibited under Section 14 of the Code of 2016, by virtue of such clause.

    6. As such, it appears prima facie that the police would be acting without jurisdiction, if they proceed on the basis of the complaints of the petitioners against the corporate debtor, since all proceedings in that regard fall within the moratorium, as contemplated in the clause referred to above.

    7. However, learned counsel appearing for the petitioners seeks a day's accommodation for taking further instruction on the matter.

    8. Accordingly, let the matter appear under the heading ‘for orders’ at 10.30 a.m. on January 24, 2020.

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    India Infoline Finance Limited And Another v. State Of West Bengal And Others
    (Jan 22, 2020)